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Carlisle Companies Inc (NYSE:CSL)
Q1 2021 Earnings Call
Apr 22, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Kavita, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies First Quarter 2021 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 will now turn the call over to Mr. Jim Giannakouros, Carlisle's Vice President of Investor Relations. Jim, please go ahead.

Jim Giannakouros -- Vice President, Investor Relations

Thank you, Kavita. Good afternoon, everyone, and welcome to Carlisle's first quarter 2021 earnings conference call. We released our first quarter financial results after the market closed today and you can find both our press release and earnings call slide presentation in the Investor Relations' section of our website carlisle.com.

On the call with me today are Chris Koch, Chairman, President and Chief Executive Officer, and Bob Roche, our Chief Financial Officer. Today's call will begin with Chris discussing business trends experienced during the first quarter of 2021, views of what's to come and context around our progress toward an unwavering commitment to achieving Vision 2025. Bob will discuss the financial details of Carlisle's first quarter performance and current financial position. Following Chris and Bob's remarks, we will open the line up for questions.

Before we begin, please refer to Slide 2 of our presentation where we note that comments made on this call may include forward-looking statements based on current expectations of future events and their potential effect on Carlisle's operating and financial performance that involve risks and uncertainties, which could cause actual results to be materially different. A discussion of some of these risks and uncertainties is provided in our press release and in our SEC filings on Forms 10-K and 10-Q. Those considering investing in Carlisle should read these statements carefully and review reports we file with the SEC before making an investment decision.

Today's presentation also contains certain non-GAAP financial measures. We provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financials in our press release and in the appendix of our presentation materials. And we've also have historically provided in supplemental tables, which are available on our website.

With that, I introduce Chris Koch, Chairman, President and CEO of Carlisle.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thanks, Jim. Good afternoon. I'd like to welcome everyone to our first quarter 2021 earnings call. I hope all of you, your families, co-workers and friends are staying safe and healthy as we collectively manage through what is hopefully the beginning of the end of the COVID-19 pandemic.

Reflecting on the last 12 months of uncertainty, I take great pride in how roughly one year ago the Carlisle team handled the immediate threats born out of the pandemic. Our first actions were to ensure our teams at Carlisle were taking the steps necessary to provide a safe work environment. We ensured that our team members had access to healthcare, continue to be paid, and had company support for the difficult situations many were facing. We enacted strict health and safety protocols based on the CDC, World Health Organization and best-in-class peer actions and recommendations, which contributed to a low infection rate at Carlisle across the globe.

Our next steps were to support our highly engaged and flexible workforce as they took very proactive measures to ensure we supported our customers that were providing essential services to the economy. We wanted to ensure that they can count on Carlisle to be there to provide the right product to the right place at the right time or what we've come to call, the Carlisle experience.

Turning to Slide 3 now. Throughout 2020 an essential part of leadership's job was to cut through the confusion, misinformation and complexity present in our daily lives and communicated a clear, direct and simple strategic vision for the organization that would inform our priorities, educate our collective mission and guide our everyday actions of work. At Carlisle we call this Vision 2025. This compelling strategic framework gave us clear direction and consistency emission during the tumultuous past year and will continue to guide our efforts as we accelerate into the recovery in 2021.

During the past 12 months Carlisle again proved its ability to navigate varying economic cycles with steadiness and focus, while delivering strong financial performance reconfirming our conviction in Vision 2025 and it's key strategies. The first quarter of 2021 continues to validate the hard work, effort and commitment by all Carlisle employees to our stakeholders and signals that operational momentum is building across our platforms.

Moving to Slide 4. Due to the strength in our CCM, CFT and CBF businesses, our revenue was flat year-over-year despite a very tough comparison to quarter 1 of 2020. The well-understood impact of the COVID-19 pandemic on the commercial aerospace markets continued to weigh on CIT results and it had a significant negative impact on the first quarter of this year. More than offsetting this was outstanding performance at CCM where our team delivered 6.3% year-over-year revenue growth. A tremendous achievement when considering the first quarter of 2020 was 1% higher than 2019 and Q1 of '19 was 12% higher than 2018.

