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Carlisle Cos Inc  (NYSE:CSL)
Q3 2018 Earnings Conference Call
Oct. 23, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, my name is Vincent and I'll be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Company's Third Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, we will conduct a question-and-answer session.

I would like to turn the call over to Mr. Jim Giannakouros, Vice President of Investor Relations and FP&A. Jim, please go ahead.

Jim Giannakouros -- Vice President of Investor Relations and FP&A

Thank you, Vincent. Good afternoon everyone and welcome to Carlisle's third quarter 2018 earnings conference call. We released our financial results after the market closed today, and you can find our press release and our earnings call slide presentation on our website at www.carlisle.com in the Investor Relations section.

With me today are Chris Koch, President and CEO of Carlisle; and our CFO, Bob Roche. Today's call will begin with Chris and Bob discussing Carlisle's third quarter operating and financial performance with updated comments on our business outlook and progress toward our vision 2025. Following our prepared remarks, we're happy to open the call up for questions. Before I hand it over to Chris, though I refer you to slide two of our presentation.

Please note that certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of risk factors. A discussion of some of the risks and uncertainties that may affect our results are provided in our press release and in our SEC filings on Forms 10-K and 10-Q. Those considering an investment in Carlisle should read these statements carefully along with reviewing the reports we file with the SEC, before making any investment decision.

With that, I'd like to turn the call over to Chris.

Christian Koch -- President and Chief Executive Officer

Thanks, Jim, good afternoon, everyone. Please turn to slide three of the presentation. As we reported in our press release, Carlisle's third quarter performance reinforces our belief that the momentum we have built in year one of Vision 2025 is on solid footing. In Vision 2025, we target doubling our annual revenues to $8 billion, expanding operating margins to 20% and generating 15% ROIC.

The foundations on which Vision 2025 success rests include driving 5% plus organic revenue growth, utilizing COS consistently to drive efficiencies and operating leverage, building scale with synergistic acquisitions, continuing to invest in and develop exceptional talent and deploying over $3 billion into capital expenditures, share repurchases and dividends. When coupled with our long-standing and defining management approach of combining continuous improvement entrepreneurial spirit decentralization, we create a unique culture that assures that the day to day energy, focus and efforts of our employees are directed toward actions to drive results and support the key initiatives within the context of our strategic plan.

With three quarters of the year behind us, we've gained solid traction on the key pillars we introduced in February under Vision 2025. In the third quarter, we achieved 5.5% organic revenue growth on track with our long-term growth targets and driven by continued core volume growth and sustained price leadership at CCM, healthy aerospace volume at CIT and positive trends in the construction and mining end markets within CBF. We remain committed to driving efficiency throughout Carlisle as demonstrated by the acceleration of savings generated by COS in 2018, specifically 1.4% of sales and cost savings within the quarter, well within our long-term target of 1% to 2%.

With respect to our goals of deploying $3 billion of capital through 2025, we continue to seek suitable candidates for our MedTech, Aerospace, Fluid Technologies and building envelope platforms. Our M&A pipeline is robust and we remain disciplined in what we view as an expensive landscape. We made great strides in bringing in new talents throughout the organization and providing opportunities for our most promising employees. And notably, given our strong cash flow characteristics and balance sheet, we remain active in deploying capital toward internal investments, as well as dividends and significant share repurchases. Specifically Vision 2025 commits to deploying $1 billion to share repurchases over the plan horizon and with our most recent activity we're well ahead of that plan, having returned over $550 million to shareholders since the beginning of 2017.

Turning to slide four. In the third quarter of 2018, Carlisle experienced strong organic growth at CCM, CIT and CBF resulting in third quarter revenues of $1.2 billion, an 18% increase year-over-year, our 22nd consecutive quarter of year-over-year sales growth. Our operating income in the third quarter grew 3.9% to $140 million, driving $1.59 in diluted EPS from continuing operations. EPS was positively impacted by a lower effective tax rate and reduced share count which Bob will discuss in more detail later. Our third quarter earnings performance reflected strong organic growth and continued progress on operational execution. In the quarter, we continued to face significant headwinds across our businesses, especially in our raw material, freight and labor-related costs. We were largely able to offset these pressures with higher sales volume, proactive and strategic price increases, continued implementation of freight surcharges and generating savings from the Carlisle operating system.

We were especially pleased with CCM's performance on pricing, recording price gains of 1.8% in the quarter, the largest quarterly price gain since the third quarter of 2012. We anticipate our business will operate in an increasingly inflationary environment in the near term, however, we expect the actions already taken and under way, coupled with the impact of COS and decisive pricing actions implemented across our businesses to continue to deliver solid gains and profitability for the rest of this year and into 2019.

