Carlisle Companies Inc (CSL) 2017 Q1 法說會逐字稿

Good afternoon.

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

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

(Operator Instructions) Thank you.

Mr. Chris Koch, you may begin your conference.

Thank you, Taney.

Good afternoon, and welcome to the Carlisle Companies First Quarter 2017 Conference Call.

On the phone with me this afternoon, are Bob Roche, our Chief Financial Officer; Steve Ford, our Vice President of Investor Relations, Secretary and General Counsel; and Titus Ball, our Chief Accounting Officer.

On today's call, I will discuss our first quarter 2017 performance and 2017 outlook.

Steve will review our segment performance, balance sheet and cash flow.

Before I begin my prepared remarks, I would like to introduce everyone to call-- on the call to Carlisle's new Chief Financial Officer, Bob Roche.

We are fortunate to have Bob join the Carlisle team.

His deep experience with acquisitions and integration, operational finance and strategic planning will be important as we enhance our focus on these areas throughout the Carlisle enterprise.

Bob's addition allows us to increase our capacity in M&A and finance, and allows Steve Ford to focus on developing a world-class Investor Relations function at Carlisle.

Given our plans for growth, these changes will help support Carlisle's strategic initiatives in the years to come.

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.

Reconciliations of U.S. GAAP to non-GAAP measures are provided in our earnings release and the appendix to this presentation.

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.

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

Now let's review our first quarter performance.

Please turn to Slide 3 in the presentation.

As announced after the stock market closed today, Carlisle reported record first quarter sales of $857.3 million, driven by outstanding performance at CCM, where through continued focus on execution of their core initiatives, growth exceeded the favorable nonresidential roofing market growth rates.

CCM also had a record first quarter margin performance.

This performance was especially noteworthy, as it was the fourth consecutive year of first quarter margin expansion.

The San Jamar acquisition within the FoodService segment, announced this past January contributed almost $20 million to the year-over-year sales growth, and we were pleased to see sales growth in CBF for the first time since the third quarter of 2014.

Negatively impacting sales in the first quarter was our decision at CIT to maintain pricing integrity, which resulted in a substantial sales decline within our in-flight entertainment connectivity, or IFEC, product category.

The decline in IFEC sales will result in a volume headwind for the business in 2017, which will be mitigated by the increasing deliveries of our new SatCom product line.

The commercial aerospace market is experiencing a technological shift from traditional seatback entertainment systems towards SatCom-based wireless connectivity.

While this technological change will cause near-term challenges within the aerospace industry as the transition occurs, this is consistent with the wire to wireless connectivity evolution underway globally and will result in enhanced customer connectivity and the in-flight entertainment experience.

This shift is more impactful in narrow-body aircraft, and we expect wide-body aircraft will offer a combination of both traditional seatback entertainment systems and SatCom wireless products for some time.

First quarter earnings per share from continuing operations of $0.94, included $0.10 of previously announced restructuring, facility rationalization and acquired inventory costs.

We are on track to complete these restructuring activities and are expecting significant EBIT improvement from these investments beginning in 2018.

Earnings performance in the quarter was well below our expectations, driven largely by lower volumes experienced in CIT.

We recorded pretax charges of $5.2 million, primarily related to the current facility rationalization and plant restructuring projects in the Interconnect Technologies and Brake & Friction segments, along with pretax acquired inventory cost for the San Jamar and Arbo acquisitions, which totaled $3.9 million in the quarter.

Our disciplined approach to deploying cash from operations continued in the first quarter, returning $22.7 million in capital to shareholders through dividends, investing $30.4 million in capital expenditures and approximately $226 million for the acquisitions of San Jamar and Arbo.

As Steve will detail in his comments, we have ample liquidity available to pursue our organic investments, acquisitions and to return capital shareholders through dividends and share repurchases.

If you would please turn to Slide 4, I would now like to share some of our recent highlights, including an update on the significant progress we are making on some of our strategic growth initiatives.

At CCM, conditions in the U.S. nonresidential roofing markets remain favorable.

Growth was better than expected despite tougher comparisons to last year, with the U.S. single-ply membrane market growth rates in the low-single digits.

CCM experienced growth across almost all regions in the U.S. and Canada in the quarter, with insulation and TPO products outpacing overall growth rates.

This business is positioned to capitalize on trends and energy, efficient insulation solutions and the growing popularity of TPO products with the contractor community.

Project backlogs remained strong for roofers, however, tight labor conditions remained.

