Carlisle Companies Inc (CSL) 2015 Q4 法說會逐字稿

Good morning.

My name is Patrick and I will be your conference operator today.

At this time, I would like to welcome everyone to the fourth-quarter results conference call.

(Operator Instructions)

Thank you.

I would now like to turn the call over to President and CEO, Chris Koch, to begin the conference.

Chris?

Thank you, Patrick.

Good morning.

Welcome to Carlisle Companies' year-end 2015 conference call.

For the first time since 2007, Dave Roberts is not on the call with us.

I would just like to take a moment to thank Dave for his leadership as CEO over the last eight years.

We're also fortunate to have him in his new role as Executive Chairman.

On the phone with me this morning are Steve Ford, our Chief Financial Officer; Kevin Zdimal, our Chief Accounting Officer; and Julia Chandler, our Treasurer.

On this call, I will be discussing our overall performance of 2016 outlook and Steve will review our segment performance, balance sheet and cash flow.

As announced earlier this morning, Carlisle reported record results in 2015 with earnings per share of 26% to $4.82.

For the fourth quarter, earnings per share were up 53% to a $1.24.

Before I discuss our results in more detail, I would ask that you review slide 2 of our presentation entitled forward-looking statements and the use of non-GAAP financial measures.

Those considering an investment in Carlisle should read these statements carefully, along with reviewing the financial reports we filed with the SEC, before making an investment decision.

These reports explain the risks associated with investing in our stock, which is traded on the New York Stock Exchange under the symbol CSL.

Please turn to slide 3 of the presentation to view our full-year 2015 highlights.

These results reflect the continued efforts of our employees worldwide and execution of the strategies we've implemented over the last eight years.

In 2015, we achieved sales of $3.5 billion, an 11% increase from 2014.

We set records in the category of sales, EBIT, EBIT margin and net earnings.

In addition, Carlisle generated a record $529 million in cash flow from operations and $457 million in free cash flow.

That strong cash generation contributed to our ability to make investments in acquisitions and capital expenditures totaling $671 million.

Additionally, we returned $210 million in capital to shareholders through a 17% dividend increase and share repurchases totaling $137 million.

With the cash generation capabilities of our business, $411 million in cash on the balance sheet, and a $600 million unused credit facility, we are well-positioned to invest in our Business, fund acquisitions and continue to return capital to Carlisle shareholders.

Now let's review our fourth-quarter performance.

Turning to slide 4 in the presentation, as stated earlier, our earnings per share were up 53% in the fourth quarter to $1.24.

Net sales were up 11%, reflecting 9% higher sales from the Finishing Brands acquisition in our new CFT division and 3% organic growth, offset by a negative impact of foreign exchange of 1%.

With respect to our sales in our divisions, let's begin with CCM.

CCM had a solid quarter, with 6% organic growth aided by favorable weather conditions in much of the US.

The CCM team remain price-disciplined throughout the quarter.

CCM's continued price discipline, combined with lower raw material input costs, resulted in CCM's exceptional margin growth of 520 basis points.

Overall, the domestic US commercial roofing market is enjoying favorable conditions and continued moderate growth, lifted by new construction and solid re-roofing demand.

Carlisle FoodService also had a good sales quarter, with sales up 4%.

Sales initiatives with our large distributors in our e-commerce channel are having a positive impact on revenue, reversing the negative sales trend FoodService reported in the first half of 2015.

CIT sales were down 1% in the quarter; these results were lower than expected.

In the Aerospace business, timing of orders due to customer inventory management and an ERP implementation at a major customer impacted the quarter.

With LHI included, CIT's Medical business performed well in the fourth quarter increasing 6% year over year.

With our breadth of products and vertical integration capabilities, we are well positioned to win with major medical device OEMs that are looking to consolidate their supply chains.

In our core Aerospace market, rapid technological change in the in-flight entertainment connectivity market has driven investment in a robust new product development pipeline.

