Q3 2020 Carlisle Companies Inc Earnings Call

We all know that this virus continues to be a threat to our health and economy and want to assure everyone that safety has and always will be the number one priority at Carlisle and protecting ourselves in each other against this virus in the Forefront of our thoughts even more. So is the winter and flu season approached. If we all do our part we can help manage this pandemic can get us all back to a healthy and productive State both in our professional and personal lives and well-being safe and healthy is always our first priority. We also have a commitment to keep all our stakeholders in mind and deliver on our key objectives including Vision twenty-twenty page and our ESG initiatives by doing this we ensure that we will continue to be a positive contributor and long-serving member of our communities. Now, let's turn two slides three and four months. Well, it's COVID-19 pandemic has affected our 2020 results are proactive approach has allowed us to continue to operate at a high level of efficiency and capacity.

Our operating income generation and cash position at the end of the third quarter speak to the hard work discipline and perseverance of the entire Carlisle team. The same attributes will allow us to further improve the efficiency of our businesses through the Carlyle operating system to continue to make the Investments necessary to deliver a world-class Carlisle experience well into the future and ensure we maintain discipline and rigor in our Capital allocation process when taking with our other initiatives these actions will provide the horsepower to drive our success in achieving our vision 20-25 goal of $15 of earnings per share.

Reinforcing a demonstrating our ability to deliver on this commitment. We have generated one point nine billion dollars of free cash flow and to 25% kegger over the last five years ending in 2019 is basically the pre pandemic. This track record of success supports our confidence in this team's ability and capability to execute on the components of vision twenty twenty-five, including our Capital allocation strategies and to create value through our business model.

Our confidence is built on first the significant and proven annuity contained in the US non-residential re-roofing market segment, which is estimated at between five to six billion dollars per year today. They grow into approximately eight billion dollars in the next decade to or reframing of our pricing approach which since mid 2017 has delivered a new paradigm tied to our enhanced value proposition in the marketplace three the financial flexibility to access up to three billion dollars for Acquisitions for operational efficiencies from our culture of continuous Improvement off.

and lastly the revenue

Opportunities in several key areas including European construction markets are medical Technologies platform within CIT highly engineered fluid Technology Solutions and Aerospace markets returning home to recover the levels of demand most of all, it's our belief in our employees ability to deliver for Carlisle customers is they have for over 100 years to the ever-improving Carlisle experience that allows us Cellar 8 through the recovery transitioning to our third quarter results. We believe the third quarter reflects the remarkable strength and resilience of the CCM business model and Carlisle's balance sheet with Carlos cash generating ability ensures that we can continue to invest organically and Via Acquisitions particularly in our high-growth platforms of building envelope Solutions Medical Technologies and fluid Technologies coupled with returning Capital to shareholders via dividend increases which we increased 5% in September the 44th consecutive year of increases

And share repurchases. We continue to demonstrate a strong underlying Foundation.

In the face of the pandemic our team has taken many proactive steps across our businesses to position Carlyle for an improved 2021 and Beyond we have taken tough, but necessary restructuring actions CIT, including the announced closures of our Mobile, Alabama and Kent Washington facilities. We also took the difficult actions of reducing headcount by approximately 550 employees in our Nogales Mexico Factory and buy over 100 employees in our dongguan China Aerospace Factory and our other businesses, we continue to optimize our footprint and drive efficiencies to manage costs through the Panthers. Let's see CM we reduced shift starting early in the second quarter at CBF. We Consolidated our Solon Ohio headquarters into our Medina, Ohio manufacturing facility and made a lot of other cost reductions. That sucks up around the globe.

Despite challenging Dynamics across several markets. I want to be direct and saying we are facing them head-on and absolutely remain committed to and focused on achieving $15 and earnings per share by the ages of twenty twenty-five our conviction in our ability to deliver on Vision 20-25 is supported by several factors. I'll start with CCM which continues to exhibit resilience and we believe is extremely well to continue on its path of both attractive sustainable top-line growth and margin Improvement. We continue to see sequential Improvement in daily sales volumes throughout the third quarter at 6 p.m. With September sales ending slightly positive year-over-year for the first time since the pandemic began.