Now let's turn to the divisional achievements in the quarter, starting with CCM. CCM grew sales 21.3% year-over-year approximately 3% organic. Our pricing result proved fruitful in our core products, as we achieved over $11 million in price realization in the quarter. Additionally, our move into the metal roofing segment continues to build momentum with Drexel's third quarter sales growing over 30%, reinforcing the positive benefits of moving further into the building envelope. Partially offsetting these positives was the effect of wet weather in September in much of the Eastern US and Midwest, including a record rainfall in Texas. This above average wet weather impacted demand for our products due to a reduction of available days on the roof for our contractors.

While negatively impacting results versus our plan, these weather conditions proved temporary in the third quarter as we've already seen a rebound to more normal levels of activity in the first few weeks of October. With roofer backlogs at all-time high in a very tight labor market, there is little flexibility and construction capacity to make up the shortfall in the near term without a warm and dry fourth quarter in North America. Remaining on pace to deliver a stated synergies, profitability levels are below our expectations, and frankly disappointing, given the spray polyurethane foam market growth rates and our expectations of solid post acquisition integration leverage on that growth.

We begun to implement structural improvement actions to drive Accella profitability toward the high single-digit operating margin levels in 2019 as we communicated in our original deal model. These include facility optimization, accelerated implementation of the Carlisle Operating System and a more aggressive reduction of SG&A. Lastly, on CCM, in mid-September, we announced the retirement of John Altmeyer, who served as President of CCM for 21 years. I thank John for his service, particularly in the last few years as he provided valuable guidance in the growth of our Company, made our largest acquisition ever in Accella last year and contributed to the development of Vision 2025. We wish John all the best.

And I'm very pleased that Nick Shears has agreed to serve as Interim President of CCM. Nick has been at CCM for over three decades, most recently as Executive VP of Sales and Marketing. Nick is well positioned to continue develop and implement CCM successful strategic and operating initiatives, and more importantly drive to the profitability levels, we know this business can deliver.

CIT's third quarter revenues reflected continued strength in aircraft build rates as well as our increased content per plane. The satellite conductivity ramp and sales this year remains in line with previous expectations. This market continues to evolve as geographies are added, the technology and applications related to in-flight connectivity advance and partnerships grow and evolve. We're excited to be here to have become a meaningful player in the SatCom connectivity market in two very short years. This rapid changing technology and market will provide opportunities and challenges in the coming years and we must stay close to our customers, drive the technology and provide flexibility in dealing with the rapid changes that accompany in an evolving market. Recent customer announcements and acquisition activity suggests the aerospace connectivity evolution will only pickup speed in the coming months and years.

CIT's global medical technology business continues to grow, well positioned to leverage favorable industry dynamics such as aging populations and trends toward minimally invasive procedures and is supported by a pipeline of approximately 130 active projects. We strengthened our efforts in new product development with the acquisition of the redgroup, a Minneapolis-based medical engineering and design company in the third quarter of this year. We anticipate the redgroup will further strengthen our product pipeline with their significant relationships and medical OEMs. We are also pleased the two-year Shenzhen to Dongguan China factory move is behind us, a move that has significantly expanded our medical technology production capabilities, allowing us to accelerate conversion of our product pipeline and the capacity to serve our growing MedTech sales base.

At CFT we're extremely pleased with the progress the team has made in 2018, in our view, putting us back on track with the original CFT acquisition deal thesis and establishing a solid platform on which to build. As a reminder, CFT's Vision 2025 included driving organic growth, vertically integrating our manufacturing operations, deploying COS, entering new segments and geographies and acquiring complementary businesses. We believe, you can see the progress in our margin improvement which Bob will discuss in a bit more detail later in the call.

CBF continues to benefit from the recovery in commodity markets as evidenced by the double-digit growth in our off-highway markets of construction and mining. The Tulsa, Oklahoma to Medina, Ohio plant consolidation remains on track to be completed by year-end and we continue to expect the annualized savings of $12 million to $15 million from this move. With the positive end market environment and our plant consolidation investments winding down, we expect CBF's operating margin to continue its upward trend and ultimately return to its pre-downturn levels of profitability.

Bob will now provide further detail about our segment performance and review our balance sheet and cash flow. After Bob's review, I'll look and discuss our updated outlook. Bob?

Robert Roche -- Chief Financial Officer

Thanks, Chris. Please turn to the revenue bridge on slide five of the presentation. As Chris mentioned in his opening remarks, we are pleased with our overall third quarter revenue performance. Organic growth had a positive 5.5% impact, lifted by 10% at CIT and 15% at CBF. As we have previously discussed and it was the case in the first half of the year, new revenue recognition standards impacted revenue in the third quarter by 60 basis points and acquisitions contributed 11.7% of sales growth for the quarter.