Additionally, we are encouraged by CBF's rebound from a multi-year sector decline in demand for off-highway vehicles. And lastly, CFT continues to build on its second half 2020 performance and we're encouraged with CFT's global end market strengthening. Our strong results and rapid recovery from the initial shock of the early stages of the pandemic reinforce our confidence in the Carlisle team's ability to achieve Vision 2025.

The first quarter results highlight how we continue to execute on our long-term strategies including maintaining the highest standards in providing the Carlisle experience to our customers, investing in high return capital projects to drive organic growth across our core platforms, working an active pipeline of acquisition targets, returning excess capital to shareholders through share repurchases and dividends, continuing on our ESG journey and demonstrating the exceptional and sustainable earnings power of the Carlisle business model. It is our history of innovation, investment and continuous improvements that supports more conviction than ever in Carlisle's future success.

Turn to Slide 5, please. The first quarter of 2021 continue to demonstrate the strength of the CCM franchise and reaffirms our commitment to reinvesting in this, our highest returning business. Our pivot to CCM that began with the introduction of Vision 2025 several years ago was to us an obvious strategic choice after more than two decades of exceptional returns on capital, strong organic growth and solid financial performance. This is further bolstered by the now well-understood value of the Carlisle experience.

By the Carlisle experience we mean ensuring delivery of the right product at the right place at the right time. We mean industry-leading investment in production facilities and R&D capabilities, best-in-class education for channel partners on the latest roofing products and installation best-practices, an award-winning customer service team, continuing to innovate and provide value-added products that ensure quicker, easier and safer installation of our building envelope systems and solutions in an increasingly labor and material constrained environment. And finally, and maybe most importantly, contributing products that provide a better environment for all stakeholders.

Taken in whole, the Carlisle experience is how CCM has become a manufacturing, engineering and commercial leader in the construction products industry. Further evidence of our commitment to the Carlisle experience into investing in our highest-returning businesses, earlier this week Carlisle announced plans to invest more than $60 million to build an innovative, state-of-the-art manufacturing facility in Sikeston, Missouri. This investment will support our organic growth initiatives and also create jobs for the city of Sikeston and surrounding communities. The building and its surrounding footprint will incorporate the latest advances in lead building technologies and highest standards of sustainability.

The insulation materials manufactured here not only lower energy cost for building owners and operators, but also help reduce a buildings GHG emissions. Additionally, this site's central location will reduce the carbon footprint of CCM's supply chain and improve material lead times for customers in the region. Demand continues to grow for our insulation solutions given the strong reroofing cycle under way in the U.S. as well as the growing needs to improve the energy performance of commercial buildings. With that in mind, we felt this was the right time to expand our capacity and enhance the Carlisle experience for our customers in the Midwest.

Please turn now to Slide 6. illustrated are some specifics on our first quarter results where CCM exhibited the remarkarble the strength of its business model. CCM organic sales grew nearly 6% year-over-year reflecting strong demand for our sustainable building envelope solutions and underscoring the importance of the Carlisle experience. March volumes were particularly strong more than offsetting significant weather-induced softness in February. And additionally, bookings entering the second quarter are at record levels. Fortunately, our conviction in a strong 2021 meant that we anticipated the market needs and drove elevated production levels during the latter part of 2020 and into the winter months as others in the industry cast out on underlying demand. We did this is a commitment to our customers to ensure their needs will be met and continue to earn our place as a supplier of choice for their building envelope solutions.

CCM continues to benefit from the strong reroofing cycle in the United States. Our products and solutions for non-residential buildings are non-discretionary and can only be deferred for so long. We believe CCM volumes in 2021 should benefit from work postponed in 2020 due to the pandemic. But we maintain our conviction in the sustainability of the reroofing demand in the U.S. where we continue to expect the market to grow from $6 billion to $8 billion in the next decade.

Additionally, CCM is meeting head-on the challenges from the significant acceleration in raw material and logistics cost inflation during the quarter. Coming into the year we were expecting an inflationary environment, coupled with strong demand and thus had prioritized selling price increases across most product categories at CCM to ensure we can continue to invest in and provide world-class customer service to our customers. Our procurement and supply chain teams are doing a great job in navigating a volatile and extremely tight marketplace. Again with the goal of providing the best-in-class Carlisle experience to our customers.