Traditionally a North American-centric business, CCM is strategically focused on international expansion through construction of a new production facility in Germany and the acquisition of Arbo.

Additionally, we are actively pursuing European acquisition opportunities in the building envelope space to complement our existing footprint.

As expected, raw material costs at CCM increased by $3.6 million in the quarter and pricing was unfavorable, declining 1.7% versus prior year.

CCM announced a 7% polyiso price increase and a 5% TPO price increase, effective April 1.

One other noteworthy development at CCM in the first quarter was the approval of a new 40,000 square foot R&D Technical Center in Carlisle, PA.

This high-tech R&D center will almost triple our current square footage and allow CCM to maintain its technological leadership position in the building and construction industry.

At CIT, the sales decline from 2 large commercial aerospace customers had a greater impact than anticipated as we exited the fourth quarter of 2016.

Offsetting this headwind going forward are sales related to the technology shift from traditional seatback entertainment systems to our new satellite connectivity products, which continue to gain momentum.

The satellite connectivity installation kit market size is currently estimated at $250 million and is expected to grow at 10% to 15% CAGR through 2021.

CIT remains well positioned to capitalize on the rapid growth for these products in both line fit and retrofit applications with our ARINC 791 solution and products we've acquired with the Star Aviation purchase last fall.

The current CIT SatCom pipeline to be delivered over the coming years is estimated at over $200 million with the pace of shipments accelerating later in the year.

And industry expectations are that air to ground technology will be surpassed by satellite connectivity as the dominant technology in the coming years.

With both IFEC and SatCom technical capabilities and products, CIT remains a market leader in the industry.

In CIT's medical business, the expansion of our state-of-the-art facility in Dongguan, China, remains on track.

This facility, in addition to the capabilities of our medical technology development team, is supporting a growing new product development pipeline of over 75 active projects with a value of approximately $50 million.

The manufacturing capabilities in this facility will contribute to CIT's position as an emerging global leader in the medical interconnect markets.

CIT remains diligent in their efforts to take costs out of the business, as evidenced by the current year restructuring and facility rationalization activities, and we expect EBIT margins to improve as a result.

At our FoodService segment, the team continues to successfully execute their sales growth and operational excellence strategies as evidenced by the 7th consecutive quarter of organic sales and earnings growth.

The acquisition of San Jamar earlier this year has added to the sales momentum, and we are very pleased with the San Jamar team's performance in the first quarter with Carlisle.

Integration activities including the roll-out of the Carlisle Operating System are progressing well.

The San Jamar management team is fully engaged in achieving the expected growth rates, and that will leverage the new tools COS has brought to the business.

Steve will now review our first quarter segment performance, balance sheet and cash flow.

After Steve's review, I will discuss our outlook for the remainder of 2017.

Steve?

Thank you, Chris.

Please turn to Slide 5 of the presentation, which is a recap of our sales results.

Selling prices, primarily at CCM, had a negative 0.7% impact to sales.

Sales volume was up 4.4%, driven by CCM, CFS and CBF, partially offset by CIT and CFT declines.

Organic growth in the first quarter was driven by strength in our U.S. commercial roofing, health care and off-highway construction equipment markets.

Acquisitions contributed 4.9% of sales growth in the quarter.

Turning to our margin bridge on Slide 6. EBIT margin decreased 260 basis points in the quarter to 11.3%.

The net impact of selling price and raw materials had a negative 20 basis point impact to our margin.

Volume was positive 70 basis points, and COS was positive 90 basis points.

The impact of acquisitions made in 2016 and 2017 was dilutive to our margin by 110 basis points.

Restructuring and facility rationalization costs in the quarter had a negative impact of 50 basis points.

The category labeled Other, includes the impact of unfavorable product mix and increased investment in sales staff.

Let's turn to Slide 7 to review the quarterly performance by segment in more detail.

At CCM, sales increased 10.5% in the quarter, led by 14% volume growth in domestic commercial roofing sales.

The Arbo acquisition contributed less than 1% of sales to the year-over-year growth.

Selling price at CCM was lower versus the prior year by 1.7%.

Importantly, the stable sequential selling price environment we have experienced in the U.S. commercial roofing market over the past several quarters continued in the first quarter of 2017.

CCM demonstrated another quarter of strong earnings performance as EBIT grew 12% and EBIT margin increased 20 basis points to a first quarter record 18.1%, reflecting higher sales volume and savings from the Carlisle Operating System.

Please turn to Slide 8 to review CIT's results.