Turning to our margin bridge on slide six. Operating margin percentage decreased 150 basis points in the quarter to 11.9%. The net impact of revenues had a positive 130 basis point impact. COS drove 140 basis point of margin improvement. Acquisitions had a negative 140 basis point impact in the quarter. And finally, rising raw material freight and labor-related cost driven largely by CCM but also CBF, had a negative 350 basis point impact.

On slide seven, we have provided an EPS bridge. As previously stated, we reported third quarter diluted EPS from continuing operations of $1.59, a 26% increase over last year. Higher volumes contributed $0.15. Tax-related items added $0.30. COS contributed $0.14. Share repurchases added another $0.06 and price realization added $0.15. Offsetting these positives were higher raw material, freight and labor-related costs amounting to a 22% year-over-year headwind, higher interest expense, a $0.06 headwind, unfavorable product mix of $0.07 and other costs of $0.12. Our tax rate of 20.5% was lower versus last year due to US tax reform and we had approximately $5.7 million of one-time tax benefits in the quarter.

Now let's turn to slide eight to review the third quarter performance by segment in more detail. At CCM, revenues increased 21.3% in the quarter driven by acquisitions, mostly Accella contributing 18.2% of the growth. This was roughly 3% organic growth. As Chris mentioned earlier, volumes in the core business were impacted by very wet weather in September, driving revenue below the plan we had coming into the quarter. We continued to achieve solid price realization in our legacy CCM business and we expect to continue positive results related to the previously announced price increases for the duration of 2018 and into next year.

We anticipate the effect of our price actions will more than offset higher raw material inflation and freight costs in the coming quarter as they did in Q3. At Accella, price actions weren't as well received. We have adjusted our strategies in certain markets and are already experienced benefits to volumes thus far in the fourth quarter.

Despite the rising raw material, freight and labor cost environment, CCM delivered operating margins of 15.6% in the quarter driven by higher sales volume, price realizations and savings from COS. These positives were offset by a little more than $9 million of raw material and freight cost increases. Dilution from the Accella acquisition also contributed to the 380 basis point operating margin decline. As Chris mentioned, we remain on track with our original synergy targets for Accella, $10 million per year in '18, '19 and '20. But we are in the process of implementing further actions, make structural improvements in the business.

Please turn to slide nine now to review CIT's results. CIT delivered outstanding revenue growth of 13.9%, of which 3% was attributable to ASC 606 revenue recognition standard. CIT experienced high single-digit organic growth in the aerospace market. Additionally, organic growth initiatives in the medical and test and measurement markets are accelerating where product pipelines are robust. CIT's operating income improved 13.1% to $29.3 million due primarily to higher volumes, lower restructuring costs and COS savings. This positive momentum was offset by unfavorable mix and labor-related costs. Operating margins of 12.2% represented a 10 basis point year-over-year decline.

Turning now to slide 10. CFT's revenues excluding foreign exchange increased by almost 3% year-over-year. General industrial markets were up double-digits and standard product sales improved given the strength in Asia Pacific. This was partially offset by softness in the transportation, automotive refinish markets. CFT's operating income improved $11.5 million year-over-year, driving operating margin of 16%. Approximately 13% excluding the gain on a sale of a facility in Mexico. Operating income benefit from previous actions we have taken to drive efficiencies from our facility rationalization efforts, progress on vertical integration and price.

Turning to slide 11, CBF again achieved excellent revenue performance in the quarter, increasing 14.3%, which reflects an organic sales increase of 14.9%, unfavorable foreign exchange of 0.6%. The sales increase reflects price implementation, share gains and continued recovery in off-highway vehicle markets. With the recovery in sales, CBF's operating income continued to improve. The $2.5 million year-over-year decline, included $4.8 million of expense related to consolidation of the Tulsa, Oklahoma manufacturing facility into our Medina, Ohio facility and $3.1 million of raw material inflation. We are on track to complete the consolidation by the end of 2018 and expect to realize annualized savings of $12 million to $15 million from this project beginning in 2019.

On slide 12, we have provided a detail of restructuring, facility rationalization and other acquisition divestiture-related items by segment. Charges in the third quarter included in operating income were $7.1 million for all segments. For the full year, we expect approximately $33 million to $37 million of costs, an increase from our previous guidance, driven primarily by an acceleration of certain cost related to our footprint consolidation.

Turn now to slide 13. As of September 30, 2018, we had $781 million of cash on hand and $1 billion of availability under our revolving credit facility. Our balance sheet remains very strong. As of September 30, 2018, our net debt to capital ratio was 23%. Our net debt to EBITDA ratio was 0.8 times and our EBITDA to interest ratio was 16.4 times .

