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Operator
Good morning.
My name is Sakela, and I will be your conference operator today.
At this time, I would like to welcome everyone to the Carlisle Companies, Inc.
first quarter earnings conference call.
I would now like to turn the call over to Mr.
David Roberts, Chairman, President and CEO of Carlisle Companies.
You may begin.
David Roberts - Chairman, President and CEO
Thank you very much.
Good morning, and welcome to the Carlisle first quarter 2011 conference call.
On the phone with me are Steve Ford, our CFO; Kevin Zdimal, our CAO; and Julia Chandler, our VP and Treasurer.
We've provided slides for your convenience and they can be found on our website, under the Investor Relations tab titled Presentations.
The slides will provide you with the backup for the data being provided during today's call.
As we prepare to get started, please look at slide 2, titled forward-looking statements.
We encourage you to review this slide before making any investment decisions.
Now let's turn to slide 3.
In the quarter, our sales were up 27%, which include the Hawk acquisition.
Excluding Hawk, we grew organically 13% in the quarter.
As the slide explains, the Hawk acquisition added sales of $76 million.
EBIT was up 42% in the quarter.
Our margin performance was again aided by the acquisition of Hawk.
Hawk's operating margin in the first quarter was 17.5%, which included $1.7 million of one-time charges for acquisition-related costs and additional $3 million of amortization and depreciation.
Earnings per share from continuing operations were $0.53, with the Hawk acquisition adding 10% to the quarter.
Negatively impacting quarterly earnings was the continuous pressure of raw material cost increases.
Each of our businesses was impacted by escalating raw material costs, and I really don't see these subsiding any time soon.
I'll review the impact of raw material and what effect it had on our performance as we look through our margin bridge on slide 5, and the performance of each operating segment later in the presentation.
Turn to slide 4, and you'll see our sales bridge.
Reviewing the slide, you will see that Construction Materials grew at 16%, Transportation Products grew 10%, Brake & Friction grew 52%, Interconnect Technologies grew 6%, all while our FoodService business remained flat for the quarter.
You will also see that price and F/X had very little impact on the quarterly sales growth.
Slide 5 depicts our margin bridge.
Here you will see that raw material had a 4.4% negative impact, while price, volume, COS and acquisitions were a positive impact.
Our margin performance improved from 7.1% to 8%, quarter-over-quarter.
Raw material pricing continues to rise, and it will be a drag on earnings this year if it doesn't subside at one point.
Turning to slide 6, we began the review -- or, we begin the review of each business segment.
Construction Materials enjoyed 16% growth, despite very harsh weather in the Northeast and Midwest during the quarter.
85% of our sales in the quarter came from re-roofing.
While sales grew at 16%, margin dollars were actually $1.3 million lower compared to the first quarter 2010.
This was mainly due to the increase in raw material costs.
Raw materials were a $9 million detriment to the earnings in the quarter.
Looking at just 3 of the raw materials we buy, EPDM was up 29%, Carbon Black up 44%, and TPO Resin was up 11%.
This gives you a good feel for the headwind we faced during the quarter.
Let's turn to slide 7, and we'll take a look at Transportation Products.
Sales and margin performance in the quarter are detailed on the slide.
Our sales were up 10%, led by growth in Agriculture, High Speed Trailer, and Lawn & Garden.
Price was a major contributor to our growth, generating $11 million, or 6%.
The margin story here is similar to that in the Construction Materials segment, good execution being offset by rising price of raw materials.
You will see in the slide that Natural Rubber was up 51%, while Synthetic Rubber was up 27%.
Raw materials were up $13 million, $2 million more than we were able to get in price increases.
As predicted during our year-end call for 2010, we had start-up inefficiencies at the Jackson plant, but we're making strides every day in improving the efficiencies of that facility.
We expect to have continued start-up costs of approximately $2 million in the second quarter, but we expect those to be minimal in the third and fourth quarters of this year.
Our biggest challenge in the second quarter will be rising raw material cost.
We have been building inventory using higher priced raw material, so as we sell that inventory in the second quarter, margins could be negatively impacted.
Turn to slide 8, and we'll see the details of our Brake & Friction business.
Our sales were up dramatically, driven not only by the acquisition of Hawk, but also organic sales within our existing business, which grew at 52%.
Because of commodity prices, mining equipment is being built and sold around the globe, and we're putting brake on these units.
The other component of Brake & Friction story is margin performance.
