Carlisle Companies Inc (CSL) 2015 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Carlisle Company's first-quarter earnings conference call.

(Operator Instructions)

Thank you.

I will now turn the conference over to Mr. David Carlisle.

Please go ahead.

David Roberts, excuse me, please go ahead.

Thank you, Crystal.

Good morning, and welcome to Carlisle's first-quarter 2015 conference call.

On the phone with me is our Chief Operating Officer, Chris Koch; our Chief Financial Officer, Steve Ford; our Chief Accounting Officer Kevin Zdimal; and our VP and Treasurer, Julia Chandler.

Before I began reviewing our first-quarter performance, I ask that you turn to slide 2 titled Forward Looking Statement, and the use of non-GAAP financial measures.

This slide details the risk associated with investing in Carlisle Companies.

I strongly urge anyone considering an investment in Carlisle to read these statements in detail, along with reviewing the financial reports we filed with the SEC before you decide to invest in our Company.

Before we turn to slide 3, let me say that we will be changing the conference call protocol slightly today.

During the call, I'll review the Company's overall performance, Chris will be reviewing our overall individual segment performance, and Steve as usual will be reviewing our balance sheet and cash flow statements.

Before I get into the details of the first quarter, I have to tell you how happy we are with the completion of the acquisition of Graco's Finishing Brands.

We affectionately call this acquisition the 1,000 day crusade, primarily because that's how long it took us to close the deal.

We hung in there for a 1,000 days, because we understood the value of this business.

This will be our next CIT.

We will work the scale of the business and to improve the operating profit.

There is tremendous upside in the acquisition of Finishing Brands.

With that said, let's now turn to slide 3. As you begin to review the information on slide 3, you will see that our net quarterly sales were up 9%.

7% of our growth was organic, while 4% or $25 million came from the acquisition of LHi.

FX reduced our sales by 2% in the quarter.

We feel that 9% growth in the quarter is exceptional, considering that the commercial roofing season had not yet kicked into high gear, and the weather in January, February and much of March made it difficult for our contractors to get on roofs in the quarter.

Many of our contractors finished the first quarter with very healthy backlog, and that should carry us through the second and third quarters with strong results.

While CCM grew nicely in the quarter, our largest dollar and percentage contributor to growth was CIT.

Quarterly sales were up 29% or $44 million exceeding our expectations and estimates.

Our large aerospace customers continue to ramp up their build rates.

We also had other customer segments within CIT growing, and Chris will discuss those with you later in the call.

At Brake & Friction, we saw sales down 6%, all related to FX.

CBF volumes were actually flat in the quarter.

We still haven't seen any signs of recovery in the braking business, and do not expect to see any in 2015.

At FoodService, our sales were down 5% due to soft international sales and a decline in the sale of capital equipment to the healthcare industry.

Health equipment sales are usually lumpy as big dollar items for healthcare facilities are not made with any consistent cadence.

Considering that the first quarter is not one of our busier quarters, I think our performance during that period of time speaks well to the strength of our commercial roofing and aerospace markets.

Overall Company earnings for the first quarter were up 5%.

Our margins were down 30 basis points, as a result of pricing actions at one of our large aerospace customers.

We did see earnings leverage in construction materials which is the result of lower cost material, and pricing remaining relatively stable.

As I said in my opening remarks, the FTC gave us approval to complete the acquisition of Finishing Brands, which we closed on April 1. The business will be the foundation of a new pillar and will be reported as Fluid Technologies in future quarters.

EPS for the quarter was $0.59, 5% growth over the first quarter of 2014.

Turning to slide 4, you'll see our first quarter sales bridge.

Price had a negative 0.8% impact on sales, as accelerated opportunity capture went into effect at CIT on January 1. Volume was positive 8.2%, and the acquisition of LHi contributed 3.9% to our growth.

FX was negative 2.2%.

By segment you'll see that organic growth at CCM was 9%, CIT 12%, Brake & Friction was flat, and FoodService was down 5%.

Slide 5 details our EBIT bridge for the quarter.

Price and raw material were slightly positive at 0.3%.

Volume contributed 0.8%, while COS savings contributed 0.9%.

On the negative side of the ledgers, other contributed 2.3% to the decline.