Turning to CIT. The first quarter results were in line with subdued expectations given the ongoing disruption in the commercial aerospace market. Improving leading indicators, which include the expanding vaccine rollout, increasing numbers of domestic travelers, growing aircraft manufacturer backlogs, and improvements in CIT's order books give us confidence that CIT is positioned for a sequential improvement going forward.

CFT delivered improved revenue and profitability performance in the first quarter driven by its reenergized commitment to new product innovation, improved operational efficiencies, price discipline and integration of our newer platforms. We are especially pleased that new products accounted for over half of the volume growth in this quarter. At CBF the significant actions taken to improve the business over the past few years are yielding expected results combined with demand for off-highway vehicles and equipment especially in Ag and construction is driving very strong volumes. CBF is delivering positive and accelerated earnings growth in what looks to be a significant inflection year for this business.

Please turn to Slide 7. Our ESG efforts also continue to gain momentum under Dave Smith, our recently appointed Vice President of Sustainability. In early April, we published our 2020 sustainability report in conjunction with the launch of a new award-winning ESG-focused website. These launches collectively share details of Carlisle's century-long journey and provide a deeper look into the socially responsible approach we undertake to create value for all stakeholders of the company. I invite you to read what we have published on the Sustainability section of our website at carlisle.com

I'd also like to highlight how important the Carlisle operating system was to Carlisle throughout the past year and will continue to be as we drive to deliver Vision 2025. During the pandemic year of 2020 and the 13th year of our COS journey, our teams leaned heavily on COS to navigate through significant uncertainty. The first quarter again demonstrated the value of COS as we delivered 1.2% savings as a percent of sales well within our target of 1% to 2% annually.

Moving to Slide 8. Before Bob updates you on our financial performance, I wanted to give you a quick update on capital deployment. We continue to seek synergistic acquisitions that are currently working a robust pipeline. For years we remained active on share repurchases buying back $150 million worth of shares during the first quarter and we paid $28 million worth of dividends. We remain opportunistic in share repurchases and will continue to balance our cash position with the opportunities within the robust M&A pipeline.

We believe the strong performance in the first quarter across all platforms at Carlisle is a product of staying the course on our strategies. I'm proud of how the team met the challenges in the past year. I believe Carlisle is at a solid position to accelerate through the recovery.

Bob will now provide operational and financial detail about the first quarter and review our balance sheet and cash flow. Bob?

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Thanks, Chris. Starting with this quarterly call when referencing profitability I'll be speaking to adjusted EBITDA margins and adjusted earnings.

Please now turn to revenue bridge on Slide 9 of the presentation. Revenue was flat in the first quarter driven by CCM, CFT and CBF offset by the well-documented commercial aerospace decline in CIT. Organic revenue declined 1.4%. CCM, CFT and CBF all delivered greater than 5% organic growth in the quarter. Acquisitions contributed 0.4% sales growth for the quarter and FX was a 90 basis point tailwind.

Turning to our adjusted EBITDA margin bridge on Slide 10. Q1 adjusted EBITDA margin declined 180 basis points to 14.4%. Pricing and volume headwinds combined for a 150 basis point decline is driven by CIT. Acquisitions were a 10 basis point headwind. Freight, labor, raw material and other operating costs netted to a 140 basis point decline. COS benefits added 120 basis points.

On Slide 11, we have provided adjusted EPS bridge where you can see the first quarter adjusted EPS was $1.47, which compares to $1.67 last year. Volume, price and mix combined were $0.24 year-over-year decline. Raw material, freight and labor costs were a $0.25 headwind. Interest and tax together were a $0.01 headwind. Partially offsetting the decline, share repurchases contributed 5%, COS contributed $0.16, and lower opex was a $0.09 benefit year-over-year.

While COVID-related volumes declines at CIT clearly represented the most significant headwind during the quarter, our CIT team did a commendable job managing costs, leveraging COS to improve efficiencies and taking actions to position Carlisle for recovery while mitigating the pandemic's impact on earnings.

Now please turn to Slide 12 to review the first quarter performance by segment in more detail. At CCM, the team has again delivered outstanding results with revenues increasing 6.3% driven by volume and 60 basis points of foreign currency translation tailwind. CCM continued to exhibit its resilience with solid U.S. commercial roofing performance despite continued COVID-related restrictions in some areas and severe weather in February. Our European and architectural metal teams were solid contributors to the quarter's revenue performance. Adjusted EBITDA margin at CCM was 20.1% in the first quarter, a 50 basis point improvement over last year, driven by the higher volumes, COS savings and cost management partially offset by wage and raw material inflation.