We still foresee a robust and growing re-roofing Market with positive Trends continuing well through 2025 driven by the need for maintaining an aging and continuous cycle of replacement of us Roofing infrastructure. This distinction is important as most of CCM sales are largely driven by replacement demand not new construction and importantly at times the financial stress are not canceled. But as far as maintaining a commercial roof is not a discretionary item.

here today

We have benefited from CCMS variable cost structure and notably lower input costs versus last year due to our size and scale. We believe we have the lowest cost structure in the industry that we create significant value through the Carlyle experience. And we continue to demonstrate price leadership connecting pricing to our value proposition the summary our commitment is to deliver the right product at the right place at the right time every time.

Very pleased with the progress we continue to make on a newer platforms of polyurethane and Architectural Metals as well as our specialty roofing materials produced and sold in Europe within polyurethane spray foam continues to gain market share notably by a refocus on court customer relationships and launching new differentiated products all under a new Consolidated brand structure these improvements help to drive your over your Revenue agents in the third quarter and year-to-date architectural Metals was a bright spot in the quarter delivering relatively flat sales and a challenging environment architectural metal margins continue to improve a solid month is on integration initiatives and in Europe the small to medium-sized Roofing Market remains steady supporting overall year-over-year growth in the quarter and year-to-date profitability in Europe continues to improve as well. We continue to believe that Europe provides an opportunity for Meaningful expansion for CCM, and we are committed to taking the necessary steps to ensure that growth potential is realized despite the head winds of COVID-19.

Sweet dissipate fourth-quarter sales at CCM will grow low single-digits barring any weather or COVID-19 disruptions.

Turn it to our interconnect business as well been well publicized and as you are all aware Global air travel in Aerospace Financial Health have both been severely impacted by the COVID-19 pandemic off. The impact on aircraft manufacturers such as Boeing and Airbus as the momentous with build rates continuing to decline substantially this quarter.

Since the beginning of March the CIT team has been focused on dealing with the rapid Decline and fall out that all suppliers in the Aerospace industry have felt our Focus has been on taking actions that will position CIO of space to support the strong recovery. We anticipate will occur as Global air travel returns in the coming years.

Despite aggressive action to minimize minimize losses in the near-term to right-size our footprint we continue to invest in new products and capabilities that will enable us to maintain our industry-leading position and exceed our customers expectations when growth in aircraft production rates resumes, we are maintaining a close eye on our Aerospace competitors and remain positioned to be opportunistic should a strategic and appropriate assets become available.

Well, we all know that the Aerospace markets have been significantly impacted by the pandemic. We do remain confident that over time passengers will become comfortable with the safety measures airlines are implementing.

The support of this TSA passenger screenings have increased dramatically since March and we believe will continue to rise in the fourth quarter additionally recent data show that the risk of transmission of COVID-19 on an aircraft is quite low.

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Encouraged by the global efforts and progress towards the development of a COVID-19 vaccine which once deployed should drive passenger confidence is safe travel and accelerated return to higher levels of Passenger miles off an additional amount of right now Boeing 737 Max 8 has been approved for a return to flight by European regulatory bodies and is moving closer to FAA approval.

Transitioning her medical platform within CIT. We entered medical Technologies several years ago through the acquisition of LHI with the concept of leveraging our core wire and cable expertise into a job Market's the Acquisitions of microconnex red group and Providian over the last two years have contributed significantly to our platform and Medtech remains a key area Focus off for both organic investment and bolt-on acquisitions.

CIT medical Technologies has proven stable in this uncertain environment benefiting from increased demand for COVID-19 related patient monitoring equipment partially offset by deferred Hospital capital investment Bank.

Recently acquired Providian which expanded our component and vertically integrated device Solutions capabilities continue to perform. Well and integration is on track in addition product rationalization actions taken in Legacy Village product lines and two thousand eighteen and nineteen have improved CIT medical Technologies, margin profile our long-term bullish this on med-tech remains intact and we c c i t revenues trending toward a better balance more profitable mix overtime near-term while CIT medical Technologies remains a positive asset to CIT Aerospace weakness. We remain watchful of key med-tech demand drivers such a spinning and hospitals elective surgery or procedure deferrals particularly in the United States.

Taken together we expect cits Revenue in the fourth quarter of 2022 declined approximately 35% versus the fourth quarter of 2019 reflecting significant inventories of aircraft in the channel limited new orders and reduced production rates.