Included in other is mix, higher inventory costs at CF or FoodService, [actual] and plant closing costs and other smaller one-time items including last year's Thermax settlement gain.

This concludes my review of Carlisle's overall performance.

I'll now turn the call over to Chris, who will provide you more detail on each one of our segments.

Chris?

Thanks, Dave.

Good morning.

Please turn to slide 6, as we discuss our segment performance for the first quarter.

Starting with construction materials our largest segment, sales grew 7% in the first quarter.

Foreign exchange fluctuations related to sales into Canada and Europe impacted CCM sales negatively by 2%.

Given the harsh winter we had in parts of the US, the solid sales growth in the first quarter is a strong indication of the demand were seeing from new construction.

Our reroofing demand should pick up in the second quarter as well as the weather improves.

Currently every indication points to a very good year for demand for CCM and commercial roofing.

EBIT was up 15% in the quarter, and margin was up 70 basis points in CCM reflecting strong leverage.

Raw material costs were lower in the quarter.

We were able to essentially grow sales and maintain selling price in the quarter, while benefiting from a lower raw material cost environment.

Turning to slide 7. Our CIT segment achieved sales growth of 29% in the first quarter.

Organically CIT grew sales an outstanding 12%.

Aerospace was up a very strong 12%.

CIT also achieved strong results in its military product line, up 12%, and test and measurement, up 53%.

Sales into the industrial markets were down 8%, reflecting the continued softness in this market.

Within aerospace, demand continues to be high for in-flight entertainment and connectivity applications, and we have seen -- and we have significantly grown our business with another leading aircraft manufacturer.

The 12% growth in airspace is net of the selling price reductions that began in the first quarter for renegotiations with one of our largest aircraft customers.

The acquisition of LHi contributed $25 million or 17% to CIT sales.

CIT EBIT was up 12% for the quarter.

On the margin basis, EBIT margin declined 260 basis points from the dilutive impact of the LHi acquisition and selling price reductions.

Also CIT margins from the prior year included an almost $1 million gain from a settlement related to the Thermax acquisition.

CIT maintained margin in the high teens this quarter through its continued success with the Carlisle operating system and strong organic sales volume growth.

CIT successfully began shipments out of its new state-of-the-art factory in Nogales during the first quarter, and CIT remains on pace for another record year.

Turning to slide 8. Sales at CBF were down 6% in the quarter, almost all of which was related to foreign exchange.

Without currency effects, CBF sales were flat to last year.

Sales to the agriculture market were down 26%, mining was down 2%, and construction was up 1%.

Efforts in generating new business and gains in some of our smaller markets allowed us to keep volume relatively flat for the quarter, despite the downturn in agriculture.

CBF's Q1 EBIT declined 11% below last year's first quarter.

The fact that CBF was be able to maintain close to a 10% EBIT margin, given the current market conditions and negative foreign exchange impact demonstrated solid performance in the current environment.

CBF took aggressive countermeasures beginning last year to reduce costs resulting in $2 million lower SG&A costs this quarter.

We expect 2015 is going to be another challenging year for CBF, with the business has taken significant steps in the area of cost reduction and new business development to improve upon its performance in 2014.

Slide 9 details Carlisle FoodService results for this quarter.

Sales declined 5% in the first quarter, primarily due to a 12% decline in healthcare from lower capital equipment sales.

Last year, CFS benefited from some large Retherm equipment orders in the first quarter of 2014 that did not repeat this year.

FoodService sales were down 2%, primarily due to lower international sales, and Jan/San sales were up 3%.

CFS earnings performance was down significantly, with EBIT down 24% and EBIT margin lower by 250 basis points.

The EBIT decline was due to lower sales volume and the higher cost inventory that Dave mentioned earlier.

This inventory was sold in the first quarter, and will not carry over an upcoming quarters, and CFS performance should improve throughout the remainder of 2015.

Before I complete my review of the segment, slide 10 provides a look into the profile of our newest segment, Carlisle Fluid Technologies or CFT.

Integration activities with our newest segment commenced immediately after our April 1 acquisition closed.

I'm very familiar with this business from my 10 years at Graco, and I am very excited very segment about the outlook of this segment, and the energy behind our new management team.