Please turn to Slide 13 to review CIT results. CIT revenue declined 30.6% in the first quarter. As has been well-publicized this decline was driven by the pandemic's impact on commercial aerospace markets. While recovery in aerospace could be prolonged we are confident that there will be a resumption of growth with the continued rollout of the COVID vaccine and airlines returning to profitability.

In our medical platform where sales were up nicely in the quarter year-over-year, we continue to expect sequential improvement from pent-up demand as the impacts of COVID on hospital capex in postponement of elective surgeries ease. Additionally, our project pipeline is robust and our backlog's improving. CIT's adjusted EBITDA margin declined year-over-year to 7.1% driven by commercial aerospace softly -- partly offset by savings from COS and lower expenses. While the actions taken by CIT in 2020 to rightsize our footprint and reuse the overall workforce were difficult, we are positioned to deliver sequentially improving performance throughout 2021.

Turning to Slide 14. CFT sales grew 12.9% year-over-year. Organic revenue improved by 5.3%. Acquisitions added 4.1% in the quarter and FX contributed 350 basis points. Stabilization in key end markets, driven by an improved industrial capital spending outlook in 2021 coupled with new product's introductions, pricing resolve and efforts to upgrade the customer experience position CFT to accelerate through the recovery. Adjusted EBITDA margins were 15.5% with a 590 basis point decline year-over-year. This decline primarily reflects an FX gain of approximately $3 million from the previous year, partially offset by growing volume.

Turning to Slide 15. CBF first quarter organic revenue growth was 20.4% and FX had a positive 3.7% impact driving CBF's organic total growth to 24.1% in the quarter. Demand for agricultural and construction equipment was a primary contributor to the growth. Additionally, backlog continues to strengthen with bookings up 80% year-over-year. Adjusted EBITDA margins were 13.3%, a 600 base improvement driven by higher volumes and COS savings.

On Slide 16 and 17 we show selected balance sheet metrics. Our balance sheet remains strong. We ended the quarter with $767 million of cash on hand and $1 billion of availability under our revolving credit facility. We continue to approach capital deployment in a balanced and disciplined manner. Investing in organic growth through capital expenditures and opportunistically repurchasing shares while also actively seeking strategic and synergistic acquisitions. Free cash flow for the quarter was $47.6 million, a 57% improvement year-over-year.

Turning to Slide 18, you can see the outlook for 2021 and corporate items. Corporate expense is now expected to be approximately $120 million for the year driven by stock and incentive-based compensation along with higher medical expenses. We continue to expect depreciation and amortization expense to be approximately $225 million. For the full year, we expect to invest in our businesses and still expect capital expenditures of $150 million to $175 million. Net interest expense is still expected to be approximately $75 million for the year, and we still expect our tax rate to be approximately 25%. Finally, we expect restructuring in 2021 to be approximately $20 million.

And with that, I'll turn the call back over to Chris.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Great. Thanks, Bob. During the second quarter of 2021, we are very optimistic about the remainder of the year. From record backlogs at CCM to growing positive trends in CIT's aerospace markets to recovery in both CBF and CFT coupled with excellent sourcing and price discipline, we're confident in our ability to deliver solid results for our shareholders. We will continue to seek to deploy capital into strategic acquisitions, share repurchases and dividends.

While there are still uncertainties around the pandemic for the full year of 2021, we anticipate the following. At CCM supported by a strong multi-year reroofing base, project deferrals that occurred in 2020, positive momentum in our newer businesses of architectural metals and polyurethanes, and expansion of our European business, we now anticipate revenue growth of low double digits in 2021.

At CIT given improving leading indicators, including a vastly better COVID-19 outlook, increasing daily TSA screenings for domestic travel, and improving airline financials translating into increased manufacturers orders CIT's financial performance has stabilized and is positioned for sequential improvement going forward. That said, we anticipate pressures remain near term. Given a very difficult year-over-year comparison in the first and second quarters we continue to expect CIT revenue will decline in the mid-to-high single-digit range in full year 2021.

