carlisle december 7, 2010
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CARLISLE December 7, 2010. Cardo Martinez Lisandro Tsai Tom Wang Antti Zhang. Presentation Outlines. Company Overview Industry Overview Competitors SWOT Analysis Management Assessment Recent Financial Results Financial Valuations Recommendation. Company Overview. - PowerPoint PPT PresentationTRANSCRIPT
CARLISLEDecember 7, 2010
Cardo MartinezLisandro TsaiTom Wang Antti Zhang
Company Overview Industry Overview Competitors SWOT Analysis Management Assessment Recent Financial Results Financial Valuations Recommendation
Presentation Outlines
Established in 1917 in Carlisle, Pennsylvania as Carlisle Tire & Rubber Company
Headquartered in Charlotte, NC In 1986, Carlisle was incorporated as a holding
company Fortune 1000 company with 10,000 employees A diversified global manufacturing company serving the
construction materials, commercial roofing, specialty tire and wheel, power transmission, heavy-duty brake and friction, food service, aerospace and test and measurement industries.
2009: Recorded Sales $2,370 million NYSE Ticker Symbol: CSL Currently trading at $38.79
Company Overview
Source: http://www.carlisle.com/
Carlisle Engineered Transportation Services Manufactures bias and radial tires, specialty wheels,
power transmission belts and off-highway braking and actuation systems
Carlisle Construction Materials (CCM) Manufactures a complete range of single-ply roofing and
water proofing systems focused on optimizing the performance of building envelope
Carlisle Food Services Products Produces a wide range of commercial and institutional
food service permanent ware, catering equipment, meal delivery system and disposable food containers
Business Segments
Source: 2009 Carlisle Annual Report pages 6 & 7
Carlisle Interconnect Technologies Designs and manufactures high performance
wire and cable, RF/microwave connectors, avionics trays, racks, intergraded subsystem and complex cable assemblies
Carlisle Specialty Products Trail King designs and builds specialized,
custom heavy-haul and bulk commodity trailers, truck and trailer dump bodies, and other specialty trailers
Business Segments
Source: 2009 Carlisle Annual Report pages 6 & 7
Business Segments
2009 Net Sales by business segments
Source: 2009 Carlisle Form 10K page 2
Recent Stock Performance
Source: http://finance.yahoo.com/q/bc?t=1y&s=CSL&l=on&z=l&q=l&c=&c=^GSPC&c=^DJI
Construction Material Industry In 2014, the global construction materials market
is forecast to have a value of $823.3 billion, an increase of 52.7% since 2009
Asia pacific accounts for 70.6% of global construction material market value
Recent decelerated growth intensified rivalry between market players in the construction materials market
The global construction materials market has experienced healthy growth in recent years. But in 2009 the growth rate dropped to 1.8 %. However, the outlook is positive with growth forecasted to accelerate over the coming years, beyond the rates from previous years.
Industry Overview
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=4294854815
Industry Overview
Global construction materials market segmentation II: % share, by value, 2009
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=4294854815
Industry OverviewThe global construction materials industry generated $539.3 billion in 2009 with a compound growth rate of 5% in the period 2005-09
The compound annual growth rate of the market in 2009-2014 is predicted to be 8.8%
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=4294854815
Tires & Rubber Industry In 2014, the global tires & rubber market is forecast
to have a value of $131.4 billion, an increase of 15.1% since 2009
Passenger car & light truck segment is the largest within the global tire & rubber market, accounting for 60.5% of the market’s total value
Asia-pacific accounts for 34.4% of the global tires & rubber market value
Rivalry is intense with four leading companies holding more than 62% of market share by value
After a period of steady growth, the tires and rubber market fell in decline in 2008, which further deepened into 2009. Recovery is expected in 2010, followed by slowly accelerating growth towards 2014.