We do not expect CFT to contribute EBIT or earnings in the second-quarter, as there will be transaction and inventory step-up costs, but we are expecting CFT to contribute to our EBIT and net earnings beginning in the third quarter.

This concludes my review of our segment performance in the first quarter.

Steve will now review our balance sheet, cash flow, and working capital.

Steve?

Thanks, Chris.

Good morning.

Please turn to slide 11 of the presentation.

We ended the quarter with $744 million of cash on hand.

As Dave noted, on April 1 we ended our long crusade and acquired the Finishing Brands business for $590 million using our cash on hand.

Following the Finishing Brands acquisition, we have approximately $150 million of cash on hand and continue to have all $600 million of availability under our credit facility, leaving us ample liquidity to further pursue our long-term growth objectives, and return capital to our shareholders.

Our balance sheet remains strong.

We had net debt of less than $5 million at quarter end.

Following the Finishing Brands acquisition, our net debt to capital is 21%, and we have a net debt to EBITDA ratio of 1 time, including Finishing Brands EBITDA.

Turning to slide 12.

Our free cash flow from operations for the three months ended March 31 was $30.4 million, compared to $27.7 million for the first quarter 2014, a 12% increase.

Turning to slide 13.

Our average working capital as a percentage of annualized sales for the first quarter 2015 was 20.4%, a 70 basis point increase from the 19.7% reported for the first quarter 2014, in part reflecting higher inventory to meet expected second-quarter demand.

With those remarks, I'll turn the call back over to Dave.

Thanks, Steve.

Crystal, you want to open the floor for comments please, and questions?

Yes, sir.

(Operator Instructions)

Ivan Marcuse, KeyBanc.

Hi, thanks for taking my questions.

Congratulations on the quarter.

How much was your raw material basket in roofing down on a year-over-year basis in the first quarter, and what's your expectations for raw materials for the rest of the year in roofing?

Hey, Steve, I'll let you go ahead and handle that.

But Ivan, thank you for your comments.

Appreciate it.

Yes, Ivan, we did have, in the first quarter we've got changes in standard inventory cap variance that partially mitigated the overall benefit.

But raw materials standing alone were down about $8 million or $9 million year-over-year, and we are set up very favorable as we move here into the second quarter.

What we've told you in the past, is this particular segment purchases about $850 million of raw materials that are petroleum-based, and we expect the savings to be in a range of 5% to 10%, and hoping that we're at the higher end of that range.

Great, thanks.

And then, in the fluid and acquisition that you just made, the fluid technologies, what is your expectation?

Is there any seasonalities to think about in this business?

And then also on top of that, you said this is your new CIT?

CIT, including LHi, have essentially quadrupled sales over the past five years.

So how would you -- do you expect the same growth rate?

Yes, Ivan, there's very little seasonality in the business.

Generally, what you'll see is toward the end of the year, you might see a slight bit of a tail-off, but it's really well-balanced over the four quarters.

And when I said the CIT comparison, yes, we plan on growing the business.

We will have to do that through acquisition.

I mean, we're out, right now, aggressively looking for add-ons.

But what we got from Graco, was an excellent applicator company with some pumping technology.

We think we can expand in the pumping area, making it look more like Graco's industrial business, and we will drive to do that.

Now quadrupling the size, that might be a challenge.

But certainly, the growth that we saw, and the improvement in margin that we saw is our goal.

Great.

Thanks for taking my questions.

You're welcome.

Matt McConnell, RBC Markets.

So previously, you guys talked about mid to high single-digit organic growth in construction materials.

Based on the start to the year and the backlog that you've built, it seems like you might do better than that.

Could there be upside to that forecast based on what you've seen so far this year?

Matt, there could be a bit of upside.

I mean, I'd hate to sit here and predict that that's going to happen.

Frankly, we were quite surprised with the strength in the first quarter.

We knew it was going to be a good quarter, but then the weather hit, and despite the fact that we had bad weather, we still had very good growth.

Actually, we had superb growth in reroofing in the quarter, which would lead you to believe that there was a lot of repairs going on and so on, because of the weather.

Yes.

But I'd be very reluctant to predict that we're going to be much above very high single-digits, or very low double-digit growth in that business.