Turning to slide 14, our cash flow year in the quarter was $76.2 million compared to $125.2 million in the prior year. The decrease in free cash flow was due to the timing of payments of customers whose fiscal year ends September 30 and cash taxes paid related to the sale of Carlisle Food Service Products.

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

Christian Koch -- President and Chief Executive Officer

Thanks, Bob. Please turn to slide 15 as we discuss our updated 2018 outlook. For Carlisle, overall, given the impact of the September shortfall at CCM, we are lowering our 2018 consolidated revenue outlook slightly from approximately 20% to high teens percent growth. By segment, at CCM driven by continued healthy underlying demand in the commercial construction market and including contributions from acquisitions, we now expect revenues to grow in the low 20% range, with the change to forecast, predominantly the aforementioned drivers we experienced in September. CCM will continue to maintain discipline around pricing actions and freight surcharges to offset the previously discussed inflationary cost pressures.

And finally, we will move forward with the structural improvement plans at Accella including facility optimization, accelerated implementation of the Carlisle Operating System and a more aggressive reduction of SG&A, notably, all within a solid demand backdrop. We're excited about Accella, our deal thesis remains intact and we view it as a platform on which we can build organically and augment via M&A.

In the CIT segment, we continue to expect double-digit revenue growth, driven by strong aerospace market, growth within the MedTech platform and continued year-over-year growth of SatCom connectivity sales. We remain focused on converting a strong pipeline for new products or projects driving the higher content per aircraft and seeking high quality acquisitions for our MedTech and aerospace businesses.

At CFT, we continue to expect revenue growth in the mid single-digit range for 2018. With our significant efforts in investment to restructure the business, the Fluid Technologies platform is exhibiting targeted margin expansion, while focusing on operational excellence, launching new projects and seeking acquisitions to continue to build out this platform.

At CBF, we continue to expect revenues to grow in the mid teens. We are seeing continued improvements in key end markets while order rates and backlog remain healthy. Corporate expense is expected to be approximately $75 million to $80 million. Depreciation and amortization expense is expected to be approximately $190 million. For the full year, we expect capital expenditures will be approximately $100 million to $130 million and we are anticipating free cash flow conversion to be approximately 100% excluding the effects of the sale of Carlisle FoodService Products.

Depending on timing and investment income derived from the sale of Carlisle FoodService Products, we expect our 2018 net interest expense to be toward the lower end of $55 million to $60 million range. Our tax rate is expected to be approximately (Technical Difficulty) environment at CCM. We're excited to build on our positive momentum as we close out '18 and set the stage for continued improvement in 2019.

This concludes our formal comments on our third quarter results and 2018 outlook. Vincent, we're now ready for questions.

Questions and Answers:

Operator

(Operator Instructions) We have your first question comes from the line of Tim Wojs from Baird. Your line is now open.

Tim Wojs -- Baird -- Analyst

Hey, guys, good morning or good afternoon.

Christian Koch -- President and Chief Executive Officer

Good afternoon, Tim.

Robert Roche -- Chief Financial Officer

Hi, Tim.

Tim Wojs -- Baird -- Analyst

So maybe just on CCM, could you give us so just a couple of clarifications. So first, it sounds like was price more than offset the higher costs in the core CCM business? It sounds like about 11.5 million of price and 9 million of cost.

Robert Roche -- Chief Financial Officer

That's exactly right. Tim.

Tim Wojs -- Baird -- Analyst

Okay. And just on the guidance, I mean the lowering of kind of the organic guidance, it's a low to mid single versus mid to high. It does imply a little bit of sequential moderation, I think in the growth rate in the fourth quarter. So I'm just trying to marry maybe that comment with the comment that October has actually pick back up due to some of the September shortfalls.

Christian Koch -- President and Chief Executive Officer

Yeah, Tim, I think October is returning to those expected levels we had for October. I don't -- I think the modulation and the slight reduction really comes from the fact that we don't -- plus some extraordinary situation occurs from -- on a weather perspective and we extend fall deeply into the winter. We don't think we're going to make up that September shortfall in any measurable way. As we said, labor is very tight, the backlogs are there, I might think it just continues to build backlog and when the winter comes, it will have to move into the spring.

Tim Wojs -- Baird -- Analyst

Okay. Okay. So the expectation would be that you'd still -- you could still see a mid single-digit growth market in CCM next year?

Christian Koch -- President and Chief Executive Officer

Definitely.

Tim Wojs -- Baird -- Analyst

Okay. Okay. And then could you just baseline us on what Accella profitability was in the third quarter, because it sounds like I think year-to-date, it might be breakeven, so is it still kind of breakeven on an underlying basis?

