Carlisle Companies Inc (CSL) 2006 Q1 法說會逐字稿

Good day and welcome to the Carlisle first-quarter earnings call.

At this time, all participants are in a listen-only mode.

There will be an opportunity to ask questions during our Q&A session.

This conference may be recorded.

I will now turn the program over to President and CEO of Carlisle, Mr. Rick McKinnish.

Mr. McKinnish, you may begin.

Good morning and welcome to Carlisle's first-quarter conference call.

With me is Carol Lowe, our Chief Financial Officer.

Just a quick reminder -- hoping you got our press release and you've got a lot of information on our website, which is carlisle.com.

So Carol and I are going to continue our format of a very brief summary and get very quickly to your questions.

What that, I will turn it over to Carol Lowe.

Thank you, Rick, and good morning.

I have just a few comments this morning focused on our results from continuing operations.

As evidenced by the results reported in this morning's release, we had a strong first quarter with year-over-year sales growth of 16%.

Organic growth was the primary driver, which accounted for 86% of the 72 million of increase in sales.

Our braking business acquisitions in the last half of '05 contributed 14% and the impact of foreign currency was negligible.

Our first-quarter 2006 EBIT improved 150 basis points to 10.1%.

First-quarter income increased 36% over 2005.

The $1.26 per diluted share reported in our release this morning included $0.10 for proceeds from legal actions initiated by the Company.

These proceeds and the proceeds that we identified in our previous earnings releases in 2005 relate to ongoing legal action we've initiated against certain material suppliers.

WE are bound by confidentiality agreements and have a policy of not discussing ongoing litigation, so will have no further comments on these actions at this time.

As you have most likely noted from our release, Carlisle's effective tax rate increased from 32% for the first quarter '05 to 33% for the first quarter '06.

This increase in our estimated full-year rate is largely due to the higher domestic earnings for Construction Materials and Trail King's operations, and it resulted in a $0.02 decrease in diluted earnings per share on a year-over-year basis.

At this time, we expect our annual rate to be 33% for the full year '06.

As someone with a recent treasury background, I'm very pleased with the improvement in the year-over-year operating cash flow.

It's a significant improvement at a $40 million plus positive swing.

We believe it's a strong demonstration of Carlisle's ability to generate strong cash flow as we improve our operating margin.

With that, I'm going to turn it back to Rick and he's going to highlight some of the operational market items affecting our business units.

Thanks, Carol.

I'm going to start with a comment about our overall sales growth, which was 15.5% for the quarter.

I want to give you a little bit of color on that. 9.6% of our growth was unit volume. 3.8% growth was pricing increases. 1.9% was acquisition.

And 2/10 of 1% was mix, which totals to the 15.5% growth.

The majority of our growth was obviously in the 9.6% of unit volume growth.

I'll start with the Construction Materials segment, which, hopefully you all know by now, consists of our commercial roofing and our joint venture in Europe, which is Icopal, where we have a 25% interest.

The sales were up almost 33%.

They continue their very strong performance.

Sales growth was favorably impacted by mild winter weather and, more importantly, the addition of several new distributors joining the Carlisle SynTec team.

We are very encouraged by that trend.

I really have nothing to add to the news release about earnings.

Obviously, it was a very good quarter and it comes on top of a 44% increase in first quarter of '05.

So it was not an easy comparison, but the SynTec team continues to perform at a very high level.

I'd really like to share with you an excerpt from John Altmeyer's quarterly report.

John Altmeyer is the group president of this business, and I think he's got a paragraph in his quarterly report that sums up his outlook.

"During the first quarter, the SynTec management team conducted a national sales meeting, we attended that National Roofing Convention and hosted its top 110 roofers.

The common feedback on the outlook for '06 is continued optimism.

The intriguing aspect of the feedback is that the optimism is pretty much universal across the country.

Typically, we see geographic pockets of weakness, but they don't see any weakness anywhere in the country today in commercial construction."

That is an excerpt from John's quarterly report, and I think it is really the best barometer of the overall outlook for the business the balance of the year.

I'd like to give you an update about some of the expansion plans that we have been talking about for the last several years -- really the last several quarters.

During '05, we announced plans for several new insulation plants.

I want to give you a quick update.

We announced a new plant in Salt Lake City, Utah.

This just started up at the end of the first quarter and will begin shipping during the second quarter of this year.

We're very pleased with the reception for this new plant in Salt Lake City for insulation.