It's EFT operating income grew 5% due to solid pricing gains operational improvements and cost discipline despite revenues declining 5% while the pressures from subdued industrial Capital expenditures remain see if he continues to execute on internal initiatives laid out and vision twenty twenty-five.

Our new technology initiatives could be highlighted by the launch of our Market differentiated premium solution for spray foam Applications, which gain traction throughout the third quarter. We're proud to be delivering a spray foam insulation industry first, the combination of application equipment with polyurethane foam. Material. This combination will allow us to provide the spray foam contractor Builder and homeowner greater application efficiency tighter ratio tolerances and ultimately a better foam insulation product than the wall. We're also encouraged by our latest strategic Acquisitions and sealants and adhesives within cfte including Echo Shinning and IDs this combination of Market leaders in specific Niche products coupled with cftc Legacy products bring CFT closer to offering a comprehensive sealants and adhesive product portfolio for a global customer base.

We're also extremely proud of the progress cftm 8 in the third quarter continuing to upgrade the customer experience from our order entry capabilities to our quality and delivery improvements.

and all our global locations

We're beginning to see positive signs that cftn markets particularly in Asia and Europe. We are optimistic. We are past the worst of the COVID-19 impact to our industrial customers. We remain committed to our original long-term goal of 20-plus percent 4 CFT and are confident the multi-faceted plans. We put in place including developing and introducing Innovative new products capturing the value of these products and enhanced pricing applying cos rigorously and maintaining hyper focus on plant safety quality delivery and cost management will result in significant improvements in 20 21. We currently expect 4th Avenue to decline mid-teens year-over-year reflecting sequential improvement over the third quarter of 2020. But up against a relatively strong fourth quarter 2019.

Turning to see BF CBF sales were down 9% in the quarter reflecting the additional impact of the pandemic on top of the multi-year downturn CBF was already experiencing and the global off highway vehicle markets off and especially impactful expect will cover related contributing factor to CBS results was similar to CIT its exposure to the Aerospace industry where it supplies high-margin metallic and carbon aircraft brake products significant progress in business Improvement actions taken in the past few years in this business including the Tulsa number Dena Bank consolidation, and many new product introductions have not been enough. I said volume declines, especially in the high-margin Aerospace business.

CBS has made substantial progress and lowering its cost base refining its production processes and reducing its footprint all actions that will help us reach our Target of margins as demand improved We Believe Global demand for CBF products will continue to be pressured in the fourth quarter of 2020 and as such we expect fourth-quarter sales 20/20 to be down low single-digits.

Reflecting on Capital deployment a creative and synergistic Acquisitions remain a key pillar of vision 20-25 despite the temporary impacts of COVID-19. We continue to aggressively track opportunity to deploy Capital into our strategic segments of c c m c i t and CFT with returns in excess of cost of capital as our guide our financial strength and cash flow generation capabilities of Fortis flexibility, and we intend to remain opportunistic notably and as we've discussed in the past when acquisition activity is subdued we remain committed to returning Capital to shareholders. This is Faith by our deployment of more than three hundred forty million dollars a share repurchases year-to-date in 2020.

And finally, we continue to be relentless and the expansion of our decade-plus Carlisle Wide operating system based on the principles of lean and Six Sigma or cos cos or the Carlyle operating system will continue to be a unifying cultural imperative providing an essential tool kit for our businesses to rely on as they seek new opportunities to make our operations and businesses more efficient and the third quarter cos once again delivered savings and efficiency gains this time approximately 1% of sales.

this result was

Remarkable feat given are very challenging volume environment and Coss proven to be more than a cost Savings Program providing the tools the training and the clear goals and objectives for our teams to remain focused on quality safety and delivery in their operations.

Bob now will provide operational and financial deal detail about the third quarter and review the balance sheet and cash flow. Thanks Chris, please turn on Revenue bridge on flight five of the presentation wage increased 12% to 1.1 billion dollars in the third quarter organic Revenue declined 14.3% and Acquisitions contributed 1.9% of sales growth fourth quarter. And in fact was about forty basis point deal wasn't turning to the margin bridge on slide six.

Q3 operating margin decline 110 basis points pricing and volume headwinds combined 4 - 360 basis points and Acquisitions were mine is 60 basis points offstage Freight labor and raw material and other operating costs and added to a 230 basis point Improvement and cos added 100 basis points that restructuring or isolation costs were an adapter 20 basis-point Island.

