Carlisle Companies Inc (CSL) 2003 Q2 法說會逐字稿

Welcome ladies and gentlemen to the Carlisle Companies Incorporated second quarter earnings conference call.

At this time all participants have being placed on a listen-only mode and the floor will be open for your questions and comments following the presentation.

It is now my pleasure to turn the floor over to your host, Richmond McKinnish President of Carlisle Companies.

Sir, the floor is yours.

Thank you.

Welcome to Carlisle's second quarter conference call.

With me as usual is Kirk Vincent, our Chief Financial Officer.

Our format is going to be about the same today --- Kirk is going to take us through the financials, I'll have some general comments and then we'll turn it back to the group for questions.

We are adding a website to this years presentation and Kirk will explain that to you and I'll turn it over to Kirk.

Thank you Rick and good morning everyone.

As you may have seen in our press release and as Rick pointed out, this conference call and corresponding charts are being made available on our website.

To see the charts, you can go to www.carlisle.com and click on the second quarter conference call icon.

Yesterday, Carlisle reported second quarter net earnings of $28.6m or 93 cents per diluted share compared to $24.7m or 81 cents diluted share in the second quarter of 2002.

The 15% increase in net earnings was driven primarily by improved earnings at our construction material segment at Tencolite and at Johnson Truck Bodies.

Sales for the second quarter, at $554m were $2.2m higher than in the second quarter of 2002.

For the first six months of 2003, net sales rose 2% over net sales for the first six months of last year; however, net income in the first six months of 2003 increased a substantial 22% on a year-over-year basis.

Net income increased from $37.6 or 1.23 cents per diluted share before the effect of FAS 142 that was taken in the first quarter of 2002 to $45.7m or 1.49 cents per diluted share.

I won't spend much time discussing the segment as Rick will comment on them later in the call but I do want to point out, the segment performance continues to be somewhat mixed.

Three of our segments showed increase sales in the quarter and 2 showed declining sales.

On our earnings before interest and taxes for either phase, three segments showed improved earnings during the quarter, two showed declining earnings and the general industry segment showed flat earnings.

In spite of this mixed results, second quarter 2003 EBIT increased 10% from $41.9m to $46.2m.

General industry segments EBIT of $1.5m included a $1.7 foreign exchange gain which was more than offset by $600,000 in costs associated with workforce reductions and a $2.6m charge to correct EBIT previously reported in 2002 and the first quarter of 2003.

Without these events, the general industry segment would have doubled this season from a year ago.

The Industrial component segment also incurred a $200,000 workforce reduction charge in the second quarter of 2003.

The construction material segment reported a 26% increase in EBIT during the quarter and a 16% increase in sales.

Included in the segments results for quarter was a $2m insurance recovery arising out of fires at two small coatings and water proofing facilities.

These moneys basically reimbursed Carlisle for increased operating expenses in the first and second quarters of 2003.

Corporate EBIT as you will note declined corporate EBIT expense declined $1.9m for the second quarter 2002 to the second quarter 2003 as a result of accruing a $900,000 interest receivable from Carlisle's European joint venture or grouping joint venture from cost reductions and timing issues.

For the six months, corporate expense is down $1.3m, two thirds of which is tied to the (inaudible).

Interest expense for the quarter was down from last year also about $900,000 primarily due to an additional $300,000 of interest fromICOPILE in the quarter and a $350,000 interest on a tax refund.

Our effective interest rate was basically flat quarter-over-quarter but down about 1.6% from the first six months of 2002.

Moving on to cash flow, net cash provided by operating activities was $31.5m in the first six months of 2003 versus $74.6m in the first six months of last year.

Working capital has increased by $46.1m in the first six months of this year compared to a $2m decline the same period last year.

An extremely wet spring along the east coast in the mid west entered in inventory liquidation in the construction material segment during the quarter.

Inventories are also up at our food service positions partially as a result of the flow pack acquisition completed in June of this year.

Accounts receivable have increased $80m since the beginning of the year with most of the increase occurring in the construction material and industrial component segments as their sales have increased significantly from the seasonally low fourth quarter.

Offsetting these increases are also increases in accounts payable and accrued taxes.

The seasonal reductions on working capital that you usually see at Carlisle's the end of the second quarter clearly did not occur this year.