We have another new plant for insulation that we announced last year that is starting up in western Pennsylvania.

It's on schedule for a third quarter start-up this year.

I'll move over to the Industrial Components segment.

As you can see from the press release, they had a disappointing quarter.

It was a tough comparison, as last year's first quarter was a fairly good quarter for us.

The lawn and garden business was soft.

We had two major OEs that produced about 15% fewer units in the quarter.

There's three major OEs in the business, and two of three produced about 15% less.

In dealing with this lower demand, we ran our tire plants at lower utilization and produced 19% fewer units in the first quarter compared to the prior year.

The good news here is we ended the period with a more reasonable inventory position.

And as a result, our production level planning for the balance of the year should compare more favorably with prior periods.

In addition, as those of you that are familiar with the tire business, we continue to get buffeted with raw material increases -- natural rubber, carbon black, I think are two examples in the first quarter.

So we've got out for additional price increases in selected markets and these are being implemented in the second quarter, dealing with this continued inflation.

Our outlook, we believe, will get better upcoming in the Industrial Components segment.

The third segment is Diversified Components, and they had a nice earnings increase of 26%.

This was led by very good improvements at Trail King, our specialty trailer business.

They have a strong position in the construction sector and that business is doing well, as you know.

Also, our foodservice business was up with very strong performance, and they have more optimism than I've seen in some time.

And again, Johnson Truck Bodies, that we talked about last year because we had a work stoppage, they had a very favorable comparison in the first quarter.

But I would remind everyone that last year's first quarter at Johnson Truck Bodies was prior to the work stoppage.

So their improvement in first quarter of '06 is an apples-to-apples comparison; they were up nicely.

Well, all three of these -- Trail King, our food service business and Johnson Truck Bodies, averaged up the earnings increase of 26%.

I'm going to finish up with a couple of comments about our guidance and outlook.

I think we were pretty clear in our February call on our earnings call that our optimism -- that we have a lot of optimism in Carlisle.

I think we were clear about that in February.

Nothing has changed.

We normally don't move our guidance this early in the year.

As you know, we are a seasonal business, and many of our businesses really crank up in the middle of the year.

But we've decided, based on the strength of our first-quarter performance and continued optimism, we've raised our guidance to $5 to $5.20 of earnings per share.

Your optimism out there comes from where we are in the cycle.

We hear a lot of talk out there about the cycle and where we're at -- early, mid, late in this cycle.

And your optimism also comes from the strength of some of our markets.

But our optimism comes from a streamlined portfolio, with a deeper management team focusing on fewer businesses.

We are early in that process.

And that concludes our comments.

And we'd like to turn it back to the operator and get some questions.

(OPERATOR INSTRUCTIONS) Deane Dray from Goldman Sachs & Company.

Thank you.

Good morning, Rick and Carol.

First question is on the internal growth.

And it was helpful how you broke out that sales growth.

You said 9.6 was unit volume.

Is there any way for us to separate out what the contribution from the new insulation plants that have gone mainstream in the last 12 months?

Because that's not really a same-stores basis, and if we were to separate that, what percentage point would that have contributed?

I don't have that number.

It's a good question, Deane.

I don't have that number in front of me right now.

Obviously, our new insulation plant that we opened last year in Florida was basically up at the volumes of the more mature plants.

And so I can't really speak to that as a percentage.

But I think we can probably get that information.

I don't know if Carol -- we might put some additional information on the website.

I will say that we're trying to avoid, Dean, a lot of detail.

There's a lot of things going on in that space, as you are probably well aware.

And we're trying to limit some of the detail, quite frankly, because obviously were investing heavily in this space, we're committed to it.

A lot of things are going on.

And so I don't know if we will be able to put any more information out, except to say that we've got growth across the entire country.

The growth rate is faster for us where we open up these new insulation plants.

Deane, I do think it's fair to comment that all of the growth -- some of the growth is on some of our more mature products as well.

We did have increased demand for the EPDM and the TPO, so not all of the growth that you are seeing within the Construction Materials segment is exclusive just to these new insulation plants.

That is a good point, Carol.

Deane, I think this may help you.

The growth rate in EPDM, which is our mature rubber membrane, was just as high as the growth rate in insulation -- to give you some flavor.

The growth rate that we had was across the board in all product lines, both mature and new, at SynTec.

Okay, we will take a look at that.

And then regarding the guidance, Rick, you have an internal growth target for the Company as a whole this year of 6 to 7%.