Our operating margins were 16.4%, which included $1.7 million in acquisition costs and approximately $3 million in depreciation amortization costs associated with the Hawk acquisition.
This acquisition has been a winner from day one.
Slide 9 is a review of our Interconnect Technologies business.
Sales were up 6%, with legacy aerospace, which includes all air frames except the 787, being up about 10%, but offset by a decline in military programs of 6%.
We saw the same decline in military programs in Brake & Friction as well.
There has been a step-up in production of the legacy airplanes, led by the 737, the 777 and the 747-8.
We have not seen the ramp-up in the build of the 787, but do expect to see it in the second half of the year.
On the positive side, our aftermarket business increased by 50% in the quarter, even though it is on a very small base.
EBIT was up 14%, despite the fact that raw material had a negative impact on earnings in the quarter.
Two of our main raw materials, silver and copper, were up 85% and 32%, respectively, compared to last year.
Copper seems to have leveled off, but at a higher level of price, while silver continues to increase.
During the quarter, we closed our Long Beach manufacturing facility and moved those operations into a new plant in Cerritos, California.
The cost of this move was minor, but it did cost us about a quarter of a million dollars.
The new building will provide us the space needed to handle larger volumes that we expect to see over the next few years
Turning to slide 10, we see the results of our FoodService business.
This business is still struggling with a lack of revenue growth.
We realized approximately 3.5% price growth in the quarter, which was offset by slumping unit volume.
Our customers are still being very cautious in their buying habits.
Overall, sales were flat in the quarter, again, driven by price.
Because of raw material price increases and volume being off slightly, our margin fell from 11.4% to 9.7% in the quarter.
I do not see a dramatic improvement in this business over the next 9 to 12 months.
We need traffic back in restaurants and, frankly, new restaurants being built, before we see a return to revenue growth.
I expect sales to be flat and margins to remain under attack, due to low volumes and higher input costs, for the remainder of year.
I'll now be turning the meeting over to Steve who will take us through the balance sheet, cash flow statement and working capital slides.
Steve?
Steve Ford - VP & CFO
Thanks, Dave.
Good morning.
Please turn to slide 11 of the presentation.
Our balance sheet remains strong with a debt-to-capital ratio of 27%, and we have almost $360 million of availability under our revolver, as well as $100 million of cash on hand, leaving us well-positioned to continue to focus on our growth objectives.
Turning to slide 12, in the quarter we used $300,000 of net cash in our operations, primarily due to an increase in working capital at our Construction Materials and Transportation Products operations, in anticipation of second quarter demand.
We are keenly focused on free cash flow generation, and currently expect to convert cash at or above 100% for the full year.
Turning to slide 13, for the quarter, working capital as a percentage of sales was 23.4%, a slight improvement over 23.5% for the first quarter 2010.
And with those remarks, I'll turn the call back over to Dave.
David Roberts - Chairman, President and CEO
Okay.
Operator, we would like to open the floor to questions, please.
Operator
(Operator instructions).
Your first question comes from the line of Peter Lisnic.
Peter Lisnic - Analyst
Good morning, everyone.
David Roberts - Chairman, President and CEO
Good morning.
Steve Ford - VP & CFO
Hello, Pete.
Peter Lisnic - Analyst
I guess, Dave, first question, you talked about Construction Materials and a $9 million cost impact.
I'm wondering if there was any price offset off that, versus that $9 million number.
David Roberts - Chairman, President and CEO
Yes.
Sequentially, Pete, if you -- if you look at fourth quarter to first quarter, basically price and raw material was a wash.
So, we did get price, but it was all offset by raw material.
Now quarter-to-quarter, we actually had a little bit of price and a heck of a lot more raw material cost.
But sequentially we did get some price, and basically that was all offset by raw.
Peter Lisnic - Analyst
Got it.
And then in terms of the price increases that you've put through, it sounds like initially starting to stick.
Can you give us a gauge as to how much is sticking, and then what the -- what your outlook is, in terms of maybe that second round of increases that you've put through, and whether that sticks or not?
David Roberts - Chairman, President and CEO
Yes.
Pete, I -- you know, as far as exact price increases, we've put through a variety of increases based on the type of material, so those vary.
I will tell you that March is the first month that we've seen actual price increase over the past, probably, 18 months.
So, we're starting to see the price increases take effect.
We do have more planned for later this year.
In fact, for mid-part of the year, probably in the June time frame, and, you know, we're going to need all of that to offset the material costs.