At Carlisle we believe our working capital should be equal to or less than 15% of sales and that we should turn our working capital six to seven times per year.

We're above that level now and are working to lower our working capital and get back on target.

I will have to say, while it doesn't show for the quarter, cash flow has been very strong during the first 15 days of July.

In addition, as you can see from the cash flow statement, this year's capital expenditures of $18m are slightly below the $18.8m of year ago, and that dividends of $13.2m are slightly above the $12.7m paid in the first six months of 2002, as we increased our annual dividend by 2 cents per share to 86 cents per share in September of last year.

For all of the above reasons, free cash flow, which we define as cash from operating activities less dividends, capital expenditures and the effect of our securitization program was only $312,000 in the first half of 2003 compared to a positive $38m, in the first half of 2002.

For further information concerning our definition of free cash flow, please see our form 8K posted on our website.

For the most part, if you look at our balance sheet, you will see that I've discussed year-over-year changes.

Specifically, I've already discussed the increase in receivables and inventory.

You will also note there is a small increase in property, plant and equipment, as a result of the acquisition of Flow Pac in June 2003.

You will note that short-term debt, as shown on the balance sheet has declined as a result of a reclassification of borrowings under our revolving credit agreement, which was to expire in June of 2003, from short-term debt to long term debt.

And to refinance this obligation and extend its maturity until June 2006.

With that, I would now like to turn over to Richmond McKinnish, Carlisle's President and Chief Executive Officer, for additional comments.

Well thanks Kirk - -.

The first segment I'm going to talk about - - it's in your press releases, the industrial components segment.

I would encourage anybody that's not familiar with our company or are potential new investors, to get on the website, where we will list the number of companies in each segment.

It will make it a lot easier to follow this.

This technology is a little slow, if you are looking at the website.

Our industrial components segment - - sales were down.

This is primarily a result of divesting our European power belt business, in December '02.

This was about $8.4m last year in the second quarter.

So you take out the divestiture our businesses were flat.

There's a real mix story in that.

The lawn and garden market was strong at both the OE and replacement channels.

Our altering vehicle business or ATV business was very strong.

We have booked new business at Polaris, Arctic Cap and Kawasaki.

We are very excited about our penetration into this new market.

There is more ATV's sold today than motorcycles and Carlisle is a big part of this growing market.

These areas of growth were offset primarily by a down turn or softness in our styled wheel business.

I haven't talked about this in some time.

We have about an 85% market share in the steel wheel after market business. - - This was hit by very soft demand in the second quarter and some inventory adjustments.

But we like this business very much and believe it should start to come back in '04.

The gulf market was also down - - slightly, and we also have a high share of the gulf business and that market probably is not going to improve the balance of the year.

Switching to the belt business, this business grew slightly in the quarter and we are excited about some new business there.

In June, we signed a long-term agreement to supply belts to a major appliance OE.

This represents over 4 million belts and it's totally new business for us and we are excited about that.

Appliance has not been a market that we have had a position in and we are excited about this new entry.

When we purchased Dayco [ph] industrial belt business a year and a half ago, we talked about the opportunities and how it fit with our company.

In order to achieve these synergies that are available, and accelerate the development of these synergies, we have consolidated management in the second quarter, between our Tire & Wheel Company and our belt company.

There was a small charge of approximately $0.25m in the quarter.

Many people have asked us in the recent months about the raw material situation in the tire business.

While there was no question that second quarter was negative, the raw materials in our tire business in the second quarter were $3.6m unfavorable to last year.

This was offset partially by a $1.7m price increase that we got in the quarter.

These two companies that we've now put together in this segment, our tire business and belt business, they share a manufacturing campus in China, they have the same management information system and over 80% of their business in the same markets.

We are really excited about the opportunities to get more efficient going forward.

The next segment is construction materials.

We had - - when you factor out all the other things, we had 10% organic growth in the quarter in our North American construction materials business.

We acquired a company, Miradri, in the coatings and waterproofing business that was $8.7m of sales in the quarter.

So the net of that is 10% organic growth at Syntech [ph].

We grew across all product lines at Syntech [ph].

It was a very strong performance.

If you follow the roofing business, the weather has been a challenge this year and the weather was an issue throughout much of the second quarter.