Okay.

That's fair enough.

And then, on liquid finishing, I know you've been very clear that that's going to be an important growth platform.

What's the timing of that?

I know these are markets that you know really well, but do you need to spend six months or a year getting reacquainted with it, or is there a pipeline now?

Can you help us understand when you could see M&A growth there?

Yes, we spent 1,000 days getting reacquainted with it, so we're okay there.

Yes.

(Laughter).

It's, what we'll end up doing is, we have some ideas, from an acquisition standpoint, we have nothing that's clearly going to pop in the next three months or four months.

There are number of things that still have to be worked, before we have anything that we would add on.

I think our objective initially is just to integrate them into Carlisle, focus on improving their operations that they have today.

And at the same time, we'll have corporate development working on acquisition opportunities (multiple speakers).

My guess is, it's going to take us a year to find anything to add on, and that year will be spent trying to improve it.

Okay, great.

And then, on that topic of improving it, I mean it's operating at a low 20% margin right now.

I know that's below Graco's level, but where's the low hanging fruit, or what are the near-term priorities there on the operational improvement side?

Well, I think what we have to do is -- think about the business that really has been well-managed during the past three years, but really had no strategic management that was done during that period of time.

The guys running the business did a superb job in keeping it going without any leadership basically.

Graco was restrictive from managing it, and the folks again, were trying to hold everything together during that three-year period.

I think there will be some short-term improvements in operations themselves.

I think that will start to help the margin.

We have some other thoughts on, as far as what we do from a machining standpoint, a variety of assembly applications.

Nothing yet that we can talk about, but there are some ideas that we've had, and then, frankly the management team had, and just didn't have the opportunity to implement.

Great, Thanks very much.

Kevin Hocevar, Northcoast Research.

Hey, good morning, everybody.

Good morning, Kevin.

I want to -- can you comment on how pricing -- it looks like it was pretty flat in the commercial roofing business.

Is that your expectation for the year, or has pricing trended any lower as the quarter progressed, or maybe into April?

Or do you expect pricing to be relatively flattish for the full year?

Yes, actually that's why I held my breath, when Steve started to talk about raw material decline.

I think there will be downward pressure as we go through the year.

I think perhaps second quarter will be okay, but I think we will see some downward pressure as we get into third and fourth quarter.

It's the nature of the beast when you're in an declining raw material environment.

Now I think we still will have advantage of raw material that declined last year, as we carry it into this year.

But I think there will be some downward pressure on a pricing.

Got you.

And then, the volumes did seem -- the organic growth seemed very strong in the construction material.

Was there any -- did you feel like you outperformed the market, just because the checks we were doing sounded like it wasn't as strong as your performance would suggest.

So do you feel like you outperformed the market?

Was there any -- well, I guess, do you feel you outperformed the market, or was that pretty much how you felt the market moved?

Yes, Kevin, just remember that last year's first quarter was really soft because of the weather.

So we performed, we outperformed the market over a very soft quarter last year.

But despite that, we saw some -- again, as I said earlier, we saw some real strength in EPM roofing which generally is an indicator of reroofing business, and TPO was strong as well.

Did we outperform the market?

If we did, it was just slightly.

Okay.

And then, a final question, just Steve as I look at the working capital as a percent of sales, it was higher on a year-over-year basis, and you mentioned building inventory for expected demand in the second quarter.

So wondering what -- where you're building inventory, what product lines are you seeing strength, and are you expecting an acceleration in demand in these product lines in the second quarter?

Just trying to get a sense for, I guess where the inventory build is and where you're seeing that strength?

Kevin, the inventory build is almost entirely at construction materials, and we are expecting a strong second-quarter there.

Okay, great.

Thank you very much.

Joel Tiss, BMO.

Hey, guys, how's it going?

Okay, Joel.

That's good.

Just can we spend a minute on this LHi?

How big is the market and the opportunity?

How big is the market for you guys, and sort of like can you frame the opportunity a little bit?

Chris, you want to talk about that a bit?

Yes, I think as we see the served market, I think we're probably in that $1 billion range.

When we look at the -- the LHi acquisition is a great platform to begin to expand into that.