Obviously you operated higher than that here in the first quarter.

Any change to that target?

Yes.

Well, that target -- I mean, when I'm giving you that target. it's a longer-term target and it's really without inflation or pricing.

We were 9.6% in units in the first quarter, 3 point something in pricing.

And you are right -- I think we're going to -- we hope to grow at a faster rate.

That is more of a longer-term, through all the cycle, Deane, baseline organic growth rate in units -- that number.

I understand.

And then if we take a look at Construction Materials, what perspective can you give us regarding the impact of weather?

So the expectation was this was a milder winter, you had more days up on the roof.

What kind of factor was that?

And have you pulled in anything from the second quarter?

All right, Dean.

I mean, there is a little disconnect here.

I mean, let's go back a year.

We said here a year ago, when earnings were up at SynTec 44% '05 versus '04, and we said we had a very good weather, very mild winter.

So we had good weather first quarter of '05.

Now we have come back in '06, we put another number up, and we are saying we had good weather.

There is some disagreement, even within Carlisle.

I don't see the weather, quite frankly, that much different in '06 than '05.

We had a good winter last year; it was good again this year.

And I think the biggest factor is just continued growth, geographical expansion, new product offerings, and a strong market.

I see that when I'm comparing '06 to '05, more than the story on weather.

Now I will tell you that John Altmeyer at SynTec thinks that the weather was a little bit better in '06 than '05.

So I mean it's very close.

So I don't see much of a weather story here.

Good.

And then what about weather impacting the lawn and garden business?

I know you said that it's been more of an OEM factor there, with 15% volumes down.

Any perspective on the weather influence for the lawn and garden?

Well, lawn and garden, Deane, as you know, it's been very much a disappointment, and the inventory levels continue to be adjusted.

Everybody is telling us now, which they told us last year, they think inventories are getting in better shape.

But quite frankly, the sales, the early indication is to us that the sales are not up to expectations across many areas of the country.

And so that is why the OEs -- several major OEs built fewer units in the first quarter.

We built substantially fewer units.

And I think we are all preparing ourselves for another kind of mediocre year in lawn and garden.

But that is all in our guidance.

I understand.

And then last question, Rick.

It was interesting how you were choosing your words about at the end of your guidance where you reflected about optimism and the deep team and streamlined business.

And you gave the suggestion that that is still an ongoing process.

So is there further streamlining to go in Carlisle's business mix today?

No.

I think, as we put in the press release and announcements, we are reaching the end of our restructuring.

I mean, the point I was trying to make, Deane, as you well know, everybody gets into where we are at in the cycle and these market strengths.

But I think our story over -- long-term is going to be more and more resources -- that's cash flow and management talent, focused on fewer businesses.

And we're excited about the improvement in our strategic planning, our ability to execute the strategy with our cash flow.

And we're just going to be much more effective with fewer businesses.

I think what I'm trying to say is I think we're rightsized, and I think our story is going to be how we develop more growth platforms, where it's not just one or two businesses.

You're going to be surprised, I think, with the evolution of Carlisle as we focus more talent and more cash flow in fewer markets.

And that is going to be the story to us, far more than cycle and market strength or weakness.

And that is the story we think we are early in that process.

Just to be clear.

So you are early in the process of benefiting from all that restructuring that you've done in streamlining initiatives?

Yes.

Terrific.

I understand.

Thank you.

Peter Lisnic with Robert W. Baird & Company.

Close enough.

Good morning, Rick.

Good morning, Carol.

Rick, if I could just ask a couple more questions on Construction Materials.

If we kind of ignore the weather -- and it sounds like it was an immaterial impact, based upon how you answered Deane's question -- but to put up a sales growth comparison of 33%, I think was positively surprising to at least us and maybe most people out there.

So I'm just wondering what -- it sounds like it's broad growth, but A, is that sustainable, and B, maybe you could comment a little bit more on the distribution that you added and how much that may have contributed and what it may contribute going forward.

Obviously -- good question, Pete.

Number one, first off, you can tell from our guidance -- I mean, we say this every year.

The first quarter for our roofing business is kind of a little volatile because it is a smaller quarter.

And we had a very big comparison last year.

That is why I mentioned the 44.

It's kind of just a warmup quarter.

A lot of the areas of the country don't roof that much in the wintertime.

So it's more volatile.

So no, I don't -- you can't think about a 33% organic growth rate for roofing.