On slide seven as we do every quarter. We've provided an EPS Bridge.

As Chris mentioned earlier, we reported third-quarter diluted EPS from continuing operations of a dollar eighty seven, which compares to $2.42 from last year.

Volume price and mix combined were a dollar 4% year-over-year decrease while tax and interest combined for $0.13 headwind restructuring was another $0.04 had went off without setting these raw material Freight House.

And labor costs netted to a $0.29 benefit share repurchases contributed $0.09 and cos contributor an additional $0.18 lower operating excuse to ten cents while COVID-19.

Now, let's turn to slide 832 third-quarter performance by segment and a little more detail.

a CCM revenues decreased 7.8% driven by volume and net of 30 basis points for next turn currency translation Tailwind 8

Operating margin is CCM was 22% in the quarter eight 260 basis point improvement over last year driven by favorable all materials lower sg&a, and cos I have setting this.

For volume declines and wage inflation CCM executed well and delivering approximately twenty-five million dollars of price cost realization in the quarter and we now anticipate full year average price cost realization of approximately seventy million dollars for twenty $20.

Turn out a slide 9 to review cits results CIT Revenue declined 30.3% in the quarter as Chris talked about earlier. This decline was driven by the crisis and Commercial Aerospace markets partially offset by positive trends that are medical technology platform cits, operating margin declined significantly year-over-year two- 2.2% off by commercial Aerospace volume declines and accelerated restructuring actions. These were offset parsley by savings from cos lower SGA and some price increases dead.

Turning to slide 10 CFT sales declined 5.1% year-over-year organic Revenue declined 10.8% and Acquisitions added 4.4% for the quarter.

Despite the sales Decline and relatives related to leverage operating income is CFT increased 5% year-over-year with operating margins Improvement. 70 basis points to 6.8% off. This was driven by Price realization efficiencies from cos and lower sg&a.

Turning now to slide 11 for CBS CBS third-quarter organic Revenue declined 10.8% FX had a positive 1.7% impact operating income was nine million dollars or 1.3% operating margin driven primarily by volume declines and unfavorable mix in Aerospace markets partially offsetting this down cos efficiencies.

On slide twelve and thirteen we show selected balance sheet metrics our balance sheet remains strong, and we ended the quarter with $719 of cash on hand and 1 billion dollars of available availability under our revolving credit line.

We deployed approximately 150 million dollars in the second quarter repurchasing 1.2 million shares. And additionally we increased our dividend in the third quarter the 44th consecutive wage increases and paid out twenty eight point five million dollars in September.

We continue to approach approach Capital deployment and balanced and disciplined manner investing in organic growth through Capital expenditures and opportunistically be purchasing shares while also actively seeking strategic and synergistic acquisitions.

Free cash flow for the first nine months of 2020 was a solid three hundred sixty seven point five million dollars.

And we expect Carlisle over all the generates free cash flow conversion in excess of 150% for the full year.

Turning to slide 14.

Chris earlier gave fourth-quarter Revenue guidance referenced here and you can see the items affecting comparability in corporate items corporate expense is expected to be approximately $95 million dollars for the full year. We continue to expect depreciation and amortization to be approximately $230.

and for the full

Here we continue to invest in our business and now expect capex to be in the range of $100 to $110.

That interest expense is expected the approximate $75 million dollars for the year and we expect the tax rate to be approximately 23%

And with that I will now turn the call back over to Chris. All right. Thanks Bob and closing. I want to once again express. My thanks to our dedicated employees. Their families are business partners all those associated with Carlisle success simply quote we can't do without you with over A Century Of History Carlisle has proven to be a resourceful resilient and stable organization in times of adversity that uncertainty and we remain confident in Carlisle's Outlook supported by our strong financial Foundation cash generating capabilities and unwavering commitment to our vision 2025 strategic plan. This concludes our formal comments Rob. We're now ready for questions in order to ask a question. You will need to press star one on your telephone. And your first question comes from the line of atom bomb Garden from Credit Suisse your line is open.