Industry Overview
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=210+4294854950
Industry Overview
Global tires & rubber market segmentation I:% share, by value, 2009
Global tires & rubber market segmentation II: % share, by value, 2009
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=210+4294854950
Industry Overview
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=210+4294854950
The global tire and rubber market generated a market value of 114.2 billion in 2009, a decrease of 6.7% from previous year. The compound annual growth rate is 0.9% from 2005 to 2009.
The compound annual growth rate of the global tire and rubber market in 2009-2014 period is expected to be 2.9%
Cooper Industries plc Crane Co. Illinois Tool Works Inc. Westlake Chemical Corp. Eastman Chemical Co.
Competitors
CSL CBE CR ITW WLK EMNConstruction materials X X X X X X
Transportation X X X X Interconnect technologies X X X
Food service products X X
Specialty products X
Competitors
Strengths Diversified product
portfolio High quality products Intellectual Property
SWOT Analysis
Weaknesses Sluggish performance in
certain segments Growth is dependent on
acquisitions Sales primarily from US
market
Sources: MarketLine and 2009 Carlisle Annual Report
Opportunities Renewable energy
source materials Growth in global
aerospace and defense market
SWOT Analysis
Threats Rising raw materials
prices Intense competition Products might become
obsolete due to technology changes
Sources: MarketLine and 2009 Carlisle Annual Report
Management is dedicated to achieving low cost positions and providing service excellence based on superior quality, on-time delivery and short cycle times.
Management Assessment
Carlisle Operating System (COS) Deployed enterprise-wide in 2009 Eliminates waste and improves efficiencies Quickly becoming part of the company’s
culture
Cost savings for 2009 is over $20 million. Similar savings are forecasted for 2010.
Management Assessment
“ 5-15-30-15-100 Vision” Introduced in 2007
Management Assessment
Comps Analysis
Comps Analysis
Recent Financial Results
Taxes (Quality of Earning)
Note on taxes from 2007-2009
The average actual return (not geomean) has been 2.4% The long term return is now 7% however they use moving thus the
12.15% expected return in 2009 The Pension is a liability, however its actual effects are not reflected
on the income statement. Only the net is reflected on the balance sheet
Pension
Note on Pension 2006-2009
Their strategy has evolved. Now they are simply pursuing returns!! (unfortunately we do not know what junk bonds they are invested in specifically). They label them as sovereign and corporate
Pensions
The continuous breakdown of goodwill has made it difficult to have a better understanding of it. The largest goodwill is applied technologies
Goodwill
Notes on Goodwill 2005-2008
Management says its due to “Strong Cash Flows”. There is more!!!! That may be a reason, however; we believe its due them being offered approximately 60 cents on the dollar.
The market believes that receivables are risky. Company was dependent on this for acquisition thus acquisition may slow down unless leverage increases.
Allowance is 7.9 on 292.5 thus (7.9/(292.5+7.9)= .0263 or 2.63%
Write-off of $4.9 million in 2009 Allowance was $11.3 million in 2008 then dropped to $7.9
million. We can then infer that $11.3-4.9= $6.4 which then results in $7.9-6.4= $1.5 million bad debt expense.
When we look at the write off in comparison to the remaining allowance then 4.9/7.9= .6203 or 60% (is remaining).
Why Securitization Ended?
Financial Valuations Sales Projection
5 Segments with different growth rate The growth rate comes from industrial
report, GDP forecast and personal adjustment
COGS Projection
0
500
1000
1500
2000
2500
3000
3500
1 2 3 4 5
Sal esCOGS
2005 2006 2007 2008 2009
Financial Valuations
WACC Cost of Debt
Fair Value=>YTM BBB Rating Spread+10 Years T notes
Cost of Equity CAPM
Historical Beta Unlevered Industry Beta=>CSL’s Beta
LTM ROE Stock Market Return for 20 Years
Financial Valuations
FCF
TEV Share
Price
Financial Valuations
The key question is if the transition from growth by acquisition to organic growth achievable. Looking at the past information as above mentioned we believe the metrics are difficult to achieve
However, if they achieve their target, their share value is about 59.13
We recommend to put this company on the watch list
Recommendations