Robert Roche -- Chief Financial Officer

Yeah, including the synergies that we get in by putting them together with CCM about 1% to 2% profitability right now in the quarter.

Tim Wojs -- Baird -- Analyst

Okay. And then any change to the commentary you made before in terms of pricing being 30 million and cost inflation being about a $40 million headwind?

Robert Roche -- Chief Financial Officer

No. Well, that's good.

Tim Wojs -- Baird -- Analyst

Okay. Okay, great. I'll jump back in queue. Thanks, guys.

Christian Koch -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Charley Brady. Your line is now open. Charley Brady from SunTrust Robinson. Your line is now open.

Christian Koch -- President and Chief Executive Officer

Vincent, maybe we can pick that one up in a minute. Move onto the next question.

Operator

Okay. We have your next question comes from the line of Neil Frohnapple from Buckingham Research. Your line is now open.

Neil Frohnapple -- Buckingham Research -- Analyst

Yes, I'm here.

Christian Koch -- President and Chief Executive Officer

Hey, Neil. Good afternoon.

Neil Frohnapple -- Buckingham Research -- Analyst

Good afternoon. I just wanted to go back to the Accella profitability in 2018. I think Bob you just mentioned what 1% to 2% profitability in the quarter. But can you just level set us for what the expectation will be for the segment for the full year of '18 relative to the high single digit margin commentary for 2019?

Robert Roche -- Chief Financial Officer

Yeah, now we're expecting, in the low to mid teens -- low to mid single digit. Sorry.

Neil Frohnapple -- Buckingham Research -- Analyst

Low to mid single digits.

Robert Roche -- Chief Financial Officer

Yeah. So 3% to 5%.

Neil Frohnapple -- Buckingham Research -- Analyst

Okay. So call it 500 basis point sort of improvement in '19 on 20% of segment sales, so that should be, if my math is right, 100 basis point tailwind to total CCM segment margins. Is that sound about right, just from the improvements from Accella?

Robert Roche -- Chief Financial Officer

Yes, the math sounds appropriate, because we expect to get back to the 8% now in '19.

Neil Frohnapple -- Buckingham Research -- Analyst

Okay. And then, just given the price increases you've implemented year-to-date in CCM, and Bob, you sounded positive that these will continue to hold in the fourth quarter. If we assume these continue to stick at these current levels through 2019, just hypothetically, and then raw costs are flat from year, what is the carryover at least for the first half of 2019 look like from a price cost standpoint?

Robert Roche -- Chief Financial Officer

Well we are getting about 20 million in the back half, a little over 20 million in the back half. So you would assume some of that would carry through to the first half and then you'd be flat in the first half. So let's just say $15 million of carryover on a conservative basis.

Neil Frohnapple -- Buckingham Research -- Analyst

And then as far as along the same lines from a material cost standpoint, including freight, what would that carryover sort of look like in the first half of '19 relative to that 15 million?

Robert Roche -- Chief Financial Officer

Yeah, I mean I think as we look at it, freights, I'm going to say, total costs have been reasonably flat quarter-on-quarter. So it's been about 10 million a quarter versus last year. So if it stays where it is, you would expect nothing, but we continue to see freight increase and we don't know what's happening to oil. So, based -- like I said, based on the 10 million a quarter, you would think if it stays where it is today, you would be fine for the even for the full year, next year.

Neil Frohnapple -- Buckingham Research -- Analyst

Okay, great. And then one last one, I'll pass it on. The $10 million increase in 2018 forecasts for restructuring facility or asset rationalization to get to the 33 million to 37 million, I guess just more importantly, what's the outlook for 2019? Because assuming that was the full quarter, that should come down which will help underlying profitability next year. So I know there's always going to be some sort of restructuring in the business, but can you just kind of help us understand what that tailwind could be in 2019?

Robert Roche -- Chief Financial Officer

Yeah, I mean we're thinking about $15 million for '19 on an normalized restructuring basis and we think that's sort of our normal run rate going forward, because we're always going to have the projects to get cost out, spread across all the businesses and all the locations.

Neil Frohnapple -- Buckingham Research -- Analyst

Okay, great. Thanks so much guys. I'll pass it on.

Operator

Your next question comes from the line of Charley Brady from SunTrust Robinson. Your line is now open.

Charley Brady -- SunTrust Robinson -- Analyst

Thanks guys. Sorry about that, not sure what happened there.

Christian Koch -- President and Chief Executive Officer

No problem.

Charley Brady -- SunTrust Robinson -- Analyst

On Accella, can you guys quantify or could you quantify the cost on that restructuring and kind of what that payback could have been now? It sounds like things are being accelerated. And then I guess the differential, it sounds like pricing went up, it was too high and you pull it back down, give me some granularity about what the delta between that was.

