CARLISLE
December 7, 2010
Cardo Martinez
Lisandro Tsai
Tom Wang
Antti Zhang
Presentation Outlines
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Company Overview
Industry Overview
Competitors
SWOT Analysis
Management Assessment
Recent Financial Results
Financial Valuations
Recommendation
Company Overview
 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
Source: http://www.carlisle.com/
Business Segments
 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
Source: 2009 Carlisle Annual Report pages 6 & 7
Business Segments
 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 heavyhaul and bulk commodity trailers, truck and trailer dump
bodies, and other specialty trailers
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
Industry Overview
 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.
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 Overview
The 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
Industry Overview
 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.
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
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%
Source: http://library.marketlineinfo.com.proxy2.library.uiuc.edu/library/DisplayContent.aspx?N=210+4294854950
Competitors
 Cooper Industries plc
 Crane Co.
 Illinois Tool Works Inc.
 Westlake Chemical Corp.
 Eastman Chemical Co.
Competitors
CSL
CBE
CR
ITW
WLK
EMN
Construction materials
X
X
X
X
X
X
Transportation
X
X
X
X
Interconnect technologies
X
X
Food service products
X
Specialty products
X
X
X
SWOT Analysis
Strengths
Weaknesses
 Diversified product portfolio  Sluggish performance in
certain segments
 High quality products
 Growth is dependent on
 Intellectual Property
acquisitions
 Sales primarily from US
market
Sources: MarketLine and 2009 Carlisle Annual Report
SWOT Analysis
Opportunities
 Renewable energy source
materials
 Growth in global aerospace
and defense market
Sources: MarketLine and 2009 Carlisle Annual Report
Threats
 Rising raw materials prices
 Intense competition
 Products might become
obsolete due to technology
changes
Management Assessment
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
Comps Analysis
Comps Analysis
P/S
P/BV
P/E
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
Recent Financial Results
Taxes (Quality of Earning)
Note on taxes from 2007-2009
Pension
 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
Note on Pension 2006-2009
Pensions
 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
Goodwill
 The continuous breakdown of goodwill has made it difficult to have a better understanding of it.
The largest goodwill is applied technologies
Notes on Goodwill 2005-2008
Why Securitization Ended?
 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).
Financial Valuations
 Sales Projection
 5 Segments with different growth rate
 The growth rate comes from industrial report,
GDP forecast and personal adjustment
 COGS Projection
3500
3000
2500
2000
Sales
COGS
1500
1000
500
0
2005
1
2006
2
20073
2008
4
2009
5
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
Recommendations
 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