Hey, good afternoon, everyone cost of Spike pretty meaningfully at least in the spot market and it seems like contract rates are expected to be up in 21 Ki walk through your life easier to spot versus kind of more contracted rates. Yeah, most are afraid almost afraid that CCM and a lot of that is contracted. It's flatbed from our factories out to the job sites. So so we don't really play that much in the contracted market and it takes time for our our contracted folks too long to get up as quick as the others do so, we're not seeing a ton of inflation quite yet, but we expect it to come a little bit next year.

And then we'll of course. I usually pass that on and price when we see it go up too much.

Got it. Okay helpful and then just in CCM, you talked about slightly positive growth on a year-over-year basis in September. Can you give a sense for how that's kind of Transit into October and maybe that forming your own need guidance. Yeah. I think you're right on there. I think we we saw things build in the third quarter September obviously was was good considering everything is going going on and and we see thank you. Gover right? Thanks guys. Yep.

And your next question comes from the line of Surrey barosky from Jefferies. Your line is open for taking my question. So CCM is not really seeing any benefit from pent-up demand so cuz just talk through how we should think about the re-roofing activity. That didn't get done this year. How long can an activity be delayed for? Yeah. It's a good question. I think it's one of the the great tensions that's been out there that's helped us for the last you know, really ten years Drive some some big, um, you know, almost close to 10% kegger in our our sales team. Obviously that includes the acquisition, but the we're we're really running up against the big stress on the contractor base that we were before which is there just so many contractors out there that are trained and qualified. I know, you know prior to COVID-19.

how do you get them done and

Going to create extra demand to really the constraint is around that contractor base. And now I would say we're adding into it the whole idea of getting business permit or getting construction outfits and things like that through the government agencies. It may be adding time by working from home. So it does continue to build obviously you're going to continue to try to do what you can to get by but uh, you know, I think that there's there's some pressure on getting these things done. Obviously before the winter season comes in the North and then in the spring season with with rain and the and the South and in the East so long I think they'll be trying everything they can be due to get it done and work as much overtime as possible. But that demand just will build until we see a break there on on construction workers and get more mature and which you know, I think had some delay here with Cove it's so hopefully they'll get through it quickly and we'll see people want to return to work.

Thanks, and then can you talk about the outlook for Aerospace and how we think about your growth as a Max production volumes pick up with maybe there's some headwinds from wide body production.

Yeah, but I could talk about the production levels. I'll just talk about our forecast. You know, we're still very I'd say we're cautiously optimistic. I saw the CEO of Delta on today talking about the need to be a connected World peoples natural tendencies are wanted to return to business travel to be connected to do things in person to visit family and friends and I mean we buy into all that and we believe it we have seen as I said in the car or the summer there TSA checkpoint traffic increasing and and I'd say we're optimistic that some of the news we've seen recently is going to reinforce the fact that airline travel is very safe. I thought I saw something today that the air is changed in the plane every six minutes through the filters and other type of filtration devices. So I think it's just a question of passengers getting comfortable. And once we get over that Tipping Point, it should pick up rapidly and you know, I think also there have been some interesting deals that have been done with different airlines maybe in Europe where regulations around being a much Greener Airline of occurred.

Having Energy Efficiency and we think the new planes that are out there will will likely displace some of the old planes that have them be retired. So again, we're we're optimistic about what's going to start to occur in 21 and Beyond and then Bobby want to talk about production rates on. Yeah, I mean from everything we're seeing and hearing from the the two big oems. You know, four Q of 20 is going to be the lowest build rate month. That we've seen in a long time and then you know, they're all projected growing from there and you know, including widebodies the question, how how quickly does the the max airplanes that are grounded get put into production and then they need to refill those and continue to produce them and that's you know, we got a keen eye on that and and seeing what she starts coming through on the build rates for the max start up again.

Perfect. Answer my questions.

Our next question comes from line of Tim from Baird line is open.

A gentleman good. Good afternoon. Good afternoon. Maybe maybe just on price. You know, how should we think about the potential and I guess your confidence around, you know, realizing price next year and you know volumes hear if kind of turned up a little bit, you know, we don't really have capacity coming on and we are starting to see some cost inflation kind of money, you know run through the system. So I mean do you think that's enough for the industry to to meaningfully realize price as you looking into twenty $21? Well, I think was looking at the fourth quarter Tim. I think everything you said absolutely correct and we've seen with the actions of our competitors in ourselves that the prices, you know are going up and I think that's actually the the organizations getting a little bit ahead of where they would have been usually on price. So that makes me believe we might be flat on price in the fourth quarter and then I think if demand continues to pick up

So we see some increases in uh in class in drawers like we anticipate then I would anticipate there could be at least it sets the stage for what could be a positive price environment in 2021.