Christian Koch -- President and Chief Executive Officer

Yeah, on the pricing, Charley, I think it was a very marginal pricing on the delta change, everything was kind of in, I'm going to say in the mid-single digits on pricing and we pull back a bit. So, we still did --- make some progress for the year on pricing, but you know it was just marginally enough to, I think I have a few people switch and obviously the product still maintains a lot of great characteristics that was we desired. And so those folks who'd come back in October and if that marginally reduce product price there, they're back in the game. And Bob will take on the first question.

Robert Roche -- Chief Financial Officer

Your first one is related to what this restructuring cost was. We don't expect, a lot of it's going to be -- we don't have a lot of big facilities to close or plants to move, a lot of it's SG&A and getting more efficiency in our factory. So we don't expect a big restructuring to come out of that either in the fourth quarter or for next year and that's kind of encompassed in the $15 million I talked about a little bit earlier.

Charley Brady -- SunTrust Robinson -- Analyst

All right, thanks. And just one thought for me on CCM the -- if you've covered this, I apologize. The extra costs from the executive exit costs, can you quantify that?

Robert Roche -- Chief Financial Officer

Yeah. We put out an 8-K was about $5.5 million.

Charley Brady -- SunTrust Robinson -- Analyst

Great. Thanks.

Operator

Your next question comes from the line of Garik Shmois from Longbow Research. Your line is now open.

Garik Shmois -- Longbow Research -- Analyst

Thank you. May be I've missed it, I was wondering if you could provide how CCM volumes are tracking prior to September, just to give an idea of how strong underlying demand was before weather hit.

Christian Koch -- President and Chief Executive Officer

Yeah, we were down, I'm going to say, mid, we were down mid-teens in September, and prior to that it was high-single digit, Garik. So, that's without giving too much competitive information away, I would say it's the high single digits in July and August and then obviously the weather hit and down mid teens. Consistent by the way, with the industry, we look at our industry associations, very consistent with what we saw across the entire competitive landscape in single-ply roofing.

Garik Shmois -- Longbow Research -- Analyst

And I guess just to that, I think there is question earlier just around mid single-digit growth into next year. But given the trends prior to September, high single-digits, I think that's how you're growing, it's got a little bit better earlier in the year. Recognizing that, there's labor constrains and timing issues heading into the fourth quarter and which are -- weather is uncertain. But is there anything that you're seeing from an end market standpoint that changes the outlook either better works, if you look out to 2019 just when we're hearing from your customers.

Christian Koch -- President and Chief Executive Officer

Not really you when we look at the ABI (Technical difficulty) demand is still there, underlying demand for both reroofing and new and I think the question going into '19 is there a pool of labor that we can draw on in some way to expand the ability to take on new roofing projects.

Garik Shmois -- Longbow Research -- Analyst

Thanks. And just wondering, if you look out to next year to some of the comments on Accella, improving, how sensitive would it be if we're in a relatively stagnant housing environment given the builders have talked about decelerating orders. And how sensitive to the business, would it be into your outlook if housing does stagnate into next year?

Christian Koch -- President and Chief Executive Officer

Well, I think stagnating is not good for anyone in the resi housing market. But I think the interesting thing with Accella is, remember this is a new technology, we're really very low market share, versus the traditional types of insulation, we've been gaining a lot of traction as energy costs have been fairly high and Accella's value proposition really starts to play out. I think Bob referenced once that at a job site, he was in there, just trying to reduce the size of the heating and ventilating an air conditioning units in homes because of the extra insulating power of foam and it offsets then so it becomes cost neutral. So, our real goal with Accella is to continue to penetrate the insulation market and resi. And so I think we'd offset some of that stagnation with our efforts to grow that new technology into the construction market.

Garik Shmois -- Longbow Research -- Analyst

Thanks a lot. Best of luck.

Christian Koch -- President and Chief Executive Officer

Vincent, maybe we could have the next question please.

Operator

Next question comes from the line of Kevin Hocevar from Northcoast Research. Your line is now open.

Kevin Hocevar -- Northcoast Research -- Analyst

Hey, good afternoon everybody.

Christian Koch -- President and Chief Executive Officer

Good afternoon.

Kevin Hocevar -- Northcoast Research -- Analyst

On slide seven, you show that product mix was at $0.07 headwind at EPS. What is driving that exactly?