As mentioned in our release this morning, we are excited to announce that CIT is the first to market with the universal SATCOM antenna adapter plate, which positions us to take advantage of the latest technology and the next stage of in-flight entertainment connectivity satellite communication.

We expect this new product platform to be a significant revenue growth contributor in the coming years.

As expected, CBF sales declined in the third -- in the fourth quarter.

The well-publicized issues with demand in the heavy equipment market, particularly for mining equipment caused our end markets to remain sluggish.

We are monitoring our key OEM accounts, major mining companies, and global commodity pricing very closely for any changes in demand.

We continue to receive information on a slowing growth environment in China, weak metal prices, and OEM reports of continued deterioration in the mining market.

While we are not optimistic about a recovery to the markets in 2016, the financial impact that Carlisle will be limited, as CBF makes up 8% of our overall revenues.

Reported as part of our acquisition growth, Carlisle Fluid Technologies sales were $74 million this quarter.

Sales were impacted by currency headwinds, not surprising given the majority of CFT sales are outside of the US.

Without currency effects, CFT sales of its Finishing and Systems products were in line with our expectations.

CFT's EBIT margin of 15.9% exceeded our pre-acquisition expectations.

I will discuss CFT margin potential and integration progress when we review the outlook.

Overall, we reported Carlisle Company-wide EBIT margin of 14.3% in the fourth quarter, a 300 basis point increase from last year, driven largely by the strong performance at CCM.

Turning to our sales bridge on slide 5, as stated earlier, our 11% net-sales growth was comprised of 2.9% organic growth and 9.3% acquisition growth, offset by foreign exchange of 1.3%.

Lower selling prices had a negative 170 basis point impact to sales, primarily from lower pricing at CCM and CIT.

Sales volume was up almost 5%.

Turning to slide 6, our margin bridge.

EBIT margin increased 300 basis points in the quarter to 14.3%, the net impact of selling price in raw materials had a positive 290 basis point impact to our margin.

Volume was positive 30 basis points, COS was positive 100 basis points and the higher margin of Carlisle Fluid Technologies had an overall 10 basis point lift to our margin.

This was offset by negative impact of mix and other of 130 basis points.

You will recall in the third quarter, we reported CIT had favorable mix that we did not expect would repeat in the fourth quarter.

We also had additional costs for warranty expense at CCM and unfavorable mix at FoodService.

Slides 7 and 8 provide our sales and margin bridges for the full-year 2015.

As we close out 2015, we are extremely pleased with the results and our record performance.

Steve will next review our fourth-quarter segment performance, balance sheet, and cash flow.

After Steve's review, I will discuss our outlook for 2016.

Steve?

Thank you, Chris.

Good morning.

Please turn to slide 9 of the presentation.

At CCM, sales increased 4% in the quarter, reflecting 6% organic growth and 2% negative impact from currency fluctuations.

Demand for commercial roofing improved from the third quarter.

Sales increased throughout the fourth quarter, in part, due to favorable weather conditions.

Selling price declined slightly in the quarter, minus 1.5% as the CCM team remained disciplined.

CCM's EBIT increased significantly by 48% and its EBIT margin increased a very impressive 520 basis points to 17.9% on continued selling price discipline, lower raw material costs, and savings from the Carlisle Operating System.

Turning to slide 10.

CIT's net sales declined 1% in the quarter due to lower sales in the aerospace and industrial markets.

Sales to our aerospace customers declined 1%, primarily reflecting lower contractual selling prices and pass-through of lower metal costs.

As Chris mentioned, Aerospace sales volume, while positive, was impacted by order delays caused by an internal scheduling issue at one customer and year-end inventory management at another large customer.

Our Medical business, which now represents 15% of CIT's total sales, grew 6% in the quarter.

Defense and Test and Measurement, each grew 2%.

Sales to the industrial market, representing less than 5% of CIT's total sales, declined 21%.

CIT's EBIT margin declined 180 basis points to 15.7%, primarily due to lower selling price from contractual reductions and negative mix in the quarter, reflecting timing differences from the third quarter.