Okay. Okay. So it's really reliant on kind of where volumes trend is you go through the year is is yeah, I think so and I think it depends on yeah absolutely volumes. And as I said three that whole idea of a contractor availability and obviously for us and it's a little bit different maybe for others but for us the value proposition the Carlyle experience is a premium service people pay for and when demand assigned volumes are high and they need to get it through age is race product right time. Obviously, it gives us more pricing ability than than it does when volumes are down.

Okay, okay, and then the the non-market the the five to six billion kind of growing to eight billion over the intermediate-term. I mean, how how would you think about the competition there between kind of a re-roofing kind of cycle and and and new construction? I'm just I'm just trying to kind of kind of think about how much of that that kind of to to, you know, call it two to three billion dollars. You know Improvement is really just replacing stuff that's already in the ground. Well, I think it's all based on that. You know, if you look at the square footage charts to 5 or we could fantasy square footage Rising. I think he's you know, it's out there. If anything you need to we can get it to them. So you a couple that I think you leave the structure of the same way with the percentage of you know, new construction related to the re-roofing parts of re-roofing is really growing New Age struction. We do think we'll pick up a little bit from from where it is and then there's a little bit of price in there as well that we think there'll be a modest inflation as we go for it over that. Maybe.

Somewhere, you know price out of that might be somewhere in the one one and a half percent something like that. Yeah, and that was largely around. All Roofing that we were commenting on is the that's the annuity that Chris always talk about around the roofing cycle that's coming forward and that chart that's in our vision twenty twenty-five that shows the you know, the next ten years and the the I'll call the bubble from the other two thousand years old cycle that's going to come through at you know, two and half the 3% growth over the next next ten years. Okay? Okay. I appreciate the help guys. Good luck on the rest of you here.

Your next question.

Comes from the line of Brian Blair from Oppenheimer your line is open.

Thanks. Good afternoon. Guess hey, good afternoon, Brian.

Nice performance from CCM in the third quarter and great to see that business back to at least modest growth and on the fourth quarter. I understand that, you know God absolutely what remains fluid in terms of the pandemic and its impact but assuming we don't have a crippling second wave, you know following up on on some of the other questions here. Is it fair to assume that that CCM volume kind of snaps back next year that seems to be the setup to me.

Yeah, I think that's somewhat fair to say I mean, you know a surrey pointed out there's building, you know demand due to the at least in the second quarter of the inability to get on the roofs and some confusion there over with the self practices were and then government offices shut down and remote working. So I would say that we set up nicely to pick up some of that if we can and again I always say it but you know really took us to constrain is not supplying the materials. It's it's the ability for people to get on the roof and put it on and that's why weather and these governmental delays around um, building permits and things like that are so impactful for for the people out there in the field. They're really the ones that set the pace of the work.

Understood and then to confirm my simple math. Bob You're Expecting about ten million price cost benefits and fourth quarter. Is that correct? Yep. Yeah and and got to remember volume a little lower and we are seeing some some cost pressures as well publicized in the oil and MDI markets.

And given current visibility you walk through some of the moving Parts here the the offsets. It sounds like a reasonable expectation for early 2021 would be worth of neutral price cost.

Is that fair or am I am not appropriately? I mean we probably won't want to project out further than that, but I think yeah as far as you know, we're looking here. I you know for you know, first queue 2021 from what we can see I think that's everybody announced the pricing pieces and the costs we have. So yes as close as we can see.

Okay, that's fair and then thinking about CIT conservatively, you know, if we if we were to assume that third-quarter run-rate volumes were Aerospace volumes were them, you know to go forward for for the foreseeable future given the restructuring that's ongoing when you get to the back end of that what kind of margins could see I see Aerospace to interact.

I tell you what, let me defer that and we'll get we'll get that answer for you. I don't know that we want to.

Take a quick swing swing at that then yeah, that was an impactful meeting and Brian we've been looking at it in total business rather than the pieces and clearly, you know, when Aerospace even comes back a little faith is going to accelerate because of the cost. We took out and The Leverage you get off of the sales, but I don't have a broken out in front of me.