I mean, that is just not going to be the case.

It was a good quarter.

But the key trends here are geographic expansion; it's we're signing up additional distribution.

SynTec has multiple brands, they're bringing in people to the Carlisle brand, they have another brand called Versico that we acquired from Goodyear some years ago.

They are signing up distribution for our Versico brand.

There is just a lot of good momentum here.

That's what I wanted to highlight in my comments -- it's geographic, it's some new products, it's more distribution.

People went to be a part of SynTec's growth and their optimism and their capabilities.

But, no, Pete.

Obviously 33% -- we think we can grow at above average rate, we have been doing that in the business.

But I will leave it up to you and the experts on what kind of long-term growth rate you want to put in for SynTec.

But I agree with you, it's not 33%.

Okay.

If you could just maybe help us fill in that long-term growth perspective a little bit.

If you look at Versico and the geographic expansion that you are doing, would you classify that as relatively early in the game or are you relatively well penetrated from the Versico brand perspective?

And where are kind of the big growth opportunities from a geographic distribution perspective?

I just talked about two more plants -- we are convinced that we can grow that we just started up another insulation plant in Salt Lake and I just mentioned another one in western Pennsylvania.

Yes, we think Versico can grow.

It just get this another way to get to the market.

There is a lot of momentum here.

I mean, it's geographic.

I don't know -- it's too early in the quarter -- I don't know about shares.

I don't think market shares have changed much, quite frankly.

The market is strong, Pete.

Everybody -- there's a lot of companies have announced before us the commercial construction business is absolutely booming.

And so you are right -- we are getting some leverage from that.

And so it's just a whole host of issues -- I mean good things.

I think over time -- see, the beauty of our strategy, what we're talking about doing by focusing in fewer businesses, we hope someday to be able to actually participate in some consolidation and other things.

And so we're focused, we're committed, we're investing in this business and others.

And I think it's early.

I mean, I guess I just think it's early in the cycle for us, what we're doing.

Okay, fair enough.

And if I could just switch gears quickly and ask one question about Diversified Components.

If I remember correctly, I think last quarter you were, I don't know, I guess relatively disappointed in what was happening at food service, but it sounds like this quarter things have turned around a bit.

Can you maybe expand on that a little bit?

Well, I don't know that I was disappointed.

First of all, let me say that food service -- I think one of the analysts said that food service is always a bridesmaid.

And I said last time I think it's a very attractive bridesmaid.

Listen, we don't think we performed over the last five years up to our expectations in this business, but it's a very good business.

And we are more excited --, I think I said this at the end of the first quarter -- we are real excited about the opportunities here.

This is a fragmented space, we have leadership, this has above-average margins for us.

And their comparison in the first quarter, as I told you earlier, the whole segment was up 26% and they averaged it up.

So this is a very strong business.

We're going to invest more in our food service business.

I think I said in the last call you're going to hear more about it.

This is a platform for us and we're excited about it.

And we just underperformed and we've not focused enough attention on it, quite frankly.

We think this is the first quarter; we think we've got more good news coming in this business.

Okay.

And now you're basically realizing your cost savings that you kind of have gone after in that business?

Yes.

All right.

Fair enough.

I will jump back in queue.

Brendan Hartman from Cramer Rosenthal.

Good morning, Rick and Carol.

How are you?

Just one last point -- and not to try to beat the dead horse -- but what is your forecast for just the overall market growth in roofing this year?

Not anything to do with Carlisle, just what do you think the overall market is going to do?

Because in the past I think John said it's a kind of 7 to 8% grower over time?

And is that -- is it going to do double digits this year, just the entire market?

While, obviously these numbers are evolving, Brenda, and they are fluid.

Most of the numbers that I'm seeing, I'm seeing high single digits.

They may be revised upward.

Because -- I'm giving you some feedback.

I think it's very good feedback when the SynTec team brings in 110 of their top roofers and they talk to these guys that are on the ground, that are bidding these projects.

And they're optimistic across the board in all geographic areas.

But the numbers that we are focusing on, we are seeing high single digits, which is kind of the numbers I think you got from John Altmeyer.

We are not ready to change that.

Okay, fair enough.

And on capacity utilization, in the past you've often thrown numbers out there, what percent of capacity you operated at.

Can you give us those for the quarter?

On a consolidated basis, Brendan, for the first quarter '06, we were at 78%.

And that compares with the first quarter '05 of 82%.