Christian Koch -- President and Chief Executive Officer

I mean, some of that's going to be Accella, right? Is a big part of it as it's less profitable and then we have some of that out of CIT as well as we talked about with Medical coming up to the profitability levels we want with the factory move and then SatCom again continuing to get efficiency out of our factory in Franklin. So that -- those are the three big drivers of it.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay. Gotcha. And then in terms of the -- back to in earlier question you updated the guidance for full-year organic growth in CCM in the low to mid single digits. And as it kind of play with the model to see you run it at about 2% pricing and volume suffered here in September obviously pretty hard, like you said down mid-teens in September. But, as you also mentioned up kind of up again in, so where you would expect in October? And it seems like if you plug in a mid single-digit type volume growth number, you're going to come in at the very high end of that guidance range of that low to mid single digit organic growth range for the year. So just kind of curious, -- what would it take to see low single digit? Is there some upside there? Just wanted to get a sense for that range and how comfortable you are with where you think that could shake out?

Robert Roche -- Chief Financial Officer

Yeah, I think it's a good question. In the fourth quarter and first quarter are always ones that -- again we're just going to go back to weather that that would be one that again I mentioned, if we can get a dry warmer fourth quarter across the US, we would do well. Texas is our biggest market, that had record rainfall obviously any recovery there is going to be important. Also labor, we can see some relief on labor, that will -- would help. But I think the biggest thing that would affect any upside is just how does that fourth quarter look from an ability to get on the roof, Kevin. We think we missed something like overall maybe four to five days, roofing days in September and you can see the impact. So if we can pick up three to five roofing days in the fourth quarter, it wouldn't probably have the same impact as September did, but it could be very beneficial to us.

Kevin Hocevar -- Northcoast Research -- Analyst

Got you. Okay. And then -- and CFT, the margin 13% excluding the one-time benefit there. So obviously real nice progress there. So how should we think about that margin progressing as we exit the ? I think you guys have kind of talked about maybe exiting the year at mid-teens. And so how should we think of -- is that still a good way to think about that and how should we think of that margin progressing in 2019?

Robert Roche -- Chief Financial Officer

Yeah, we're still on track for what we talked about early in the year exiting approaching mid teens. And I think the nice progress we made in the third quarter gives lot of confidence in that. And then going into '19, right, you do have some modulation throughout the year, it's not an even volume year. So we expect 150 to 200 basis points. As I talked about before, improvement year-on-year in the full year.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay, got you. Thank you very much.

Operator

Your next question comes from the line of Bryan Blair from Oppenheimer. Your line is now open.

Bryan Blair -- Oppenheimer -- Analyst

Hi, good after noon. Thank you for taking my question.

Christian Koch -- President and Chief Executive Officer

Good afternoon, Bryan.

Bryan Blair -- Oppenheimer -- Analyst

I call out the strong new product growth in CCM, I'm assuming that a rapid lock contributed to that. I was just wondering if you could parse out what is driving that growth and perhaps what the revenue base that is growing at that percentage?

Robert Roche -- Chief Financial Officer

Yeah, the revenue base is pretty small. I mean, it's 22 to -- $20 million to $30 million right now and 20 million last year, 30 million this year, that we're talking about there. And it's rapid lock in some new ceiling capabilities with the appeal as well. So we have a couple new products fit in there.

Bryan Blair -- Oppenheimer -- Analyst

Okay. And as they continue to gain scale, is it fair to assume that those are margin accretive?

Christian Koch -- President and Chief Executive Officer

Yes, I would say both. Really the rapid lock, this is the Velcro applied roofing as it got a great margin profile and very good pricing characteristics. It's taking about half a labor off, we have appeal, which obviously reduces the clean-up on a roof, and that has some great margin. And then Cap Grip [ph] and some others again are taken either VLCs out of reducing labor and ease of use and increasing the performance. So yeah, we're definitely trying to drive an ROIC mindset in that and get value for the products, the new products we're introducing.

Bryan Blair -- Oppenheimer -- Analyst

Okay, thank you.

Christian Koch -- President and Chief Executive Officer

You bet.

Operator

Your next question comes from the line of Liam Burke from B.Riley FBR. Your line is now open.

Liam Burke -- B.Riley FBR -- Analyst

Yes. Thank you. Good afternoon, Chris Koch and Bob.

Christian Koch -- President and Chief Executive Officer

Good afternoon.

Liam Burke -- B.Riley FBR -- Analyst

Chris, you mentioned that in the CIT, there was a product mix that setback operating margin slightly and aerospace was a big grower. Was it new projects within the aerospace or what created the margin headwind within the -- I presume within the aerospace area?