CIT's EBIT in the quarter also reflected $1.3 million, in non-recurring expense for product warranty and start-up costs associated with CIT's new satellite connectivity application.

As we announced in our press release this morning, CIT launched its new SATCOM antenna, adapter plate solution for use by providers of in-flight satellite connectivity.

Satellite connectivity has higher bandwidth and provides global in-flight service.

We expect this market to develop and grow significantly over the next several years.

We are currently expanding our Franklin, Wisconsin facility to meet this expected demand and expect to begin shipments in the second half of the year.

As discussed on our previous call, CIT is also expanding its footprint in Dongguan, China, with a new 260,000 square foot facility to meet expected growth for its medical and aerospace applications.

Please turn to slide 11.

CFT had sales of $73.6 million and EBIT margin of 15.9% in the fourth quarter.

CFT's EBIT includes 600 basis points of amortization expense from purchase accounting.

On a pro forma basis, CFT sales were down 5% from the prior year, primarily due to foreign exchange fluctuations.

Sequentially, sales increased 8.4%.

Sales growth was positive in the US and Japan, offset by softer demand in Europe and South America.

Slide 12 is a review of CBS results for the fourth quarter.

CBS sales declined 11% in the quarter, reflecting a 7% organic sales decline due to lower volume and a 4% negative impact from currency fluctuations.

Sales to the construction market were down 25%.

Sales to the mining market were flat to the prior year and sales to the agricultural market were down by 3%.

As widely publicized, global demand conditions, particularly for construction and mining, remain depressed.

CBS EBIT margin declined 20 basis points in the quarter due to lower sales volume, offset by SG&A expense reductions.

For the full year, CBF reduced expenses by $8 million to address the decline in its end markets.

Please turn to slide 13 as we review FoodServices results for the quarter.

Segment sales increased 4% in the quarter.

Sales to the FoodService market grew 4%, reflecting new sales from e-commerce initiatives and sales improvement with large distributors.

Net sales to the healthcare market grew 2%, also from gains with large accounts.

Segment sales to the janitorial/sanitation market grew 10%, largely due to higher sales to a large supercenter chain.

FoodService's EBIT margin remained level at 11.4%, as higher sales volumes were offset by negative changes in mix, due to more expensive rebate programs with certain large distributors.

Slide 14 summarizes full-year results by segment in 2015.

As Chris noted we delivered record sales, record EBIT, record margins, and record net earnings.

At CCM, sales exceeded $2 billion, EBIT was $351 million, a 31% increase over last year and EBIT margin improved 360 basis points to 17.5%; all records.

Please return to slide 15 of the presentation.

At the end of the year, we had $411 million of cash on hand.

We continue to have all $600 million of availability under our credit facility.

During 2015, we returned $210 million to our shareholders in dividends and share repurchases.

We repurchased 1.5 million shares in 2015.

We begin 2016 with a diluted share count of approximately 64.8 million shares.

In 2016, we plan to continue our systematic share repurchases to offset share dilution from equity compensation and expect to buy additional shares on an opportunistic basis.

Our balance sheet remains strong.

At December 31, our net debt-to-capital ratio was 13%.

Our net debt-to-EBITDA ratio was 0.5 times and our EBITDA-to-interest ratio was 18.9 times.

In August of this year, our $150 million senior notes are due and we currently plan to repay these notes with cash on hand.

Turning to slide 16, our free cash flow from operations for the three months ended December 31, was $152.9 million compared to $105.5 million in the fourth-quarter 2014, a $47.4 million improvement.

For the full year, we generated record free cash flow of $457.1 million, a 158% increase over 2014.

This significant improvement is attributable to higher earnings, cash generated by lower usage for working capital, including lower payments for tax, as well as $46.7 million of lower capital expenditure.

Our free cash flow conversion rate in 2015 was a very impressive 143%.

Turning to slide 17, our average working capital, as a percentage of annualized sales for the full-year 2015, was 18.2%, a 40 basis point increase from the 17.8% reported for 2014, in part, reflecting higher inventory at CCM in the first half of the year in anticipation of higher demand.