It was very wet in key areas like the northeast, but we did get some drier weather late in the quarter and we had very strong demand when the weather improved.

We are optimistic about this construction business the balance of the year.

We see continued good demand.

I'd like to clarify the earnings in this segment.

As Kirk has mentioned and as in our footnotes, we had an insurance recovery of $2m.

I should mention ICOPILE, our joint venture in Europe, their earnings were down $900,000.

So, if you take out the insurance recovery and you take out the change in ICOPILE, our Syntech [ph] company grew their earnings by 19% and added 40 basis points to their EBIT margin.

We think it's a good performance as we look at other people in this sector.

The next segment is the automotive components segment.

We had a disappointing quarter.

We talked about it in the first quarter, we are between programs on model years, we have new business that we broke, that we are excited about at Nissan and Toyota, on the new Toyota truck.

This is new entry for us with Nissan and Toyota.

These negative comparisons as we said before, will occur over a three to four quarter period.

The third quarter will continue this kind of comparison but these comparisons will start improving in '04.

The next segment is our specialty product segment.

This consists of two braking companies.

We consolidated management in these two companies earlier this year.

We now have one management team that is over both businesses.

As you can see, they are making some progress, it's small but it's occurring.

On a positive note, our heavy-duty friction company, Motion Control, grew organically about 13% in the quarter.

They are starting to rebuild that business after a difficult plant shutdown and startup last year.

The next segment is the transportation segment.

These markets continue to be very soft.

This consists of our Trail King Company and Walker Transportation and we have got a very senior management team at Trail King and they have got pieces of their business where their customers are off 60%.

There is obviously - - that we are going to have to take some action here to get this business improved for the future.

The backlog did grow in June and we are optimistic for a better third quarter but we have a lot of work to do in transportation.

The next segment and last segment is general industry and as Kirk has talked about, there is a lot of pluses and minuses here.

Our sales were only up 2% and we had some growth but our exposure to commercial aircraft at [Inaudible] and our exposure to travel-related businesses at food service, those businesses softened and it resulted in our sales only being up 2%.

If you look at the year-to-date numbers, we've had solid improvement, which occurred in the first quarter.

We took a charge in the second quarter, which Kirk has described.

In summary, this quarter has been quite a contrast.

We've had areas in improvement in our time wheel business, our belt business, our roofing business but a large disappointment in the auto sector transportation, commercial aircraft and the travel related businesses and foodservice.

I'd like to provide some overall operating numbers that we've been giving out for the last several quarters and we get a lot of questions about.

The first is our factory utilization.

Our utilization in the second quarter was 75% as for same as a year ago, same period.

The unabsorbed overhead from this slow utilization was 18.8m in the quarter and that compares to an unabsorbed overhead last year in the second quarter of 19.7m.

The utilization was up in our roofing business and you can see it in their results but it was offset by drops in our auto and transportation businesses that we've talked about.

Raw material was interesting in the quarter.

It was very volatile, it ended up be negative four and a half million for the quarter $4.5m.

Of that $4.5m, $3.6m occurred at the Tire & Wheel Company, which I talked about earlier.

We had some price erosion in the quarter it was 1.7m, which is 3/10 of 1% of sales and they occurred in the auto business and in the roofing.

I'd like to clarify the guidance that was in the press release.

We've had some questions about that already.

We've identified a number of improvement projects that I would characterize as restructuring projects with excellent payback.

We plan to execute a significant portion of these restructurings in the last half of this year.

These cost are in our guidance, which we are reaffirming at $2.60 to $2.80, which we have forecast since February.

With that, I'd like to turn it back to the operator and hope we will get some questions.

Ladies and gentlemen the floor is now open for questions and comments.

If you do have a question or a comment please press numbers one followed by four on your telephone keypads at this time.

If your question has already been asked and you would like to remove yourself from the queue, please press the pound key.

Please know we do ask that you pick your handset in answering your question to provide optimum sound quality.

Once again ladies and gentlemen to pose a question or a comment please press the numbers one followed by four on your touchtone phones at this time.

Our first question of the morning comes from Wendy Caplan [ph] with Wachovia Securities.

Good morning.

Morning.