Obviously, we had done some organic work in medical, and that business we've done before LHi actually is growing at a pretty good clip this year, Joel.

And so, the LHi just brought us a bigger product sweep, brought us more contact with new customers, and greater penetration in some existing customers, and has given us that platform to now expand into other capabilities within those markets, specifically with the wiring and connector side.

Okay.

Steve, can you help us on the accretion in Finishing?

I'm sure you have a better idea, certainly than we do on what the purchase accounting is going to look like?

Can you give us any sort of ball park, or any way that we can frame 2016, and as this starts to come together, the accretion?

Well we are still finalizing the valuation, and all the purchase accounting.

At a very high level, we are looking at about 700 basis points or so of additional amortization relating to goodwill and intangibles.

So I think with that information, with the coming into the Carlisle fold with margins in the low 20%s, subtracting the 700 or so basis points from that -- we've talked about the inventory step-up which will prevent us from really generating any EBIT in the second quarter.

For the back half the year, we're expecting margins in the low teens to -- in the low teens range, and based on that, we'll generate our accretion.

We're not incurring any debt for this purchase.

It was all existing cash, so in our accretion calculations, there is no interest expense.

Okay.

Good.

That's awesome.

And then just lastly, can you give us a little more granularity on some of the actions that you guys are taking to help the accretion of both the Finishing business, and a little bit on LHi also?

Yes, probably easier to talk about LHi initially.

We, on day one basically, we began running the COS activities there.

Keep in mind, as Chris said earlier, that business grew very nicely under the previous ownership.

What they were doing though, was really throwing manpower at the growth.

So they weren't doing anything to automate or streamline their operations.

So what our folks have been focused on is streamlining operations, attempting to make them more efficient, and I think our headcount there is down about 100 people during that period of time.

The good thing is it's been all transition, people leaving, and just not filling positions.

So we've not had to take any large reduction in forces, but we'll continue down that line to reduce the number of direct labor in the operation.

That's at LHi.

At Fluid Technologies, I think it's going to be more of a look at what we're manufacturing, and what we are purchasing outside.

We, Chris and I at Graco learned very quickly, that there's a lot of value add in manufacturing most of the product, rather than sourcing most of the product.

We'll be looking in that area to capitalize on the machining expertise that Fluid Technologies has today, and the machining expertise that we have at our braking business.

There might be some combination of facilities being able to machine aluminum, and that would be able -- that would be helpful for us there.

So really, there is nothing I can give you more than that, and those are just the areas that we're looking at.

We just don't have solid plans in place yet for Fluid Technologies that would suggest that we're going to be able to improve the margin x percent by a given date.

Okay.

That's awesome.

Thank you.

You're welcome.

[Jim Giannakouros], Oppenheimer.

Good morning, guys.

Good morning, Jim.

Question on your Interconnect.

The legacy margins were 20%.

I was positively surprised that you came in at 17% or north of 17.5% in operating margins this quarter, particularly with the contractual price down there.

What exactly drove -- I think that the margin experience was higher than you had kind of suggested earlier this year.

What drove that, and can we expect sequential improvement from here as you've indicated, getting to an exit rate potentially north of 20%?

Well, I don't think we'll be north of 20% this year, and what really drove the improvement was volume.

Our organic growth was up double-digits, and any time you put more volume through the factory, that helps the margin rates.

It was that more than anything.

If the volumes continue at a level that they are, we should remain in this operating margin range, and I would think as we improve LHi, you'll start to see margins creep up.

But it's primarily volume.

Got it.

Okay.

And then, if I understood correctly, you took down the CBF expectations for growth, top line growth this year.

Was that a reflection of organic prospects in either ag or mining, or was it predominantly FX?

It was FX more than anything.

We had seen a little bit of volume growth and were anticipating more than what we saw, just listening to our customers.

But we're convinced now, as we look out for the -- the view that we have today of backlog, it's going to be relatively flat from a volume standpoint.

And then, with FX, you'll see a negative impact, particularly if it weakens any longer.

More than 50% of this business is outside the US, and that will drive -- FX will drive sales shortfalls.

So flat volumes and FX down.

Pricing holding in?

Yes, we're okay on pricing.

We haven't seen any issues with pricing at this point.