Peter Lisnic - Analyst
And if I look at the business top line, can you address a couple of things?
One would be weather impact, if there is any way of quantifying that and how much of that might be recovered in the second quarter, if it at all?
And then just trends and mix, EPDN, TPO, and insulation, would be helpful as well.
David Roberts - Chairman, President and CEO
Yes.
I mean, I don't have those numbers.
We did have some -- basically, what's called lack of roofing days in the first quarter, just primarily because of the harsh weather, certainly in the Mideast -- or, the Northeast and the Midwest.
We would expect to be able to gain that back.
We think that will create some work for us as we get into, certainly the second and third quarter.
I can't really tell you what that was.
You know, we looked at new construction in the first quarter.
It was up about 13%, but off a very small base.
So, we did start to see some growth in new construction.
And then, we talked about what was going on with re-roofing.
That was up as well, obviously.
Peter Lisnic - Analyst
And if I could switch gears, quickly, to Brake & Friction.
Both Hawk and the core business running sharply higher than year-ago levels, and from the looks of things, the core business may be approaching peak already, I guess, from a revenue perspective.
Can you give us a sense as to what the capacity capabilities in those -- in the two businesses are?
Any need for incremental investment to kind of serve what seems to be a pretty robust end market?
David Roberts - Chairman, President and CEO
Yes.
We're actually in good shape, brick and mortar-wise.
We may make some investments in capital equipment, just to streamline the operations.
But frankly, we've got capacity to certainly handle today's volume levels and what are projected to be growth levels going forward.
Again, it might be some minor investment in equipment.
We did have -- if we did it on a pro forma basis, we actually had record sales in both businesses in the first quarter, so, you know, combined, you know, actually we had record sales in Brake & Friction for the first quarter.
Peter Lisnic - Analyst
All right.
That is very helpful.
Thanks for your time.
David Roberts - Chairman, President and CEO
You are welcome.
Operator
Your next question comes from the line of Deane Dray.
James Bank - Analyst
Hello.
Good morning.
James Bank filling in for Deane.
Thanks for taking my questions.
David Roberts - Chairman, President and CEO
You are welcome.
James Bank - Analyst
If I could just jump back to the price increases.
Are you seeing any pre-buying by your customers since you guys have announced this latest round of price increases that is expected to take effect in June?
David Roberts - Chairman, President and CEO
Yes, James, there is always a little bit.
But keep in mind, the size of the material and so on.
There is not a lot of buy-ahead.
So, if we look at -- and I assume that you are talking about Construction Materials --
James Bank - Analyst
Yes.
David Roberts - Chairman, President and CEO
If we look at that 16% growth, I think that's real growth, not a buy-ahead based on what is happening with prices.
James Bank - Analyst
Okay.
David Roberts - Chairman, President and CEO
You know, if there is any in there, it is very small, in a relative term.
James Bank - Analyst
Okay.
And basically, the inventory build in, let's say the month of January and February would reflect some of those finished goods.
Would reflect the lower prices, I guess, that your customer is going to be buying, as you expect to work out the working capital?
David Roberts - Chairman, President and CEO
Yes.
What we end up doing, is we protect jobs.
If a job is in-house that's been quoted, and it -- let's say it is a March job or an April job, and it was quoted in January before the price increase went through, we would certainly protect the price on that job.
But, you know, while there's some of that, again, they don't know exactly when they are going to have a job come up or --.
So, they can't really pull ahead and say I've got, you know, X building going to be repaired and, you know, I need protection on the price.
There is very little of that, honestly, in the overall growth.
James Bank - Analyst
And the change in the competitive landscape in roofing.
On the last call you mentioned that.
I think one is scaling down in PMD, one is leaving TPO altogether, just want to see how that is impacting this business for you as, you know, the --
David Roberts - Chairman, President and CEO
You know, what we saw is another competitor actually announced that they were opening an EPDM plant.
So, while the capacity during the call looked as though it was compressing somewhat, there's been a plant announced and it is supposed to be coming online I think either early next year or mid-year next year.
We think capacity will be back about where it was in EPDM.
TPO, you know, we announced what we were seeing in the marketplace for capacity reduction.
That continues.
I -- we haven't -- you know, it hasn't happened, at this point, to really have any positive impact on pricing.
I think what we are seeing in pricing is primarily driven by everybody having the same raw material cost increases that we've had.