And with those remarks, I turn the call back over to Chris.

Thanks Steve.

Please turn to slide 18 as we cover our 2016 outlook.

For 2016, we expect Carlisle's total sales growth to be in the mid-single digits.

By segment, at CCM, we expect the market for commercial roofing to grow at a moderate pace in 2015, with solid growth in new construction and relatively steady re-roofing demand.

As we enter the first quarter, pricing remains relatively disciplined in the market and raw-material tailwinds continue.

Overall, we expect CCM to have another outstanding year in 2016.

CIT is expected to continue its strong performance in 2016, with growth in the mid- to high-single digits.

We also expect initial sales from CIT's new SATCOM adaptor plate product to begin in the second half of 2016.

CIT's first-quarter growth rate is expected to be lower than the full rate, as comparables to last year will not account for the full AOC pricing impact as well as some order [patterd] carryover from Q4 2015.

With its expansion projects, CIT is going to have start-up costs in both Dongguan, China and Franklin, Wisconsin.

These are expected to be $4.5 million in 2016, with about $2 million occurring in the first quarter, primarily from the Franklin expansion.

At CFT, consistent with expectations we are planning for mid-single-digit growth.

Foreign currency is expected to be a continuing headwind, offsetting some of this growth.

Higher sales will come through new product introductions, entering new market segments and global sales share gains.

CFT has acquisition costs of $9.3 million, primarily related to inventory step-up in its 2015 EBIT that will not repeat.

As we communicated when we first announced this acquisition, CFT is expected to become our highest margin business.

During 2016, we will invest significant dollars in vertical integration, additional sales personnel and CFT's move to a new global headquarters.

There are a number of well-understood initiatives underway that will allow us to reach our goals, but will impact short-term margin results.

At CBF, the demand for heavy-duty mobile equipment continues to be unfavorable and may decline further.

We are in our fourth year of this global-mining recession and the outlook from our major OEMs indicates a near-term recovery is unlikely.

The team at CBF continues to focus on sales initiatives to offset the lower demand as well as actively pursue further cost reductions.

At FoodService products, we expect growth in the low-single-digit range with corresponding EBIT improvement.

As indicated on slide 18, corporate expense is expected be $59 million and D&A is expected to be $136 million.

We are planning for capital expenditures of between $100 million and $125 million.

We expect to continue our strong cash generation, with cash conversion of greater than 100%.

Interest expense is expected to be $31 million, reflecting repayment of $150 million of bonds maturing in August 2016.

Our tax rate is expected to be 33% in 2016 versus an effective tax rate of 31.7% in 2015.

2016 looks to be another record year for Carlisle.

CCM is well positioned in its markets for continued strong performance.

CIT is expected to grow and leverage the significant investments we have made in this business.

The significant investments underway at CFT will enable us to expand our global sales and increase our productivity.

In addition, we continue to look for bolt-on acquisition candidates to build on both of these key growth platforms.

In closing, I, again, want to commend our 12,000 employees for their excellent performance in 2015 and their continued dedication to delivering value in 2016.

This concludes our formal comments on our 2015 results and 2016 outlook.

Patrick, we're now ready for questions.

Yes, sir.

(Operator Instructions)

Joel Tiss.

I wondered if you can get a little more granular on the aerospace industry, what's going on there?

And I think you won a new Airbus contract for 2016.

So just a little more detail on what the Boeing builds plans are and how the business flows for the year?

Yes, Joel.

The Boeing builds are consistent with what we said in the past.

I think for the 787, to give you an example, we're 10 and the projection is for Boeing to go to 12 a month this year.

We see basically the continuation of what we've seen in 2015 on the aerospace front, with a slight blip there in the fourth quarter on some inventory ordering patterns, as we discussed.

Okay.

And then I just wondered if you could give us a little sense of what is left to do on the Carlisle Operating System.

It seems you've been getting a lot of returns out of that for a long time.

I just wondered what's left to do there.

Yes, that's a -- it's an ongoing process.