So we think that will hold.

We think margins will be in the 9% to 10% range for the year.

As Chris said earlier in the call, the guys running the business have done a very nice job in reducing their SG&A, and we think that will continue for the year.

So we think margins will hold -- volume, I think volume will be relatively flat going forward, unless there's another dramatic change in the currency exchange rates.

Okay.

Thank you.

That's all I had.

You're welcome.

(Operator Instructions)

Tim Wojs, Baird.

Yes, hey, guys.

Good morning.

Good morning, Tim.

I guess, two questions for me.

One, I noticed that you brought back just a minimal or a modest amount shares in the quarter.

I guess, how are you -- if the M&A pipeline is building, how should we think of repurchase in our model through 2015?

Yes, the reason we only bought a few shares, Tim, is that we really didn't start until after earnings release in February.

So we really only added for a little more than a month.

Steve, why don't you go ahead and talk about what our plans are, and what we're doing?

Yes.

So as Dave noted, we are buying back shares through a 10b5-1 program, and that was put in place after the earnings release, so we didn't get the full benefit of the program in the first quarter.

We spent about $9 million on a go-forward basis.

I would expect us to continue to be buying in the open market to the tune of about $15 million a quarter, which is sort of similar to what we are paying out in our dividends.

It is not a much more aggressive program that that, Tim.

We're looking to just sort of maintain share count, avoid the dilutive impact of equity awards, and maybe take the count down a little bit.

But on a go-forward basis, I think you can expect us to be buying shares back to the tune again of about $15 million in the quarter.

Okay.

No, that's helpful, thanks.

And then, I guess, just a bigger picture question.

In the CCM business, have you seen over the past couple of years, or I guess going forward, are seeing more content on roofs, and how should we think of that, as a benefit to growth over time?

No, there's really no more content on the roof, other than in new construction, there is additional insulation that's being sold in some areas.

But no, the content is what we had seen.

We've got obviously membrane insulation and the accessories that go on the roof, and it really hasn't changed.

Now keep in mind, we've opened our new TPO plant in Carlisle, Pennsylvania.

That's now producing product, and that's going to serve the Northeast for us.

We're starting to see more and more companies moving to TPO roofing in northern climates as compared to EPDM.

We continue to counsel them that EPM is a better roof up there from an energy standpoint, yet the architects are moving toward TPO.

Okay, great.

Well, thanks for the help.

Appreciate it.

You're welcome.

Neil Frohnapple, Longbow Research.

Hi, good morning, and congrats on a great quarter.

Thanks, Neil.

Impressive sales within CCM during the quarter, and I believe you're up against a very difficult comp in Europe as well.

Any way to quantify what you saw organically in Europe in the first quarter, and able to break that change down between organic and FX?

Steve, do you have that information in front of you?

Yes, organically, and excluding currency, we were relatively flat.

So the -- we were down, and the decline was all attributable to the euro year-over-year.

Okay.

And then, any color, David, you can provide on just kind of the outlook for that business this year?

I know there's a secular penetration story for EPDM.

Just any thoughts there on what you are seeing from an underlying and market demand standpoint?

I don't think it's going to change much.

I think that we will see the migration to EPDM.

We may see growth, minus FX that would be in the mid single-digit area.

I don't think it's going to grow much more than that, but we will see growth.

Okay.

And then, sorry if I missed this, have you guys laid out any sort of CapEx requirements for Fluid Technologies in 2015 and beyond?

Just trying to think about what we should be modeling, from like a maintenance standpoint?

Yes, we haven't yet.

Honestly, I think that -- if you look at our capital spending over the last few years, I think even with the fluid technologies, you see that capital spending come down a bit.

I don't think it's going to require a significant amount of capital.

We're going to spend probably $100 million this year, which is basically all maintenance CapEx.

I would think we'd be in that range going forward.

Got it.

Okay.

And then, just last one, within CIT, did you realize any incremental revenue in the quarter from a contract win with one of your customers on -- particularly with the start up of the Nogales, Mexico plant, or will that really build from here?

The best way to answer that is -- yes, we did.

That's what drove some of the growth.

We had -- obviously we had the continued ramp-up of the Boeing aircraft, and then some additional Airbus work.