James Bank - Analyst
And then shifting to Hawk, another 50% organic in the quarter, but I think as we head into the second and throughout the year you will face some stiffer year-over-year comps, just given the initial recovery in that business.
Can we expect that to moderate?
David Roberts - Chairman, President and CEO
Well, I think that it will moderate somewhat.
But, you know, we were looking -- Steve and I were looking at our top ten customers about a week ago and their business.
And we've got, just in the top ten, one of those customers is up 223%, the one that is up the lowest is up 12%.
So -- and, again, that is in our top ten which covers probably 40% to 45% of our business.
So I think it is going to remain strong over the next, you know, certainly the next couple of quarters and I do not see it really pulling back or reducing any.
James Bank - Analyst
Okay.
Great.
And is that really what has given you this confidence?
I guess on the last conference call you sort of implied 5% to 7% growth for all of your businesses, excluding Hawk, so implying organic.
And now you are looking for a high single or low double digit.
Is this really coming from the Brake & Friction group?
David Roberts - Chairman, President and CEO
Actually, it is coming from all of the businesses.
I think if you look at Hawk, that certainly has got great growth prospects to it.
I think Construction Materials, you know, we came out of a -- basically, a harsh winter quarter, with 16% growth.
I think that we'll still see growth there.
I think Tire & Wheel will grow a bit, probably not what it did.
But we're anticipating the 787 in the second half of the year as well, which will start to drive the CIT growth.
So I think it is a combination of those that are going to drive the growth going forward.
We're a little more optimistic on growth today than we were just a quarter ago when we had our year-end call.
James Bank - Analyst
That's great.
That's all I have.
Thank you very much.
David Roberts - Chairman, President and CEO
You're welcome.
Operator
Your next question comes from the line of Ivan Marcuse.
Ivan Marcuse - Analyst
Hey, guys.
How are you doing?
Steve Ford - VP & CFO
All right.
David Roberts - Chairman, President and CEO
Good, Ivan.
Ivan Marcuse - Analyst
Real quick, in Hawk initially you said that you thought you were going to be able to get $20 million of cost savings, with about half of it coming in 2011.
So now that you've been able to, I guess, look at the business a little bit more closely and have it in (inaudible), do you see upside to the $20 million savings, or is that sort of the target?
And what do you (multiple speakers) see 2011 coming in?
David Roberts - Chairman, President and CEO
Yes, Ivan, I think that is still the target.
The guys are identifying more every day, but I think for us to say something beyond $20 million at this point would be just a little bit too early.
But, like I said, Steve and I had a quarterly review with them, and they were very optimistic on what was going on, on the cost side.
Ivan Marcuse - Analyst
Great.
And then, I know that construction is a big part of the Hawk and also just the traditional brake business, so is there some seasonality to it?
Or do you think the $76 million for Hawk, or this revenue that it's at right now, I guess for the full business, is that sort of -- ?
David Roberts - Chairman, President and CEO
Actually, there is a little bit of seasonality to the business, but it generally doesn't occur until the second and third quarter.
So, you know, first quarter was just a phenomenal quarter.
I think that will continue, you know, certainly in that business.
And, you know, I think it should be strong through the second and third quarter, anyway.
Ivan Marcuse - Analyst
And steel costs, I know those are going up, but is that traditionally a pretty easy pass-through, or will there be a lag between pricing and -- ?
David Roberts - Chairman, President and CEO
No, there is never an easy pass-through.
But, you know, apparently it is, in relative terms I guess, easier to pass through in Tire.
Let's just put it that way.
Ivan Marcuse - Analyst
Great.
David Roberts - Chairman, President and CEO
But there is no easy pass-through on price.
Ivan Marcuse - Analyst
And then with -- in regards, in the Tire -- I know you built inventory in the second half of last year, just to make the transition smooth going to Jackson.
So, is that inventory that was built, is that all through the P&L or is there still a little bit left?
David Roberts - Chairman, President and CEO
Ivan there is a little bit left, but I think there's very little.
What you are going to see in the second quarter, I think we'll have some margin decline there, primarily because we're now getting the higher priced materials flowing through the P&L, out of inventory.
And I think that may have a negative impact on margin in the second quarter.
Ivan Marcuse - Analyst
Great.
And then, more of a longer term type question.
I know one of the goals out there -- or long term goals, is a 15% operating margin.
Do you feel that you are still on a trajectory to meet that, and when do you think that, you know -- is that two to three year or three to five year?