You mentioned in your comments that inventory was particularly high in the quarter and you're looking to working it down.

The inventory level has a decline, what are the margins implications for the rest of the year as you shift from inventory?

Well Wendy, all that's in our guidance.

As Kirk talked about inventory some of the inventory was in anticipation of very strong roofing demand, which was delayed because of the weather.

We don't see in this inventory reduction at this time too much cut backs at the plant level.

Well we have some cut backs in our entire business but that's in our guidance, so really I don't see much on the margin side.

We typically have the normal seasonal aspects to our business that you're familiar with and that's going to occur in the third and fourth quarter.

But if you look at our historical information, a mean, and you look at our guidance you see the similar seasonal pattern to all this that occurred in each quarter.

Wendy.

Okay and one more question and I'll let someone else jump on.

Kirk can you work through the lower interest expense one more time just so I can follow it?

I didn't.

Thanks.

That's fine Wendy, I know it is somewhat confusing; beginning at the beginning interest expense is net.

We net interest expense with interest income we did have some interest income this year that we didn't have last year.

We have about $350,000 interest income on a tax refund we closed our tax audits for 1997, 98, 99 and we're due a refund so we've booked some interest on the tax refund and we've booked some interest from Icopal (ph) that we didn't have last year.

The difference year to year is about $860,000 difference and that accounts for about $650,000 of it.

Our interest rates quarter to quarter were about the same, they are down surprisingly year over year by about 1.6% but that has to do with the sloth that we had going.

So for the balance of the year what are you assuming in terms of the net interest?

We won't have the one offs that we had this quarter, so you can add back in that $650,000 for this quarter.

Thank you very much.

Our next question comes from Michael Harris with Robert W. Baird.

Good morning.

Rick considering that Carlisle is so diversified in some of the many end markets, I would be curious to find out how the company's order trends have progressed sequentially through the quarter?

Well I think we put in our press release our backlog, it's really how to answer the question.

Our roofing business has no lead times, no backlog we simply ship same day or next day to orders.

And obviously its---we talked about the weather impact, there's no question that we saw a lot of strong sales activity, shipment activity when the weather got better the middle of June and that bodes well for hopefully more normal weather in the next two quarters.

But it's very hard to talk about that because we have long lead time businesses our automotive business has a 13 week and we a Food Service and Time Wheel business and roofing businesses operate with no lead time.

So we've published a backlog based on the same way every time, but we don't rely that much on our backlog.

Okay just to kind of state it a different way, I would just love to get your opinion regarding economic conditions you eluded to in the press release.

Economic conditions remain challenging in Q2 and clearly when you look at the overall stock market it's a pricing in a nice pick up in the economy in the second half of this year with in a 30 different end markets, are you seeing a meaningful pickup in the economy in the second half of the year?

No.

Okay, that's the answer I was expecting.

As far as industrial components segments flat year over year organic growth on a segment basis.

Can you just give the break down on what the organic growth was at Tire & Wheel, and then Power Transmission?

Well Power Transmission had a couple of points a very small amount of organic growth but the short fall of the drought came in our Tire business and that's why I try to take some time.

And I mean there's no question we had some real softness in our Style Wheel business where we have 85% to 90% market share.

We haven't lost any market share though, but it was off about $5m, we were soft in some of our Trailer businesses that was off somewhat and the Golf business and that more than offset good growth in lawn and gardens at Reign vehicle and our alternate businesses.

Can you quantify the year-over-year change in lawn and gardens if you have that?

I don't have that in front of me Mike but you could probably get it, I mean it's available in the industry information.

The lawn and garden business as we talked at the end of the first quarter, entered the quarter with low inventories and it was a good quarter.

Now I should report to you that inventories are still in good shape and quite frankly there are more lawn and garden products in the third quarter schedule than in some years.

So (indiscernible) East Coast really made that grass grow?

Exactly so the lawn and garden business we're expecting to be up in the third quarter as well.

And then you talked about this a little bit better Carlisle food service you were down organically 6% year-over-year.

I view that as a bit disappointing considering this is one of your core businesses.

Can we just get a little more detail here as to the reason why we saw that 6% decline?

Well I mean there's no question that first off this is very unusual for this business.