And one of the larger contributors to the decrease is what Rick has already discussed relative to (multiple speakers) Industrial Components.

Well, both power transmission and the tire and wheel business are both large suppliers to the lawn and garden market.

Okay.

So if you stripped that business out, it's fair to say it would have been above the 82% last year in the other segments?

Possibly.

Slightly above or right at it.

I don't have the exact number, but really the tire and wheel business was down, as we talked about.

And I see kind of a flat plant utilization number.

There's a lot of story in the earnings.

Okay.

You mentioned, Rick, the inflation in the tire and wheel business and in some of the segments.

But overall, do you have a number for the Company overall and how much of that you were able to recover with price?

Because I mean you've got to have it in just about every business you operate in today.

Yes, Carol may have some -- I talked about 3.8% was the price increase when you consolidate across the board.

So we got price increases in almost all our businesses.

But, Carol --

Well, I guess in total, Brendan, --

But did it offset all the inflation?

I mean you have resin costs, metal costs, everything --

(multiple speakers) on a consolidated basis, we're covered on the raw material cost increases that we received were on consolidated a breakeven.

Now we have pockets where some businesses haven't quite recovered everything because of the delay of when they implement price increases and the lag.

But I think it's important to note that especially in light of the recent run-up in the price of a barrel of oil, we're not whole on some of our freight and distribution costs.

And another thing we always lag in is when you roll in the total cost for employee benefits and labor and how inflation has pushed some of our labor costs up.

So we always run a little bit behind on that.

So there should be more to come to help make Carlisle whole.

Brendan, I don't want to -- I mean, obviously each business is different.

But I talked about, I think, some price increases that are being implemented today in the Industrial Components area.

But really there is pricing activity throughout the Company.

I think we've gotten better at this.

After so many years of deflation, I think most industrial companies, quite frankly, have improved their model here and we're just reacting.

So there is ongoing pricing all over the place.

I mentioned some in the second quarter.

So, yes, there is still a need, as you know; it's just very fluid.

Fair enough.

You guys sound a lot less worried about it this year than you were last year.

And Rick, on the M&A front, you mentioned your balance sheet is still underleveraged, you're generating a lot of cash flow, you've got opportunities to grow the business, you've hired more people in that capacity.

Can you give us any more color on areas you're looking or are you close to completing something?

Brendan, listen, based on the scenario -- I had better get something done, hadn't I?

Huh?

If I got more cash and underleveraged balance sheet and I'm hiring people to help us, I guess I'd better get something done, hadn't I?

Yes, as long as you don't overpay for it.

Well, I'm not going to overpay.

Listen, we are active, we are out there.

As we've improved our strategic planning by focusing in fewer places, fewer businesses, I'm more excited about this.

But we are not going to overpay.

We're going to be in our space.

We're going to continue our discipline.

And I can't speak to any specific area except that we are actively -- we agree with you.

Try to make these announcements that we are committed to acquiring, but it's going to be the right deals.

So I can't speak to it except we're hard at work on it.

That is fair enough.

Rick and Carol, thanks very much.

Saul Ludwig from KeyBanc.

Good morning, Rick and Carol.

I see you eked out another decent quarter.

Saul, I checked on the meaning of eked, and we (multiple speakers).

Relative to the utilization rate, what was the unabsorbed overhead in this quarter versus last quarter?

Saul, it's a negative comparison.

And again, largely driven because of the decreased utilization for Industrial Components.

It's only negative about 2 million on a consolidated basis.

2 million worse than last year?

Yes.

How many dollars was it, Carol?

It's $2 million.

No -- I'm missing something.

In prior years, the number has been up like 10, $12 million a quarter or something.

Oh, you are talking about the total for the quarter.

It's approximately $12 million.

$12 million this year and $10 million last year?

Yes.

Got you.

Again, Saul, I think it is always important to note that one thing was unabsorbed overhead.

It's also driven by your change in sanders and everything else.

So it's hard to look at it on a stand-alone basis and really understand what is going on within the operation.

Rick, talk about a couple of things.

You closed the belt factory last year and took a lot of cost and aggravation with moving that production to, I think, Kansas City and China.

You are making more tires in China or less tires, I'm not so sure.

You wanted to find a place to make radial trailer tires;

I think you are still buying those from somebody else.

Could you sort of talk about -- I know you've talked about the pulse of the tire business being a little mushy -- but some of these more strategic transformations and how they are -- are they starting to help you?