How would you gauge where you think you could get there, keeping I guess raw materials as a wide variable?
David Roberts - Chairman, President and CEO
Yes.
If you keep raw material flat, we'll be there in a couple of years, if raw material continues to do what it is doing, it is going to take us longer than that.
But, you know, we said that we would be two to three years to get to 15% with, I don't know, do you call them stable raw material cost increases?
And that is the biggest challenge we have today, and my guess is it is everybody's challenge.
Ivan Marcuse - Analyst
Right.
Thanks for taking my questions.
David Roberts - Chairman, President and CEO
Sure.
Operator
Your next question comes from the line of Wendy Caplan.
Wendy Caplan - Analyst
Good morning.
David Roberts - Chairman, President and CEO
Good morning, Wendy.
Wendy Caplan - Analyst
The -- just one more inventory question.
Up $14 million versus 4Q.
Most of that is construction, would that be correct?
Steve Ford - VP & CFO
That is correct, Wendy, yes.
Wendy Caplan - Analyst
Okay.
David Roberts - Chairman, President and CEO
You know, we build ahead in the first quarter for the building months in second and third.
Wendy Caplan - Analyst
Right.
I know you have historically done that.
But it was only up, like, 3%.
And my question is what does it -- is that a -- is that a usual number?
I had trouble finding that as I looked back, in terms of confirming that most of it was construction.
But, anyway, as I look at that, what does it say about our view of demand as we go into the big selling season?
David Roberts - Chairman, President and CEO
Yes.
I don't know what that number is either, now that you've said that.
But our view of demand is very good.
Wendy Caplan - Analyst
And it's -- you know, we usually root for wet, windy weather, and we've certainly had a lot of that.
So, you would expect that second and third quarter should be strong in that segment, I assume?
David Roberts - Chairman, President and CEO
Yes.
We think so.
The only thing that may temper that is, based on raw materials and this product just getting so darn expensive that people start pushing off as much as they can.
But that's my own -- that would be my only concern about it.
I think demand is still there.
Wendy Caplan - Analyst
And have you seen any changes in terms of substitution of product or any of that?
Or all of other materials are high as well?
David Roberts - Chairman, President and CEO
Yes.
It is a -- it's an example of everything has gone up.
You know, everything is oil-based.
And everything has gone up.
And really there is nobody that has any advantage today, any technology that has any advantage today over another.
Wendy Caplan - Analyst
Okay, okay.
And in Transportation, how much did the Jackson consolidation cost in the quarter?
You mentioned $2 million in the second quarter, but I didn't get the number for this quarter.
David Roberts - Chairman, President and CEO
Yes.
We think it is about $4 million in total, Wendy.
We had a couple million in restructuring, and we had, we think $2 million to maybe even $2.5 million in inefficiencies, as we got the plant up and running.
Wendy Caplan - Analyst
And, how is the plant going these days, quality (inaudible)?
David Roberts - Chairman, President and CEO
Yes.
It is actually doing much better.
I do not have the production levels in front of me, but we've nearly increased production by about 60% over the last three months.
So it's, you know, it is running more tires and higher quality tires, I guess you would say, or -- not necessarily higher quality tires, just less scrap.
Wendy Caplan - Analyst
Yes, yes.
Okay.
And finally, FoodService, probably the disappointing segment given the lack of top line growth.
Obviously, you can't do anything about getting people into restaurants.
But can you comment on the cost cutting initiatives that you have put in and what effect you expect those to have?
David Roberts - Chairman, President and CEO
Yes.
Wendy, I think that, you know, we've taken small incremental costs out, because we're relatively flat in volume.
We would expect that margins are going to be in the 10% range for the year, you know, going forward.
So, just about where they are today.
Wendy Caplan - Analyst
Okay.
Thanks very much.
David Roberts - Chairman, President and CEO
You are welcome.
Operator
(Operator Instructions).
Your next question comes from the line of Ajay Kejriwal.
Ben Loper - Analyst
Thanks.
This is Ben Loper for Ajay.
Could you just touch on, you know, confidence in the free cash flow outlook.
I realize first quarter is seasonally weak, we had a couple quarters of weak free cash flow.
So, any color there is helpful.
David Roberts - Chairman, President and CEO
Yes.
I think that -- and I will give you my general feeling and let Steve talk to you in numbers.
We feel comfortable that we will convert at 100% of -- (multiple speakers)
Ben Loper - Analyst
Okay.