CIT's net sales decreased 1.3% in the quarter, with volume and selling price down 8.9%, partially offset by the Micro-Coax and Star Aviation acquisitions, which added 7.9% to sales in the quarter.

Sales to the commercial aerospace market decreased 11.5%, and sales to the medical market were flat in the quarter.

CIT's EBIT declined 39% due to lower sales volumes and $4.3 million of pretax restructuring and facility rationalization costs, partially offset by COS savings.

As Chris noted earlier, the demand for satellite communication product solutions in the commercial aerospace market continues to gain momentum with the pace of retrofit activity accelerating.

Demand for these solutions is expected to rise substantially over the next few years as airlines act to increase in-flight satellite connectivity and bandwidth.

Please turn to Slide 9 to review FoodService's results for the quarter.

At Carlisle FoodService, our focus on operational excellence continued to yield year-over-year sales and earnings growth now for a 7th consecutive quarter.

FoodService's organic sales increased 6% this quarter.

Sales to the health care market grew 19% on higher equipment sales.

Sales to the janitorial/sanitation market grew 5% on further penetration of large accounts.

San Jamar performed as expected in the quarter.

CFS EBIT margin was 7% as current quarter included a pretax charge of $3.4 million of acquired inventory related to the San Jamar acquisition.

Turning to Slide 10.

CFT's sales declined 1.1% in the first quarter, representing an organic sales decline of 0.5% and the negative impact of foreign exchange of 2.8%, partially offset by 2.2% growth from the acquisition of MS Powder.

Sales to the transportation market declined 15.9%, primarily in Asia Pacific due to the timing of system sales.

Sales to the automotive refinish market were down 3.8%.

Sales to the general industrial market increased 3.9%.

CFT's EBIT declined 29% due to continued investments in sales resources, expanded manufacturing capabilities, in-sourcing initiatives and consolidation of its global footprint.

All of these investments are consistent with CFT's stated growth strategy and are expected to lead to incremental margin improvement.

Turning to Slide 11.

CBF's sales increased 1.7% in the quarter, reflecting an organic net sales increase of 3.6%, partially offset by a 1.9% negative impact due to foreign exchange.

CBF experienced sales growth for the first time since the third quarter of 2014.

Sales to the construction market grew 9%.

Sales to the mining market grew 0.8%, reflecting growth for the first time since 2012.

Sales to the agriculture market grew 11%.

Sales to the aircraft market declined 48%.

CBF's EBIT declined $2.5 million as a result of unfavorable product mix, primarily due to lower aircraft sales, higher raw material costs and expenses related to the previously announced closure and relocation of the Tulsa, Oklahoma manufacturing facility to our Medina, Ohio facility.

Please turn to Slide 12 of the presentation as we review our balance sheet.

As of March 31, we had $134 million of cash on hand.

In January, we used approximately $226 million of cash on hand to acquire San Jamar and Arbo.

We increased our credit facility in the quarter and now have $1 billion of availability.

We returned $22.7 million to our shareholders through dividends.

Our balance sheet remains strong.

At March 31, our net debt-to-capital ratio was 16%, our net debt-to-EBITDA ratio was 0.7x and our EBITDA-to-interest ratio was 23.7x.

As Chris noted, we remain extremely well positioned to pursue acquisitions and return capital to our shareholders.

Turning to Slide 13.

Our free cash flow for the first quarter was $1.5 million compared to $90.3 million the prior year, with the decline attributable to lower net income, a greater usage of working capital to support organic growth and higher capital expenditures.

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

Thanks, Steve.

Please turn to Slide 14 as we discuss our updated 2017 outlook.

We expect our 2017 consolidated sales growth to be in the high-single digit range.

By segment, we expect CCM to achieve mid-to high single digit sales growth, leveraging a favorable U.S. nonresidential construction environment.

CCM will continue to operate with the same commitment to maintaining price discipline in their markets and by driving increased use of the Carlisle Operating System throughout the business.

CIT is expected to achieve mid-single-digit growth for the full year, reflecting our price discipline on legacy IFEC products and the corresponding impact of the customer in-sourcing initiative.

We are optimistic that our growing backlog and increasing ramp-up of SatCom product sales will contribute to sales growth in the latter half of 2017.

The sales growth estimate includes sales contributions from the Micro-Coax and Star Aviation acquisitions.

Demand for CIT products remains strong in the commercial aerospace and medical technology markets and we're excited about the significant operational improvements underway.

At FoodService, we expect organic net sales growth in the low to mid- single digit range with continued earnings leverage and a significant positive contribution from the recent San Jamar acquisition.