I mean, particularly the belt business was a disaster last year.

What has sort of gone on with those items?

Well, Saul, let me try to answer that in a couple different ways.

Number one, two disappointments for us in the really recent history -- first quarter is another example -- is our heavy friction business, motion control and our belt business.

Both of these businesses are in the middle of a ramp-up in Asia.

And we've just not executed as well, a lot of things going on.

We're very optimistic about the future, but it has taken us longer, we're adding a lot of resources in Asia.

And I accept the criticism.

It is just taking us longer to change the competitive positioning of our belt business and our heavy friction business.

But we like these businesses long-term.

And I see it as an opportunity that there's a lot of upside as we get this going.

So both of those businesses are similar, that they are ramping up plants in China and it's just not accruing to the bottom line yet for a whole host of reasons.

Now the tire business, I will tell you that there's some encouraging signs in the tire business.

The tire business separate from the belt business, it is pretty encouraging to me to have a softer lawn and garden market, to make 19% fewer units and have flat earnings.

I mean, I want you to go out and do your homework on EBIT percentages of sales and find me another tire business right now.

So once again, I think this is nothing but an opportunity.

I see it differently.

I see tough comparison right now, but these are good businesses and there's a lot of upside for us going forward.

But I'll accept the criticism.

It's taken too long for us to get the benefits from our China expansion in the belt business and in our heavy friction business.

You hired the new guy to run those businesses.

Does he have experience in China in terms of --?

Yes.

-- finding what the hot buttons are to push to get the thing turned around?

Yes.

Saul, there is a number of management changes that have been executed in this area.

And we are bringing a lot of new talent, because we are so committed to certain things in Asia, and so there's a lot of work going on there.

But I agree, it's taking us longer than I would like to get some benefits of it.

But we are very comfortable that we're headed in the right direction.

In terms of the positions that you are trying to fill, management-wise, not necessarily those that report to you directly, but some of the next tier down -- have you had success in hiring any of those people yet?

Yes.

Where have you brought on somebody?

Saul, Barry Littrel is the group president of Industrial Components and he has recruited a new vice president of tire manufacturing.

He has a new plant manager in his Clinton, Tennessee plant.

So he has brought on several.

And all of these individuals are professionals coming from out of the tire industry, quite frankly excited about coming to Carlisle.

And we're starting to see some results already, quite frankly, at our Tennessee plant in productivity.

The new VP of tire manufacturing just started a couple of weeks ago.

It's early yet, but there is a need there and there's an opportunity, and I think we are going to have better results going forward.

How about the belt guys?

Well, there's a lot of activity in that area.

I can't really speak -- there's a lot of activity in that area right now, except that we are not very happy at all with the performance of the belt business and we are making changes.

And then what about -- I listened earlier to these radial trailer tires -- I think you are still buying them from somebody else.

What are your plans here?

Well, Saul, our strategic model is pretty simple in this business.

We are a specialty tire and wheel business, we focus on the tire and wheel.

We have a model that has domestic tire plants and Asian tire plants.

And it's a combination.

And so we have the ability to tweak our model.

We wouldn't trade our two domestic tire plants with anybody.

And we've got a lot of work in Asia, because we shut down the plant in Trinidad a couple of years ago and we really never replaced it.

So there's a lot of work going on there.

So we are going to continue to tweak our model, low-cost domestic tire plants and low-cost global tire manufacturing.

And so it's in a little bit of a flux right now.

And we'd prefer to make an acquisition, quite frankly, as opposed to another greenfield startup.

But we're looking at all options there.

And then just finally, Carol, I share your enthusiasm about the improvement in working capital management, cash generation, etc.

I think historically, your second, third and fourth quarters are cash generation quarters as opposed to the first quarter, which is a cash consumption quarter.

So you are going to be generating additional cash from operations, and it looks like the net assets of the businesses that you have up for sale are around 60, $65 million.

A, is that correct, would at least the book value of the assets that you have up for sale net about $65 million that you would get cash from that, when those closed?

Plus, how much will you be generating just from cash from operations net of cap spending as we look out the balance of the year?

It sounds like you are going to have a hoard of cash.

The free cash flow, taking out CapEx and dividends, is projected around -- for the year to be somewhere between 80 and $100 million.

That is 80 -- what is that 80 -- that is after cap spending?

After cap spending and after dividends.

Okay.

And it would not take into account any proceeds on dispositions.

And is the 65 million the right way to read the balance sheet for disposition expectations?