Christian Koch -- President and Chief Executive Officer

Really, Liam, it revolves around the SatCom business and efficiencies related to our Franklin and Morville [ph] factories. In SatCom, we have had tremendous growth obviously in these two years in SatCom and these factories are processing that and they're growing and establishing their manufacturing operations as we do it. I think we expanded Franklin twice over the last three years. So it really relates to that SatCom efficiency. And the other piece I would touch on is the medical in Dongguan obviously when we did the factory move, it's a start-up. We think it went fairly smoothly but as with any start-up we have issues around scrap and around a lower efficiency performance out of new employees in a new environment. But those were the big hits in CIT.

Liam Burke -- B.Riley FBR -- Analyst

Okay. And COS, you're taking that to the next level to get to your long-term 2025 objectives. How are you tracking in terms of -- you've got some ambitious goal within those programs. How is that tracking toward your long-term goal?

Christian Koch -- President and Chief Executive Officer

I think it's right in there. You know, this quarter, as we mentioned, it was the 1.5, I think and we were right in that 1% to 2% that we want, where we think it's picking up speed. We've made some investments, both in people, in software, in our factories to drive that, Liam. So every day we build on that. And the other nice thing is I think it's starting to really take on some of the, I would say, ownership within the divisions and this no longer just a corporate project after 10 years or corporate led project, it's now embedded and people can see the benefits from it. So, the great thing is, it does savings or seeing an experienced in the divisions, and they are the ones pushing it. So we feel very comfortable that we'll get to that 2% savings.

Liam Burke -- B.Riley FBR -- Analyst

Great. Thank you, Chris.

Christian Koch -- President and Chief Executive Officer

You're welcome.

Operator

Your next question comes from the line of Joel Tiss from BMO. Your line is now open.

Joel Tiss -- BMO -- Analyst

Hey, guys, how it's going on?

Christian Koch -- President and Chief Executive Officer

Hey Joel, good afternoon.

Robert Roche -- Chief Financial Officer

Hey, Joel.

Joel Tiss -- BMO -- Analyst

So I don't know if you -- if this numbers called out at all, but how much was the gain in CFT from the sale of the Mexican facility?

Robert Roche -- Chief Financial Officer

$2.3 million.

Liam Burke -- B.Riley FBR -- Analyst

Okay. And then the inside on slide seven, that $0.12 of other costs in the third quarter, what is that from?

Robert Roche -- Chief Financial Officer

Yeah, I mean, a big part of that's the retirement costs that we talked about in the 8-K.

Christian Koch -- President and Chief Executive Officer

I think the $0.07 of $0.12, Joel is -- $0.07 of $0.12 is John Altmeyer and the other $0.05 really relates to some one-time medical expenses we had and that's it.

Liam Burke -- B.Riley FBR -- Analyst

Okay. Okay. So that's pretty clear. And then just -- I know you -- I don't want 2019 guidance, but I'm just holistically like trying to think if the pricing that's in the system now, is there enough in CCM to be able to offset what seems reasonable to expect is coming if 2019 in terms of cost increases? Or is it going to be more pricing there? Sorry.

Robert Roche -- Chief Financial Officer

I think what we're seeing now with where MDI and oil seems to be modulating, I think we're pretty comfortable, the wild card is freight is how high is that really going to go. So, we may need to do further freight actions to be able to make up for that, but we are feeling pretty good now with the gains we have made that we should be even year-on-year.

Christian Koch -- President and Chief Executive Officer

And Joel the gains on the other side of the Accella are really going to come from operational improvements, things we control, I think that pricing we've -- based upon how we pushed in the third quarter, I think we have a really good feel for what we can do on price in Accella and now we're turning and work on cost improvements and manufacturing efficiencies.

Joel Tiss -- BMO -- Analyst

All right. Awesome. Thank you so much.

Christian Koch -- President and Chief Executive Officer

You bet.

Operator

Your next question comes from the line of Neil Frohnapple from Buckingham Research. Your line is now open. Neil just got disconnected. We have no further questions in queue. Mr. Koch any closing remarks?

Christian Koch -- President and Chief Executive Officer

Vincent, thank you very much. Appreciate that. And this concludes our third quarter 2018 earnings call. I want to thank everybody on the call for their participation and we look forward to speaking to all of you at the next earnings call. Thanks again.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

Duration: 46 minutes

Call participants:

Jim Giannakouros -- Vice President of Investor Relations and FP&A

Christian Koch -- President and Chief Executive Officer

Robert Roche -- Chief Financial Officer

Tim Wojs -- Baird -- Analyst

Neil Frohnapple -- Buckingham Research -- Analyst

Charley Brady -- SunTrust Robinson -- Analyst

Garik Shmois -- Longbow Research -- Analyst

Kevin Hocevar -- Northcoast Research -- Analyst

Bryan Blair -- Oppenheimer -- Analyst

Liam Burke -- B.Riley FBR -- Analyst

Joel Tiss -- BMO -- Analyst

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