At CFT, we will continue to invest in the previously noted key initiatives to drive improved financial performance and add scale to this platform.

These investments are expected to provide returns beginning in 2018 and put us on track for significantly increased operating performance in the coming years.

The outlook across CFT's largest global end markets remains positive and our expectations for sales growth are in the mid-single-digit percent range.

At CBF, we remain cautiously optimistic that we have seen the bottom of the cycle in our key end markets of mining, construction and agriculture.

At this time, we would expect CBF net sales to be slightly positive for 2017.

Throughout the prolonged downturn, CBF has aggressively addressed its challenging markets by realigning its cost structure.

As noted with the Tulsa closure, the CBF team has and will continue to position this business for a rebound in the global mining, agriculture and construction markets.

Corporate expense is expected to be $65 million, and depreciation and amortization expense is expected to be $155 million for the year.

We expect capital expenditures will be approximately $125 million to $150 million for 2017, and we're expecting free cash conversion to be approximately 100%.

Interest expense is expected to be $27 million, and our tax rate is expected to be approximately 33% in 2017.

We are pleased by the record sales performance in the first quarter and look to build on the positive momentum we have as we continue through 2017.

This concludes our formal comments on the first quarter results and 2017 outlook.

Taney, we are now ready for questions.

(Operator Instructions) And your first question comes from the line of Jim Giannakouros.

Great, great stuff in CCM, would love a little bit more details on how you guys can drive that type of volume in a seasonally soft period against extremely tough comps.

Can you call out anything that moved the needle there?

A large project?

Or a weather event in a certain region?

Or maybe how much of that would you attribute to any pre-buy activity ahead of the price increases that I believe all Big 4 manufactures instituted in early April?

Yes.

Thanks, Jim.

They did an excellent job at CCM.

And as you noted, there might have been some pre-buy.

We're thinking something less than $10 million, but I think that's a good number in approximation.

And then really the weather again, just like last year, the weather was favorable.

We saw nice increases across all the products lines, EPDM, TPO, PVC, ISO, even Europe, some nice growth there.

So just a really good job all the way around.

And then a little bit of growth in Canada.

Not a lot of dollars, but a nice percent.

And they just knew products and a continued focus on the CCM experience.

We continue to see CCM improve their deliveries, their customer service interaction and I think that has a lot to do with the performance they're driving.

Okay.

Thank you.

And if I can follow up on just what you're seeing so far.

To the extent that you can comment on pricing, how much of that is, of what you put in place in early April?

How much of that is sticking?

And was it just on those areas- TPO, polyiso?

Were accessories also priced up?

And then, I guess, as a tack-on because we're all trying to figure out the price-cost equation, anything you could talk -- any updates on to that $7 million to $10 million EBIT quarterly headwind that you anticipated several months ago for this year?

Yes, I'll let Steve talk about the price to ROS.

As far as the price increase, though, it was implemented April 1. We typically see a pretty good lag there, 30 to 60 days on the bulk of a price increase.

So we're -- it's still playing out.

We are seeing it have some effect.

So I'll have to get back to you, we'll add more information and obviously in the second quarter and then it was just on the polyiso and TPO product lines.

So Steve, do you want to answer the question?

Yes, Jim, a little more color.

In the first quarter, price was a negative about 7 and ROS were negative about 3.6, so a little over 10 on a combined basis.

Sort of the guide that we gave coming into the year was that on a net basis, we would be negative about $40 million.

That's where we still see it.

We still see over the course of the year, negative about $40 million, maybe getting a little bit more price but having a little bit more raw material pressure.

But overall, for the full year, negative around $40 million.

And your next question comes from the line of Kevin Hocevar.

Can you -- you called out a greenfield plant in Europe.

So I was wondering if you can describe for CCM, what you're doing there.

What product line that's for within CCM?

Because I guess my understanding, Europe is different than here.

I think it's more asphalt-based and you guys kind of have the sole EPDM manufacturing there.

So wondering what you're building over there?

What product lines?

And If you could kind of frame up the market for us, how much is asphalt?

How much is EPDM?

That would be helpful.

Kevin, we have -- we made our 2 EPDM acquisitions a couple of years ago.

And 1 is since we bought an older factory.

We are bullish on the European prospects.

This is just an opportunity to invest in a greenfield: new production, new technologies, new equipment and we just think, it's going to sort of allow us to sort of reduce our cost and position ourselves for future growth in Europe.

So this is just really an enhancement of our current EPDM.

And you're right.

There is sort of a retrofit -- [retro next] is the brand name that we use over there, it's a combination of EPDM rubber and asphalt.