David Roberts - Chairman, President and CEO
Can you all hear me?
Ben Loper - Analyst
Yes, we can hear you.
David Roberts - Chairman, President and CEO
Okay.
We had a lot of background noise there.
Again, we're going to end up converting at 100% or greater, and we feel fairly comfortable with that number.
Steve Ford - VP & CFO
(Multiple speakers) I'd just confirm that.
Again, there is seasonality here.
Our first quarter is historically weak.
But we have got a lot of working capital initiatives underway.
We feel good about the progress that we're making and we're very committed to converting cash at or above 100%.
It is an incentive goal for all of us and we're all focused on that.
Ben Loper - Analyst
Okay, thanks.
And then, can you elaborate a little bit on the outlook for non-res?
Are you seeing any stabilization here or -- ?
David Roberts - Chairman, President and CEO
Yes, you know, not really.
We saw a little bit of growth, as I said, in new construction, commercial construction in the first quarter, but off of a very small base.
We would expect that to continue, but nothing that would be dramatic.
We're thinking 2012 before you really see a turnaround in new construction.
Ben Loper - Analyst
Okay.
And then last question, just going back to Hawk, you had about $2 million inventory adjustments in the quarter, $3 million amortization, how do we kind of think about that in the second quarter?
David Roberts - Chairman, President and CEO
Well, the inventory adjustments are done, amortization will continue.
Steve Ford - VP & CFO
A million a month.
Ben Loper - Analyst
Okay.
Thanks.
David Roberts - Chairman, President and CEO
You are welcome.
Operator
You have a follow-up question from the line of Deane Dray.
James Bank - Analyst
Oh, hi.
I'm sorry, one more question.
David Roberts - Chairman, President and CEO
Sure.
James Bank - Analyst
When you look at Hawk and 17.5% margin, are you seeing cost synergies come through faster than what you guys might have expected?
David Roberts - Chairman, President and CEO
Yes.
James Bank - Analyst
And so, it is still $20 million run rate?
David Roberts - Chairman, President and CEO
Yes.
You know, we're -- that's one that we're comfortable that we think by the end of the quarter -- or the end of the year, we could be close to 20% for the total business.
James Bank - Analyst
I'm sorry, 20% of the $20 million run rate?
David Roberts - Chairman, President and CEO
No.
20% margin for the year.
James Bank - Analyst
For Hawk?
David Roberts - Chairman, President and CEO
Yes.
James Bank - Analyst
For Hawk?
Okay.
David Roberts - Chairman, President and CEO
For our braking business.
James Bank - Analyst
Okay.
David Roberts - Chairman, President and CEO
We've fallen in the trap here, as we have, calling it Hawk.
James Bank - Analyst
Yes.
David Roberts - Chairman, President and CEO
But our braking business, right.
James Bank - Analyst
Okay.
Okay.
That's all I have.
Thank you.
David Roberts - Chairman, President and CEO
Okay.
Operator
And there are no further questions at this time.
David Roberts - Chairman, President and CEO
Okay.
Well let me go ahead and thank everybody for attending the call.
As you can probably tell from the comments on the call, we remain very upbeat, certainly for the remainder of 2011.
First quarter was a terrific quarter for us.
We're starting to see the fruits of our efforts in COS, and frankly our strategy is beginning to pay off where we talked about going into higher margin, faster growth rate businesses.
The Hawk acquisition is all we expected and more.
We continue to look for businesses that are similar in that type of business.
I think we'll continue to see, you know, margin improvement in the braking business.
You know, we talked about just recently 20%.
We think that we can get to the 20% range by the end of the year.
We also think that Boeing, when they begin to ship the 787, you will see our margins improve in CIT.
We should be in the 15% range, certainly in the latter part of the year, in CIT.
You know, those that are most concerning to us are Construction Materials and Transportation Products, primarily because of the cost of raw materials.
I think Construction Material probably has a better opportunity to manage a cost-price relationship between the two.
But I think we're going to have negative impact in raw materials for the year.
It has been impossible to keep up with the pace of the cost increases that we've seen, and as I said in our year-end call, raw material is our biggest challenge, and we've seen no way to be able to control it, at this point.
Despite that, I think 2011 is going to be a very good year.
So, again, thank you for attending the 2011 first quarter earnings call.
And, operator, you can now end the call.
Operator
Thank you for your participation.
This does conclude today's conference call.
You may now disconnect.