At CFT with end markets strengthening especially general industrial and improvements in the team's execution of our key strategies, we continue to expect low double-digit growth in 2021. And at CBF supported by strengthening demand in core markets, price resolving and growing backlog, we now expect over 30% year-over-year growth in 2021. And finally, for Carlisle as a whole, we expect low double-digit growth in 2021.

In closing, I want to once again express my gratitude to our dedicated employees, their families, our business partners and all those associated with Carlisle's success. Given our 100-year history and the resilience this company has shown in times of adversity and uncertainty, we remain confident in Carlisle's outlook, our strong financial foundation, cash-generating capabilities, unwavering commitment to our Vision 2025 strategic plan, and to providing products and services essential to the world's needs.

This concludes our formal comments. Kavita, we are now ready for questions.

Questions and Answers:

Operator

[Operator Instructions] And our first question comes from Bryan Blair with Oppenheimer.

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

Good afternoon, guys. Just a very solid start to the year.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes. Thanks, Brian. Good afternoon.

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

I was wondering if you could offer a little more detail on CCM volume trends through the quarter. I guess I'm most interested in, what I assume, was an inflection in March or regions that February was tough, and there was a freeze throughout a good portion of the month, January wasn't great flat to slightly up, so that implies a very strong margin momentum into the second quarter, which is consistent with having record bookings but curious if you could quantify that level of momentum?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I think I view it pretty consistently with you. But I'd also say the third quarter and fourth quarter the teams were already seeing a return to some pretty solid numbers and backlog was continuing to be quite stable and growing. And then we did say I think in the fourth quarter call that we came into the year with momentum and the first quarter was going to be fairly good. And I think we've talked about we did anticipate a strong 2021 coming off of the tough 2020 where we had some adds that we knew we're going to come back, specifically in distributor stocking for instance and we also knew there'd be a big backlog that hadn't been addressed in 2020.

So yes, you're right. January was -- I think it was good, I think it continued to trend. February was a dip. It created some uncertainty out there. I think people were wondering how many days were lost out the roof and then March did come back and I think March just reflected though, what we anticipated all along that 2020 was going to be a good year that we were going to get some distributor restocking, that contractors were going to have more flexibility going out under the roof and we were going to see momentum build so.

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

I appreciate that color. How is your team thinking about second quarter growth for CCM? If we work off of the $719 million in the first quarter and think of historical seasonality and again with record bookings going into the quarter, that implies a very significant second quarter growth versus obviously, a weak comp, but nonetheless very significant growth. Anything you can quantify would be appreciated.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I'll let Bob address it. But I think the seasonality thing I would kind of forget that. I think it's again, last year was a exceptional year, and I think there are some forces that overwhelm any seasonality that might be there. But Bob, you want to give some more specific?

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Yes, Brian, second quarter we're expecting over 20% growth off a week last year. So I think the normal bump from Q1 to Q2 will sustain but the year-over-year is definitely going to be bigger than usual because of the weakness last year.

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

Okay, fair enough. And then any updated thoughts you can offer on cost -- public input costs have been less than cooperatives, that's well understood. You have been aggressive on price. We know there is traction there. How do you see that shaking out on a full year basis, and how should we think about the first versus second half dynamic?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I'm thinking about like -- at least from my perspective what we talked about at some of the other calls, which -- where we thought we were going to be relatively flat in 2021, we were being -- the team is being very aggressive on price. Again, I think they anticipated what was going to happen in the year very well. I think they knew there's going to be high demand, there's going to still be labor constraints and I think they knew this idea of having product would be important especially inflationary times. So when we look at Q1 and Q2, I think for Q1 I -- from my perspective, relatively flat on price cost. I think Q2 might be a little bit negative. And then as we roll into Q3 and 4 we turn flat and then maybe a little positive. So net-net for the year I'm thinking flat. Bob, do you want to add anything?

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Yes, Brian, just even with what Chris said about the second quarter, we still believe I think adjusted EBITDA margin's relatively flat year-on-year, even with the slight pressure we may see.

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

Okay, excellent. I appreciate that. I'll leave it there.

D. Christian Koch -- Chairman, President and Chief Executive Officer

All right. Thanks, Bryan.