Yes.

Okay.

Are you able to pay down debt?

I mean, that gives you $160 million.

Is your debt such that in the event that you can't make acquisitions, you are able to put that money to reduce your debt?

We only have a little bit outstanding on our revolver.

We do have -- at the end of the quarter, we had $133 million outstanding on our securitization program that could be paid down.

In addition, we have $150 million of bonds that mature January '07.

We are currently evaluating strategies of whether we might go ahead and access the market in anticipation of those bonds maturing, or just impart some money on the balance sheet, possibly tender early.

There are a lot of things different things in discussion right now.

But in a very short time period, we would need to utilize that cash.

And hopefully, we are going to have some acquisition opportunities as well.

Should we be using, from both the standpoint of corporate expense and interest, the numbers of the first quarter?

Are they representative of what we should use for the subsequent quarters?

Yes.

And the reason that corporate expense is up so much is --?

There are a couple of items.

One of the larger items is the expensing of the stock options, which added the $0.04 that we disclosed in the earnings release.

The total impact for the full year is expected to be $0.08.

So the remaining $0.04, you can divide it evenly over the remaining quarters.

The other increases, Saul, the largest piece, it relates to the additional management bench strength that Rick has discussed that we've added, including total compensation (multiple speakers) we've added.

In addition to that, we increased the utilization of our securitization program; that approximately $700,000 additional expense at a corporate level.

The securitization program remains our lowest cost of capital.

As interest rates have picked up on the short end of the curve, the securitization program becomes more and more compelling from a rate perspective.

But that number sits above (technical difficulty) in the EBIT number.

Okay.

All right, Saul.

Very good, thank you very much.

(indiscernible) from Standard & Poor's.

It would seem to me that with the strength in the housing market, even though there's been a little bit of weakness here in 2006, but it would seem with the strength in the housing market that the consumer lawn and garden market would be much stronger.

Isn't there usually a correlation between the two, or not?

I agree with you.

There is a correlation, and that's why we like the business.

Long-term, the lawn and garden works with housing formation, things like that.

But there's just no question -- I mean, last year that we had too much inventory.

There was weather.

I think it's early.

There has been some drought in some of the southeast this year.

I don't know all the reasons yet, but I'm just reporting some information about what OEs have built and what the inventory position is.

I mean, we like the lawn and garden business long-term, but there's no question it's going through probably three or four quarters of difficult comparison here.

You said that the volume was down 19%, I think, that Carlisle produced 19% fewer units.

That is correct.

And yet sales were -- for the whole division were up slightly.

What parts of that division made up the difference?

Well, some of my comments are about the lawn and garden business and then the other businesses grew.

I mean, the all-terrain vehicle business grew;

I think the golf business grew; the high-speed trailer business grew.

So there were elements in there that grew.

We had some inflation.

This is a business that's had to go out and get -- see, I was talking units on the 19%, and this has been an area where we've had to go out and get several price increases.

So I think some of this is you are looking at dollars, which includes some price increases, and I gave you units on the 19%.

So there is a whole bunch of things going on there, and some mix changes.

But the big single driver is the downturn in the production at two of the major OEs.

And then we reduced our production plans accordingly.

How about the brake business?

How is the integration of the acquisition going there?

There were two acquisitions in the brake business, the acquisition of the off-highway braking, which really services mining and these articulated trucks; that is going beautifully.

In fact both of them are going well.

It's just we are not satisfied with the rate of progress, quite frankly, penetrating the market and making use of our new asset in China on heavy friction for Class 8 trucks.

We really like the Class 8 trucking business.

I don't know if you are keeping up with this, but there is a shortage of drivers.

I mean the whole trend looks very good; we've got a strong position there.

Now we are positioned even better, with the capability to make the shoes and friction in our new plant in China.

And I'm just referencing to you the frustration in the timing it is taking us to execute these new plans and harvest some benefit.

There wasn't any benefit in the first quarter of the new heavy friction acquisition in China, but we think there will be in future periods.

But we're optimistic.

But the off-highway system there, the business we bought from ArvinMeritor, is performing well and did contribute a great deal in the first quarter.

Does that help?

Thank you, yes.

(OPERATOR INSTRUCTIONS) It seems we have no further audio questions at this time, sir.

We'd like to thank everybody for listening in or participating in our call.

And we hope you have -- the rest of the day is very good to you.

And we will talk to you again in a few months.

That concludes our call.