Okay.

Then last one can you walk through the ft's monthly order or sales rate, you know, the the third quarter results was was certainly better than what I was modeling off on in the Reeds that I had early in the quarter. So I'm guessing there was some acceleration but then there seems to not be as much of a seasonal lift as has been there in the past past going into the fourth quarter off. Yeah. I think you're reading the right way. I'm not going to break down. Yeah, I'm not going to break down each month in the third quarter, but I think you've got the the thing right that is you is you got out of the summer and just like, it's ECM as you wanted to September you song I think starting to come together from a sales perspective and I don't think that's unrealistic for anybody considering we were emerging out of this, you know, terrible second quarter with a lot of uncertainty and things like that. I think people started to jump back on the capex purchases and things like that and then going into the fourth quarter. I mean last year we had a really robust fourth-quarter project driven.

And so those projects as you can imagine with covert and that they do take some time to put together and to get organized and they just haven't materialized in the fourth quarter. And that's really where the fact is is we go into the fourth quarter. Okay. Appreciate all the color you bet. Thanks, Brian.

Our next question comes from the line of choice from loop capital your line is open. All right, thanks. I'm just to follow up on the ten million in price cost benefits of the fourth quarter. Is it fair to assume that contemplate some of the disruptions that some of the MDI suppliers have been announced? Yeah. We are we are assuming some some price or some cost off Edwin's going into there from the like I said the well-publicized

Okay uses that have taken. Okay got it. And then just on the sg&a savings that you called out in his helping is it possible that's been and you know, how much is permanent versus how much could come back when demand improves more materially? Yeah. Yeah, and and I think we talked about this a bit on prior Closet in CCM while the volumes were down in the second quarter. It was almost all temporary. We didn't adjust any kind of structural cost in that business and it goes to the variable cost of that business. The sales force is variable. A lot of the costs we can get out quickly, but that one volume comes back you got to put them back. So I don't think there's been any structural adjustment to the cost of the business. Other than other than what Bob would say would be the ongoing material purchasing games and things that we do on a normal basis. Yeah.

Okay, and then just lastly just on the Ikea just looking at sequentially just with the drop of about $15 million from the second quarter to the third quarter, but I keep it was only down about 2 million dollars. So, you know pretty good sequential Prophet control, you know, just wondering how to think of that, you know moving into the fourth quarter, you know not to get too cocky anywhere, but how should we think about you know margins in CIT? Just given the projected Revenue drop again in Q4?

Yeah, I guess we got to remember that there was three million less restructuring in Q4 than Q3. So the the Gap drop if you if you factor that and was bigger than that, do mm mm drop through. Um, but also the cost management is coming in and and we expect that to continue and we announced the factory closures and things like that and those take some time especially the the Washington one to come through. So I mean again, I don't think it's it's going to change drastically and and the normal drop through margins will be there right on the decline and then when it comes back and back quickly, okay. Thanks and actually just last week just to touch on restructuring, you know, it's early but you know, just give them the pace of restructuring that you put down here in 2020 any way to to handicap the amount of restructuring we might be looking at a 2021.

Yeah, I mean I've been saying for years. It's probably around fifteen million dollars a year 15 to 20 and we do have the the Kent carry over and they you know from prior discussions. It is takes a long time to close down and Aerospace Factory because of the approvals of both the FAA and the OEM so it takes a while these things so that will carry and twenty Twenty-One. So we'd expect to carry over but you know somewhere in the 15 to 20 million dollar range is what we we think today. Okay, helpful. Thank you very much off. Your next question comes from the line of jolt is from BMO your line is open.