This quarter was really as we look back one of the most difficult that we can remember and we've been in this business a long time.

And for whatever reason we have exposures here to travel related businesses, hotels, airlines and there's just no question that saga continues and its made more difficult as it backs its way through distribution and all kinds of inventory changes going on.

We think this quite frankly is a one in (---) it's going to reverse itself, I don't have in front of me Kirk the Food Service year to date I think it's about---but it was down as you see in our numbers 6% for the quarter.

I'm not too concerned about it we became sure, we continually (indiscernible) this business has more pricing power than most any other businesses we've got.

So we're very British about this and have just acquired another company to go into this business in the Jam Fan Sector, which quite frankly was not done.

It's still a core business and they like it a great deal it has very good margins even in spite of the softness in their Travel related.

Yes Mike, Rick's right on year to date basis it's a bad quarter but on a six months basis they are down but it's more like 1.5% that's down in revenues.

Okay so when you look on at it on a near terms here lets say over the next quarter or two do you expect this business to continue to encounter weakness and maybe pickup on entering '04?

Yeah I would agree with what you just said.

When there's no question that we came to see the first signs, I mean our whole business (inaudible), in travel, you know, just went through a ridiculous quarter but its starting to get better.

So, yeah, we're looking for better comparisons, but not much the balance of the year but getting better in '04.

Okay, and then the last question here is just, that $2.6m charge taken out of Life Sciences, I mean is this - - could this be described as a common restatement, essentially?

It is to reverse some EBIT recorded at the U.K Life Sciences during - - that was discovered during an ERP implementation in the first quarter this year, so I think restatement is not the right word, but we took the charge all this quarter.

When you say ERP implementation I understand.

Yeah, it's a bad thing.

Yeah.

Okay that's all I had, good quarter guys.

Thanks Mike.

Thank you Mr. Harris.

Our next question comes from Michael Sison (ph), with McDonald Investments.

Good morning guys.

Morning.

Morning

Congratulations on a good quarter.

In construction materials in terms of your organic growth of 10%.

Could you give us a little more detail in each of the segments EPDM, PPO and the inflation business, how that fared out?

And obviously when you look at the economic status, non-results from construction isn't as strong, are you taking share and from who?

Well Mike, I mean obviously the write-ons - - it was up across the board, our whole traditional rubber membrane, our APDM membrane, it grew organically.

Our TPO continued to grow in the high teens as a percent, our insulation business grew nicely our Eco-Star roofing business grew (inaudible), and we think that's out of - - you know, it is market share.

As you know the whole industry was down about 13% last year, we grew.

We think it will be down in low single digits this year and we're growing.

Obviously I'm not going to talk about who we're taking it from, I don't think that would be appropriate, but there is no question we have a lot of momentum here and we continue to produce new products and differentiate ourselves from this market, and we're excited about this.

But our opportunity, quite frankly, with the way some of our peers are doing in the roofing business to grow this business.

And you alluded to, in your prepared remarks, that you just hope the second half can continue the sequential trend of better demand.

Is that more predicated on weather or sort of maybe the order patterns you're seeing already?

No, the order patterns are just like we experienced, I mean you see the growth in the second quarter, we see similar patterns right now, and obviously the weather is the wild card.

Hopefully we think we've gotten through, quite frankly, about as difficult a weather in the first six months because of the number of roofing days they can't get up on the roof.

Now I stand to my comments, we're optimistic about the balance of the year in roofing and think these trends can continue.

Well maybe its more (inaudible) of demand and weather on the roof, that sort of drive the second half here.

No question about it.

And we talk about it that the severe wind - - hurt the first quarter, you can't get up on the roof with the ice but it helps the balance of the year.

And there's no question a portion of this organic growth is that.

You see raw materials falling, and I was sort of surprised to hear that pricing was lower for construction materials.

Any particular reasons for that?

Well, I mean the people - - and they would tell you its good strong purchasing, but the trends are good and they think there's other opportunities.

Yeah, the raw material situation throughout the company is fairly solid, it's not an issue, except for the one I identified as the Tire & Wheel Company in the second quarter.

Okay.

Lat few questions, in general industry, I think Kirk you sort of walked us through the charges.

Does EBIT for operations come out to be somewhere in the 3.5m - 3.6m range.