Great.

Thanks a lot, guys.

You're welcome.

Matt McConnell, RBC Capital Markets

Great.

Thanks for taking my follow-up.

Could you give us a little bit more insight into the higher cost inventory in FoodService?

And then, I think that sounded like it was all finished, and you were on a nice path towards the low teens margin in that business.

Is that still the expectation, and could you get back to year-over-year margin growth in FoodService next quarter, and for the balance of the year?

Yes, Chris, do you want to take that?

Yes, let's start with the expectations.

Yes, our expectation will be that that same, that aspirational goal I think would be 15% there.

That might be a little bit high, but certainly getting back to that lower teens level that we've seen would be good.

We're working with the group to continue on those three platforms we've worked on.

One is to grow the sales, which obviously will have an impact on the volume in the factories Dave mentioned earlier in CIT, with more volume, obviously, better leverage.

We've worked on factory consolidation, and then we've worked on operational efficiency, and we still continue to see opportunities there.

So there is still opportunity to expand the margin.

On the inventory, we really had a reduction in inventory in the fourth quarter, and there was just an absorbed costs that were attributed to that inventory, and then came out in the first quarter.

So pretty simple story there, related to a reduction in inventories.

Okay, great.

Thanks very much.

Yes.

At this time, there are no further questions in queue.

All right.

Thank you, Crystal.

I will go ahead, and wrap up the call then.

As we prepare to end the call, let's turn to slide 15.

As we enter the second quarter, our outlook for 2015 remains positive.

Nothing has changed in our markets that would suggest anything different.

We expect the consolidated, or consolidated FX Impact to remain manageable, as close to 85% of our sales are in US dollars.

FX, however, is expected to negatively impact CBF, and now CFT, as both businesses generate more than 50% of their business outside the US.

For the remainder of the year, I expect CCM to benefit from a strong non-res new construction market, a healthy reroofing market, and lower raw material costs both in the US and in Europe.

Sales should grow high single-digits, and [earnings] are expected to be leveraged with that sales growth.

How much earnings will grow is dependent upon what transpires with obviously, the oil-based material cost and the sustainment of pricing.

As of today, 2015 is stacking up to be a very good year for construction materials.

At CIT, sales should grow in the 20% range, which includes the acquisition of LHi.

LHi should contribute approximately $80 million in sales in the final three quarters of the year.

EBIT will grow, but will not be levered at the same rate as the sales growth due to the AOC program, and the influence of LHi's lower margin.

Despite that, we expect margins to move upward by year end.

At CBF, we continue to plan for flat revenues for the year.

Margin should be in the 9% to 10% range for 2015 as well.

Despite the sales downturn at CFS, in the first quarter we expect low single-digit growth for the full year, and margins will be in the 12% to 13% range by year end.

Sales at CFT should be slightly above $200 million for the full year.

But as Chris said earlier, CFT will not contribute to the Company's earnings in the second quarter, primarily due to purchase accounting.

Once purchase accounting adjustments are depleted, I expect this business to contribute margins in the low teens initially, and then ramping up toward the end of the year.

Once the business gets blended into Carlisle, and we see the full impact of COS, this business is expected to begin to produce 20% margins out over the next couple of years.

Overall, Company sales are expected to grow organically mid to high single-digits.

We're also planning for EBIT dollars and EBIT margins to show improvement, and will be leverage to our sales growth.

If were able to hold prices at CCM, and raw material costs remain at the current level, margins could show a very favorable leverage.

We expect the acquisitions of LHi to increasingly contribute to earnings, as we implement COS and integrate the business.

Corporate expenses will be approximately $57 million, which includes transaction costs for CFT that will incur -- that will be incurred in the second quarter.

D&A will be approximately $118 million.

Cap expenses will be $100 million.

Free cash flow conversion will be approximately 100%, interest expense will be approximately $34 million, and the planned tax rate is going to be in the 33% range.

This brings our call to a close.

I want to thank you for attending the first quarter conference call, and we look forward to reviewing our results with you in July of the second quarter.

Crystal, you may now end the call.

This concludes today's Carlisle Companies first quarter our earnings conference call.

You may now disconnect.

Presenters please hold.