And that is the production that will be in our new European facility.

So that's, again, it's just an effort or a chance here to really renovate and take advantage of what we expected to be our future growth in Europe.

Got you.

Okay.

It's encouraging to hear CBF see a sales growth here for the first time in a while.

What is your -- and it sounds like your expectation is you'll get some very modest sales growth for the year.

What is your visibility in this segment?

How far out can you see -- how far out do your order books look?

And I guess, is what you're seeing there essentially what's supporting the-- I forget what, if there was exactly, low single digit or some type of growth there in CBF for the year?

Yes.

Kevin, we're seeing about -- we see 30 to 60 days out.

And indeed, what we're seeing in some of the orders with, I think we've had 5 to 6 months of increasing bookings within CBF, and that's giving us some positive feedback and good feeling for the remainder of the year.

And then in CIT, how should we think of the margins here as we go through the year?

Because I guess even if you strip out that $4.3 million in restructuring charges, margins were down 500 basis points here in the first quarter.

So is that kind of how to think about it going forward?

Or is there a different way to think about it?

And also on the restructuring charges, I think last quarter, you called out there would be $4 million in restructuring charges in CIT over the next 6 quarters.

And that's how much you incurred this quarter.

So are the restructuring charges done at this point?

Yes.

So I think what we called out, Kevin, was specific to China.

So there was more in the first quarter than just China.

So there will be continued restructuring charges in subsequent quarters here in '17.

I think our Q2 is going to resemble our Q1.

I think some of the challenges that we had in Q1 will continue into Q2.

And we see a bit of a recovery in the second half of the year, margins improving as we exit and we feel good about where we're heading.

[We're up for] '18.

And your next question comes from the line of Neil Frohnapple.

For CFT, you indicated that sales volumes increased in Asia Pacific -- I'm sorry decreased in Asia Pacific, primarily due to the timing of system sales.

And I think, Steve, you mentioned that in the commentary with regard to the transportation side.

Any way to quantify this impact to the quarter?

And I guess, really what gives you confidence that growth will accelerate for the remainder of the year to hit sales growth in the mid-single digit range?

Neil, I'll let Steve take the quantification.

But in terms of the second half, this business is a little bit longer in terms of visibility than, say, our CBF business.

So these projects are significant projects in automotive, assembly and paint shops and so we already have visibility into projects in the third quarter.

And so I would say that the project pipeline is what's giving us confidence that we'll have a solid second half of the year.

Steve, I don't know if you want to try to quantify the first quarter.

Yes, system sales were down about $2 million in the quarter.

And again, they tend to be lumpy, they tend to be more back half of the year loaded.

And based on our order book, we feel pretty good about the way the second half is feeling for system sales.

Okay.

Great.

And then Chris, you've obviously communicated some heavy lifting in CFT for this year.

Just kind of wondering, is that going to persist through the rest of this year?

And maybe spillover into 2018?

I mean, just any thoughts there would be helpful.

Yes.

We'd like to get through the bulk of it here in 2017 and that's been the plan.

That -- on around things like site consolidation and the heavy lifting, and then we may have some vertical integration and some sourcing initiatives as well as the sales initiative we put together, where I think we put in 33 new sales people in 2016, and really they don't come to full potential for us until about the third year.

So that would spill over into '18 as well.

But we would like to get through the bulk of the heavy lifting in '17.

Okay.

Great.

Just one final one, if I may.

Brake & Friction, obviously, with the slight revenue growth now, any thoughts just kind of on margin progression there?

I mean, should we still kind of expect 35% to 40% incremental as you talked about historically there?

I think we can expect that as the volume gets to higher levels than we've got now.

Right now, with the aircraft drag persisting through the year, I think what you're seeing right now, in terms of margin impact, may improve a bit on the volumes, but I don't think it will be at that 40% level until we get maybe into the high-20s and $30 million a month range.

And your next question comes from the line of Joel Tiss.

Just the size of the satellite opportunity.

I thought you said earlier that the size of the market was only $250 million.

But then you said your backlog is $200 million over the next couple of years.

Did I hear that wrong?

Well, yes.

$200 million in total -- in revenues over a several year period.

That's your backlog, right?

Yes.

And Joel, those are really the opportunities that (inaudible) identified, and we're working with those organizations at very different levels of implementation as we get FAA approvals and those kind of things.

And actually, that's been one of the impacts or drags on the SatCom performance in the first half of the year was some delays beyond our control with the FAA at different installations.