I think more like 3 Mike.

More like 3.

And I guess my question is when you're sales gained in the second quarter, those were about general industry as they were in the first quarter, but your EBIT did fall by about $2m.

Is that largely, what - - raw materials?

Lower utilization?

The sales fell a little bit, the utilization was about the same, the raw materials - - they use a lot of different raw materials than those we use, and I don't think we can characterize that the raw materials were higher.

There were some jobs in the Life Science business that had lower margins, but its not a fair comparison to look at the first quarter EBIT at $5m and the second quarter of $1.5, I think you have to look at $5m and $3m.

Okay.

And final question Rick.

When you look at the restructuring initiatives that you feel you're going to take in the second half, are there any particular segments that you're looking at, you know?

Can you give us a range of how big the charge could possibly be and what level the savings move forward - - could be going forward?

Okay well, Mike, obviously I think the answer, where the restructuring is going to be, just look at the press release and look at the EBIT.

And where you see these low EBITs you are going to see some restructuring.

I don't really want to talk about diminutive but except to say that in our guidance --- the thing about restructuring, and actually I don't want to get into quarterly numbers, because it's so hard to predict how these things flow.

They are kind of lumpy and so we think we can get these things done.

We think that the savings will be very attractive for '04, and as we do these restructuring, again behind us, we'll probably talk about it (inaudible) in the third quarter and fourth quarter and you'll have a good (inaudible) on what its going to mean for '04.

Fair enough.

Thanks guys great quarter.

Thanks Mike.

Our next question comes from Michael Burke of Goldman Sachs.

Morning, its actually Deane Dray.

Ray just to follow-up on that, the question on the restructuring plans.

I know you don't want to get pinned down to anything too specific, but just (inaudible) besides this the potential impact.

The restructurings will be both --- will be primarily severance or they will also be charges for facility closures and what not?

Okay 'cause this quarter if I understood it's two --- was 2 cents on the restructuring side and that was all severance is that correct?

That's correct.

And just in terms of magnitude, are we talking about something that 2x this or --- and how should we thinking about the third and fourth quarter?

Well I mean it's a --- it's going to be better than a 2 cents a quarter.

In order of magnitude I'm really, --- we've got a plan in place, really I'm excited about it.

I think it's going to be surprising how much we think we can say.

The key here Dean is, and I think it relates to most companies in our sector, we are not going X mark it (technical difficulty) any.

We are going to take the action necessary so that if these markets stay flat, that we are going to meet or exceed our growth in earnings.

So we have identified a significant number of restructurings --- and the planning quite frankly is well under way and there'll probably be announcements made even later today.

So we feel good about it, the plan it's appropriate for the times we are in.

But I cant really give anymore details but it will be a lot more 2 cents a quarter and it is within the guidance that's one of the reasons I kept the range normally by (technical difficulty) by this time of the year quite frankly I could have tightened that range.

But I kept it at the 20-cent range because trying to maintain some flexibility to get through this restructuring.

Okay.

That makes sense and just to appreciate the fact that it all gets float through just in terms of how we view the quality of earnings that's a positive.

And then just, I signed on a little bit late I may have missed this very early, did you give an overview organic growth for the consolidated company, you know excluding the Dayco divestiture?

Yeah if you add the --- take out the Dayco add the acquisitions, try to neutralize that entire Dean, our growth was not where we ended up.

That is flat.

Right good.

And what was the impact of FX on revenues and was there any earnings impact?

About 2.2 million of earnings impact.

2.2, and how about a percent on top line?

Very little, very little.

I mean the 2.2 is almost all in the top line also.

Okay.

And then last question, Rick, if we look at the business or segment mix within Carlisle you've got four out of your six segments that are at 5% operating margin or less.

I know that's a big focus for you on the restructuring side.

What in the way of divestiture prospects are you looking at?

Is this all focus on fixing or are divestitures an option here?

What would be the time frame?

The --- I mean most of the activity is on fixing and you are actually right Danny, we are disappointed quite frankly, that we've not made more progress so far in the segments that under performing.

And we are determined that we are going to make enormous progress.

Now I really can't, --- I really don't want to get into --- the restructuring could include divestiture, but the majority of our activity is internal fixing.

Does that help any?