We are -- what I'd like to say is we're in early stages.

We will see continued opportunity with COS in the future.

We don't see this as an ending in the near term.

The performance this year was consistent with the growth we've seen in the past and we would look in the future to higher savings as we roll out that COS product in our business processes.

To date, they have really been focused on the factory and we think there's a lot of runway as well in the business process side.

Okay.

Thank you.

Ivan Marcuse, KeyBanc Capital.

Great quarter.

Quick question on -- you're welcome.

A couple quick questions.

On roofing.

I understand that weather helped out this quarter; is there any way you could quantify what kind of benefit that, that was for the quarter?

Yes, Ivan, I don't think we can quantify it.

Certainly the weather was more cooperative in the fourth quarter this year than it was last year.

So there was a benefit but it's hard to identify and assign a dollar value.

And then your -- great.

And then on your raw material -- the price for raw material on the bridge for EBIT, I'm assuming the vast majority of that was in roofing or was there another segment that had sort of a raw material benefit as well?

Yes we had a little bit of a benefit within the CIT segment but as you note, the vast majority was within CCM.

Great.

And then if you look at your -- the antenna, the Wi-Fi antenna for air -- for planes that you talked about, what kind of sales benefit are you expecting out of that?

And is that going to cannibalize anything existing that you're already sort of selling that market?

I'm assuming they have -- they are already using some sort of antenna.

How does that impact you and what sort of expectations for this business?

Sure.

It's early days.

I think we'd expect something in a first-year sales around $10 million and then ramping up over three years to something, let's say, in the $20 million to $30 million range.

As you look at the technology, I think we're going to see an expansion here.

I think you'll see us growth through share gains and there may be some attrition in our current product but I don't expect much.

Great.

And jumping right back to roofing.

Great margins this year, as you talked about raw materials.

We've already -- historically, this has always been talked to, about a 15% to 16% type of margin business.

Do you think that's changed structurally and we will return to that over time?

Or is there something that history won't repeat going forward and we'll start to see this 16% to 18% type of margin going forward?

I think we like to think there's been a structural shift.

Dave Roberts has talked about it in the past, our efforts to try to move the industry up.

Obviously, this year the price discipline by CCM had a lot to do with that and we don't see any change in our philosophy going forward on our pricing.

So we'd like to think that we are changing that structure and moving it up permanently.

Your pricing strategy, it may be changed but do you think the industry has changed?

Well, I would say that as we look at what's happened through the year, we -- the market has exhibited what we think is some strong pricing discipline, so obviously, I can't project what our competitors are doing.

But we would hope that the trends we saw here in 2015 in the market, would continue.

Great.

Thanks for taking my questions.

Jim Giannakouros, Oppenheimer.

On the CapEx, I'm sorry if I missed it but can you bucket your CapEx plans between maintenance growth and calling out the new facilities or expansion that you announced today?

Yes Jim, the maintenance piece is between $65 million and $75 million and anything above and beyond that would be for these growth platforms.

Okay.

And then our range for the year is 1 to 1.25.

Right.

Got that.

Thank you.

And the debt paydown, should we expect that to be midyear or the summer, rather, when it comes due or is there any --?

No, August 15 is when the notes come due.

Okay.

And then appreciating that it's a -- it's quite a small piece of your EBIT but on -- in CBF and I understand that it's a continued challenge that you see there.

But can you give us a better look into what your top-line decline assumptions are on your plan?

And are margins -- can we assume that you can hold margins just on either incremental restructuring or just blocking and tackling on COS initiatives, et cetera?

Coming into the year, our plan was to sort of remain revenues level to 2015.

The certainly some of the news that has been reported so far this year, is going to create some challenges for us.

I think the business has done a nice job taking cost out and we continue to focus on cost reductions, again, as these end markets continue to remain soft.

So we're - - I think it's more of the same that you'll see in 2016 and our focus on cost reduction continues.

Thank you.

Kevin Hocevar, Northcoast Research.

Nice quarter.