Hey, how's it going? Hey, Joel, good you all right, Kian CCM. I wonder if we can just take a minute and and get a sense of what's going on there. Cuz everything else we here from Europe is a little more a little more muted. Yeah, it's been off, you know, it's been surprising. I've been in touch with the she ft teams during although there are smaller business our group in Europe has been somewhat positive on what's happened and maybe that's a reflection of coming out of the month, you know bad Q2 and what was going on there with the people in Italy and their homes and the Spanish impact from COVID-19. So maybe it's just that, you know, they're out of that and restaurants or real life and things like that, but they were upbeat and then with CCM

You know, we've had good sales which as I said the underlying demand there's been really good which has been a little bit of a surprise but but positive and then we also have made some leadership changes there that we think are going to really come get us onto more of a track that we've been in the United States where we're looking at filling in some of the niche markets filling out the portfolio products offered to the market and perhaps getting more active than the acquisition space within Europe. So now I think you're right to pick that up going. Thanks. We're we do and I think we've always seen Europe as is that thousand tear that was a little bit untapped for Carlisle and given some of the initiatives we've done on Energy savings and green and things like that. We we've been a little bit late getting to that market where I I really think our message will be received and I think we can build on the good demand we've got going on right now.

That's really good. And and then can you talk a little bit about the competitive environment? It sounds

Like your competitors in CCM are raising prices a little bit and you know any sense, you know, I know you can never know what everyone else is going to do. But any sense that kind of that environment going to stay favorable through 2021 will for sure for us to see a relatively quick and uniform response to the raw material price increases by our competitors coming out with their price increases really quickly as a group kind of independent. Not not thinking that it was a reaction to what others were doing. That's really heartening and then I do think the the pressures on raw materials are going to um bolster their resolve to going to 20 21 protecting their margins and things like that. And I think that's that's understandable because obviously we've got we look over the resi side and you know, the shingle Mark is on backorder and people are seeing great demand in in resy, and I think non-residential.

Picks up is going to you know have some of the same pricing pressures on labor and things like that too. So, I think I think I do have some confidence that we'll get some good pricing traction going into 2021.

Your next question comes from the line of David MacGregor from Longbow research your longest open. Yeah. Thanks. Good afternoon, everyone just to go back to it earlier a couple of questions around just took the fertile of business from 20 20 and 220 21. What's your best estimate of the twenty twenty dollar value of volume that's been pushed down into twenty twenty-one.

White David. I know it's going to be a cop help. I really don't have an idea because we were really I mean we had a strong nineteen. I I went into first quarter of where we wanted the first class of 2020 thinking it might be another record year, you know, and so when you look at how quickly that dropped off and the impact in Q2, I don't know that I have an estimate for you. I think that on the re-roofing side you can look at Bob's projections and and maybe you know Parts one of that one of those years out, but maybe I'm just big picture to 300 million may be okay, but I mean, that's a gift.

Yeah, yeah, that's helpful. Thank you. And then you can just talk about what you're seeing in distribution right now in terms of inventory levels and out the door sales patterns month. Well, we have seen some Rays of Hope with a you know, and I won't get specific but with a few Distributors having some confidence to put some inventory back in we did talk in the second quarter of this like weird call about the destocking that it occurred there. So I do think there's a little bit of demand left there that if we wanted a 2021 with some confidence we'd see distribution maybe in the you know back in the spring usual talking season will go back to normal and that'll certainly help twenty Twenty-One, but we haven't seen a lot of stock go back into distribution right now. And I think people are obviously you're you're through most of the heavy season here wage when you start to get into October and I don't know anybody that wants to put a lot of inventory in going into into Q4 in the winter months. So again, I think we look to look to the spring and then look to get back in a more normal schedule.

and add in that inventory of

That needs to be there. Yeah, as you know, most of our products go from our our factories to the to the roof, even if they're sold through distribution, so they're not holding a lot of product for us off. Okay. And then what can you say about the door sales patterns right now? What kind of table growth you see in there?

At distribution. Yes.

Yeah, we don't really measure that I mean to be honest with you. We I suppose you want to talk to her CCM wraps. They might have some idea of that but we don't track that at our level volt know from our perspective though. We're focused on the the slight growth in September and then our our few percent growth in Q4, which is consistent with what the markets taking. So I think if you think that there's no inventory change channel and sales were up in or you know a little bit up in September that implies then that the pass through and the out-the-door sales are are are higher. Right, right. Okay. Thanks very much.

Yeah, you're welcome.

There are no further questions at this time. Mr. Chris, Koch. I turn the call back over to you for some closing remarks.

Well, thanks Rob that concludes our third quarter 2020 earnings call again. We really appreciate everyone being on the call and your participation look for or we thank you for all the questions. We hope everybody stays safe and healthy as a journey through this fourth quarter, and we'll look forward to speaking with her next earnings call. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Yep. Yep.