So a lot of these are going on in line fit, but all the certifications do need to be received before we can go forward.

Yes, and Joel, this is Bob.

That was -- that included pipeline as well as backlog in orders.

So it wasn't all just 2 orders, it was pipeline of projects to come.

So you're basically going to have the whole market?

Is that what I'm missing, I guess?

I think it's $250 million this year, Joel, and if we were -- let's take the 15% CAGR on the market, we're going to be growing somewhere $20 million, the $10 million to $15 million, somewhere between $20 million and $40 million or $35 million a year.

So as we roll that out, if you go, we said to 2021, let's take 4 years at $30 million, that's another $120 million.

But yes, I mean, we don't want to get too specific on market share.

But our market shares are very good, especially looking forward in our relationships with the different both, [OE] aerospace manufacturers and the airlines.

Okay.

And then great.

And then on CFT, is this turning out to be a little bit of a bigger project like the integration, indigestion or whatever you want to call it?

Is it a little bigger project than what you guys originally expected?

Or this is all sort of, this was the original plan?

No, I think in order to get the margins we wanted and to drive the kind of the sales growth that we wanted, we knew we had to make these investments.

And when we looked at the vertical integration initiative, as much as we want to be optimistic, it takes time to buy the machines, install them and [prove them out] and in-source the product.

And in terms of reducing factory size and footprint, it takes time and some of those things are beyond the control of the team in terms of the order in which they are dealing with the local authorities on layoffs and terminations and those things.

So I think it's about what we expected.

But by no means is it an easy task.

It does -- it is a lot of heavy lifting.

Yes, sometimes it's kind of nice to be on this side of the table.

I just have to be tired listening to a whole bunch of companies reporting earnings, so I don't want to have to actually do anything.

And then in the aerospace drop in CBF, I didn't hear what was behind that.

Is that just you guys maintaining your price discipline?

No.

That was a little bit different situation.

There, we had make or pay contracts that are expiring.

And there's less demand today for steel brakes on replacement aircraft than there was a number of years ago.

And that's just sort of a decline in the overall market, and we're seeing that.

We started seeing that last year, and we're seeing some more of it this year and that will impact us again next quarter.

Okay.

And then lastly, in terms of acquisitions, just kind of where your head is at in terms of, do you need more pieces that kind of fortify the segments you already have?

Or are you going to be more opportunistic and just find maybe potentially other businesses that can be accretive to earnings.

Or just give me a sense what you're thinking about there?

Yes, Joel, a little bit of both.

In CCM, 2 things we want to do, as we mentioned in the call, we want to find a way to grow geographically, specifically in Europe.

But also find additional Building Products to kind of create that building envelope concept.

So we want to add to that, that great presence that CCM has within the distribution channel and the loyalty they have with customers and contractors and specifiers.

CIT, we still think there's opportunity within the aerospace, specifically, with its wire to wireless conversion.

If we saw opportunities there, we would do those.

Also, within the medical segment.

That really within CIT is what we've talked about for a while and we'd love to acquire a significant -- have a significant acquisition within medical.

When we look at CFT, we've talked about that as well as part of the original plan.

You asked if it was going on schedule, we would really like to see acquisition opportunities within the sealant adhesive, or finishing, or protective coatings or pumps businesses within that CFT segment.

We continue to work hard to find those.

CFS FoodService is going to be a little bit more opportunistic.

We've talked about options for FoodService, we continue to improve the business and when we see an opportunity like San Jamar, where we've got a great brand name and it can add to that portfolio, we'd probably act on it, but we'd be very opportunistic.

And then I think with CBF, we need to get through this Tulsa consolidation, we need to work on improving our sales position and our market share at different end users and grow that business.

So I think, for now, that one, it would be hard for me to imagine we'd make an acquisition in CBF.

And you have this follow-up question from the line of Kevin Hocevar.

Just one other quick one.

You mentioned expectation for $40 million of raw material net price raw headwinds for the year.

Is that all gross, essentially flattish pricing, and $40 million in raw material headwinds?

Or is there an assumption that pricing will move up throughout the year?

And the raw material headwind would be bigger than that?

No, right now, it's just as you described, Kevin.

It's more or less flat pricing for the full year and $40 million of negative raw materials.

And I think, to the extent raw materials become more unfavorable, we feel better about getting more price.

But we're still looking at a net negative of $40 million.

And there are no further audio questions at this time.

Well, thanks, Taney.

That concludes our first quarter 2017 earnings call.

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

And this conclude today's conference.

You may now disconnect.