I'm wondering if you could comment on how your raw materials, particularly in CCM trended throughout the quarter and kind of how they're trending now given oil has taken a bit of another letdown here in 2016?

We saw raw materials throughout 2015 continue to -- raw material costs continue to decline and there will be some continued decline, I think, going into Q1.

There may be a little bit of a lag in terms of how those raw material cost changes on oil or captured in the business and in the end products we use but we see Q1 as a continued decline in raw material process.

Okay.

Okay, got you.

And then could you elaborate, too, on your comments about your expectation for moderate growth in CCM in 2016, as -- does that imply kind of low single-digit type growth?

Mid-single digits?

Just -- I wondered if you could help kind of put some parameters around that comment.

Kevin, I'd say low to mid.

I think we don't think really much change coming out of the Q4.

Q1 is really a very low volume quarter for us, obviously.

So picking that up in Q1 is up, I think, is an indication for the year but we see things in that low to mid-single-digit range.

And then a question on -- for Steve, for cash deployment.

You really did boost the share repurchase activity in the fourth quarter.

And it makes sense given the share price movement during the time.

So I was just wondering, has that bumped up in terms of a priority in terms of cash usage?

And also curious in terms of M&A pipeline, how that's going and kind of when you guys think you'd be ready to, particularly on the CFT platform, when you think you'd be ready to start making acquisitions because I know that's a key driver for that business.

So I'm curious your thoughts on that.

Kevin, our first priority remains to grow the business, both organically and acquisitions.

And we are excited about acquisition opportunities and that's where we hope to do, to deploy cash in 2016.

In addition to that, share repurchase continues to be our focus but I think you're seeing in 2016 a similar program that we employed in 2015.

We will buy back systematically to minimize the dilutive effect of equity awards and we will also look to be opportunistic to buy on top of that.

So I think what you saw in 2015 is what I'd expect to see in 2016 and beyond.

Great.

Thank you very much.

Neil Frohnapple, Longbow Research.

Congrats on a great quarter.

And Chris, congrats on the new role.

For CIT, could you just help us with the margin expectation for 2016, with a few different moving parts?

Such as some of the start-up costs for expansion but you guys do expect the mid- to high single digit net sales growth, which would presumably be favorable to profitability?

And maybe further COS opportunities, particularly within LHI.

So could you provide an outlook, at least directionally versus the 18% operating margin you achieved in 2015?

Yes, I think you're going to see, for 2016, that operating margin in the range that you saw for 2015.

I think we -- that 18% to 19% is probably a pretty good range.

All right, that's helpful.

And then Chris, could you maybe just talk bigger picture on your vision for Carlisle over the next two years as the new CEO?

I mean, anything you plan to approach differently or longer-term targets you plan to initiate?

I think Dave had alluded to, maybe upsides to the long-term margin goal last quarter.

Just any more thoughts you could provide there?

Sure.

We -- Dave and I've worked together a long time and we worked together on the construction with the other team members of the current strategies and so there's going to be a lot of consistency moving forward in the whole framework of Carlisle.

But with that being said I think Dave and I have alluded in the last year to as we have, or alluded to, some higher growth expectations as we have reached some milestones.

Certainly, getting close to our 15% EBIT margin for Carlisle means we're probably going to take a look at that again.

And of course, we have pretty high expectations so there will probably be some changes there.

As we continue to build out the CFT platform, the margin profile changes as well in CIT, with new products like the connector plates that are innovative and bring good margin, I think that just reinforces that.

I think you'll see continued growth, like I said in CIT.

I think CFT, both of them platforms for acquisition.

We are also -- we'll probably be opportunistic with CCM; that's been a great business.

And we talked earlier about hopefully having moved up that margin profile in the industry.

So I think it's not just more of the same; it's probably additive to the same and continuing to reinforce the strong financial management, the conservative balance sheet, the opportunistic acquisitions and moving the business forward.

So we think good things ahead.

All right.

Thanks very much and good luck.

(Operator Instructions)

Tim Wojs, Baird.

Nice job.