Yes it does, and I, can I throw one last question in.

Just trying to get clarification on ICOPAL.

I know the goal is to hit break even, and I thought I heard Kirk say that it was down 900,000 I don't know if that was quarter-over-quarter.

What was it in terms of performance for the quarter?

It was just about break-even.

It was about 100,000 --- 130,000.

And the outlook for the third quarter?

They'd have any of the same sorts of weather issues?

What's driving the business there?

Yes exactly right Dean.

Their biggest markets are Northern Europe and they suffer during the first 4 or 5 months of the year because of weather and they make it up now.

So basically you're exactly right.

Okay thank you.

Thank you Mr. Burko (ph).

Once again ladies and gentlemen as a reminder to pose a question or comment please press number 1 followed by 4 on your telephone keypads at this time.

Our next question comes as a follow up from Wendy Caplan with Wachovia Securities.

Thank you just a clarification on the general industry declines, the tensilite (ph) in the food service.

Were they - they were year-over-year declines as opposed to sequential declines.

And would we expect that those two issues would resolve themselves by year-end or --- what's your view on that?

Well they are definitely year-over-year.

All my comments Wendy because we are so seasonal in some businesses are year-over-year.

Now the commercial aircraft business that we talked about, I mean it's a good question you asked.

Believe it or not one of the key areas for us focuses on the Boeing 737.

We have the wiring on the Boeing 737 and quite frankly that business for some orders that have been in the press recently, the schedule looks a little better on that the second half.

Travel related at food service, I've talked about that and we anticipate an improvement in that.

In the airline business has been through an incredible trough.

And signs are it's going to get better.

I can't really predict I think there will be very much better for '04.

But it's hard to predict right now on the third quarter.

We still see softness in both those sectors for the third quarter.

Thank you.

Once again to pose a question or a comment please press numbers 1 followed by 4 on your telephone keypads at this time.

Our next question comes from John Wahaussen (ph) with Paradine Capital Management.

Hi yes good morning.

Good morning John.

A question about ICOPAL, are we - I realize there is seasonality there; my impression is that we haven't really achieved a good return on that investment yet.

Is that correct?

And are there some things that we can do to improve the returns?

That's correct John.

And we have a 25% interest and it is a very irritated, vocal, abrasive 25% interest.

We've had several meetings recently and yes we're going to continue to be a very abrasive, loud 25% owner and get some positive changes accruing.

And we anticipate some improvements in that business for '04.

But as you know it takes a little longer sometimes in Europe to get some of these things done.

But I agree we have not achieved the returns on this investment that we expect.

It's still a leader, it's still a profitable company.

We wouldn't change places probably with any other commercial roofing company in Europe, but it's under achieving at the time.

And we are going to take some action.

Okay that's helpful.

The other question I had was on the power trends.

Have we completed the actions that we initiated when we did that?

Or are there still some things that need to be done there?

That's an ongoing John.

I mean one of the things just so you know we had a 12-months stands deal.

As you would probably know Parker Hanson bought a part.

Carlisle bought a part.

Right.

And we had 12 months stands deal where we shared a lot of resources.

So that delayed 12 months.

So now we've been in this thing really less than a year and we've elected to consolidate management return wheel to accelerate the original plan.

And we took a charge in the second quarter.

Kirk and I have talked (technical difficulty) that relates to that.

The work is not totally done but most of the communication has been done and there is a lot of opportunities here with sharing.

I mean we have multiple people calling on the same customer.

There is a lot of opportunities.

So those saving haven't occurred in this segment yet.

So we should be in position to complete that by the end of the year?

Yes.

Okay great.

That's very helpful, thanks.

Once again ladies and gentlemen as a reminder to pose a question or comment please press numbers 1 followed by 4 on your telephone keypads at this time.

Gentlemen it appears there are no further audio questions at this time.

All right fine.

Well I would like to thank everyone for taking the time to join us to listen to our presentation.

Hopefully we'll get our technology on our website to speed it up a little bit.

It took us a little too long to change the over views.

But with that said thanks a lot for your time and good day.

Ladies and gentlemen we thank you for your participation in today's Carlisle Companies Incorporated second quarter earnings conference call.

You may disconnect your lines at this time and have a pleasant day.