I guess just on the CCM business, I mean, just with volumes up in 2016, according to your expectations and just where we are in raw materials, is it fair to assume that we should see margins kind of flat to up in that business for next year?

Yes, Tim, obviously, the pricing is the other part of that equation.

But the pricing continues to hold and we continue see the discipline within the industry that we've enjoyed, really, throughout 2015.

Yes, we expect raw materials to be a tailwind and we do expect to have some top-line growth.

Okay.

And then I guess just in the Fluid business, I think in 2015, there were some larger equipment orders that might've been back half-weighted.

I was just curious how we should think about the revenue cadence in that business in 2016?

Does that kind of repeat or does the revenue a little bit more evenly spread through the year?

Tim, that's -- and you're right, with the Project business being a part of the CFT and that will continue every year.

The Systems business is hard to really work forecast in, I'd say, month-to-month granularity because obviously, the automotive companies and other large OEMs operate on their timeframe.

But I think you'll see growth in CFT.

You'll see growth in systems; growth in standard product.

And we'll just -- I can't really give you a lot of clarity on that Systems business, other than to tell you it will be there and it will be part of the revenue mix going forward and just to expect it.

Okay.

Okay.

No, I understand that.

Great job.

Okay, Thank you.

Liam Burke, Wunderlich.

Staying on CFT, since you've purchased it, how has the -- did you inherit a strong new product pipeline or have you been able to accelerate it since it's been brought under the Carlisle umbrella?

I would say both.

We did inherit a strong product pipeline.

One of the examples I would give you that we're having a lot of success with right now is our smart pump technology.

It's an electronic -- or electric, excuse me, pump for applications like automotive paint systems.

It's being very well received worldwide.

It was already launched when we took over.

It had been recently launched.

And we are continuing to see just solid penetration globally and especially in major automotive OEs.

And then we've come in and we have organizationally added some assets.

We have changed the structure to be more responsive and as we look to 2016, you'll see an accelerated investment in new products.

I mean, that is an absolute essential part of this business and its continuing to deliver customer solutions that are innovative and have that high margin profile.

Great.

And then just on the acquisitions.

How has the pricing been in the market as you look to add product and geography?

Well, I think with what's going on in the overall market, there's been a 20% decline in equities in general.

And I think we are seeing some of that in the marketplace.

I think it's becoming a better time to be a buyer than maybe it was a few quarters ago.

Great.

Thank you.

You're welcome.

We have one follow-up on the line from Jim.

Thanks for taking my follow-up.

Excuse me.

When thinking about how you view your, what drives your CCM business from top line, non-res demand, fully appreciating that, maybe 60% to 70% of that is driven by replacement.

Looking back on entering into 2015, I recall you were thinking mid- to high-single-digit type of growth, predominantly volumes, as pricing kind of flattish to maybe even some pressures there.

That stepdown, just reflecting on your 2015, can you give us your thoughts on what drove the stepdown in growth expectations?

Was there a certain bucket in new construction that didn't grow as expected or is it just general replacement demand, not as robust as you had previously thought?

I don't think I can break it down for you by individual segment within the markets.

I would just say that as the year went on, there was some moderation in the growth rates.

I think we had some significant discussion around the third quarter and what the surprise that was.

I think Dave did a great job of characterizing it.

We didn't see that coming and that had an impact on 2015 growth rates.

And then as we moved into Q4 with the warmer weather, we saw some nice growth and I think we're seeing a Q1 that is pretty consistent with the growth rates in Q4.

So I think as you look at 2015, you've got to take third quarter in account and think about what that did for overall growth rates for the year and as we look at 2016, we think the outlook is for moderate growth.

And we think that's consistent with what we saw in the fourth quarter.

Fair.

Thank you.

There are no further questions at this time.

I'd now like to turn it back over to the presenters for any closing remarks.

Thanks Patrick.

This concludes our fourth quarter 2015 earnings call.

Thanks to everyone for your participation and we look forward to speaking with you at our next earnings call

Thank you.

And this does conclude today's conference call.

You may now disconnect.