Operator

And our next question comes from Tim Wojs with Baird.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Hey, guys. Good afternoon. Nice start to the year.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thank you.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Maybe just first question, could you just talk a little bit about kind of material availability maybe not for yourself to selling something that you have assigned but perhaps maybe just kind of the broader industry and kind of what you're hearing around lead times and kind of how those compare maybe relative to your own business?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I think you're right. I think our team has done a good job of ensuring that we have supply and things are getting tighter. We're able to I think, keep everybody side for right now, but across the business I think there are those who are perhaps struggling. I know on the foam side there has been polyol has been tough to get, MDI I think for some people has been tough to get. I think even on the fasteners and steel decking has been surprisingly, I think tough to get.

So yes, I think in a broad sense, Tim, across we're seeing it's getting a little bit worse. And that's putting pressure obviously on the ability to deliver product and I think for some folks lead times extending. But as I said, I think for us we're keeping our customers satisfied and filled. So we'll see what happens though because if the demand rates things continue like this, it's going to put even more pressure. I do think as the year goes through though, suppliers will have caught up. They'll have caught up to what they took out in 2020 and probably as we look at the back half of the year things should normalize. But I think this summer is going to be interesting.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay. And then, if I remember correctly, distributors really, really tightened up in April last year. Are you seeing that significantly loosen up or are they kind of scrambling for inventory?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Well, I think that some of the bookie record bookings, obviously are people who are restocking. In the last year we had that begin and we did talk about -- in the second quarter, we talked about people not putting in that normal load for the year. I think, now there's probably than normal load plus there was the -- there is the backlog from last year's jobs that didn't get completed. And then we might have, I would say, some buying where people are worried about being able to deliver jobs in July and August. They want to make sure they get them priced and get them in inventory at least to have a line of sight to being able to deliver.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay, good. And then just free cash flow conversion, it looks the same but I think it's actually off of adjusted net income now. I guess from a dollar perspective what, I guess, has changed relative to before because I guess, if you put it relative to GAAP it'd be significantly higher right?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes. Relative to GAAP, it was higher. The new metric that we have is on adjusted net income, Tim.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Okay, and I guess what changed?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Nothing has changed.

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

But you had $120 million on GAAP last time and now you have $120 million on adjusted, in terms of conversion right?

D. Christian Koch -- Chairman, President and Chief Executive Officer

We leave some room for conservatism on the preliminary call for free cash flow conversion. So the math is the same meaning...

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

I got to you. Okay, good. Okay, great. I'll hop back. Thanks, guys. I appreciate it. Good luck.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Okay. Thanks, Tim.

Operator

And our next question comes from Saree Boroditsky with Jefferies.

Saree Boroditsky -- Jefferies, LLC -- Analyst

Hi, good evening.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Hey, Saree.

Saree Boroditsky -- Jefferies, LLC -- Analyst

Technically a positive sign when companies are increasing capacity, so maybe what's the capacity of your new facility and how long will this capacity last before you think you're going to acquire another one?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Well, I think we generally think that a volume that plant adds somewhere between 5% and 10% to the capacity of the industry. And when you think that we're growing, in the first quarter 6% and we think that's going to continue I think it's just an appropriate level of capacity add and likely it will take a couple of years to consume that. We've seen competitors add plants. I think over the last 5 or 6 years it's been one every couple of years and that seems to have been the appropriate level of capacity to not over capacitize the industry and then have pressure on pricing.

Saree Boroditsky -- Jefferies, LLC -- Analyst

And then maybe, can you talk about what you saw from an end market perspective in CFT, and do you see an acceleration through the quarter? How are orders trending and then I believe you have a decent amount of auto exposure there. So maybe any impact you're seeing from production issues?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Right. So I think most of the things -- I'll address the first one, the production issues there in capacity. When they're putting in these paint systems and sealer systems typically, it's a longer-term project with ROIC-based investment over multi-years. And so we haven't seen much in terms of negative impact over the long-term visions of people upgrading either sealer decks or paint jobs. When we look at the general trends in industrial, I think they're good. I think I've been surprised at how Europe has been as strong as it has been. China has returned and North America, if anything, will be a little bit of a laggard but that's coming on strong now too. So end market trends -- and I think you see that in CBF as well where we're seeing heavy equipment in that pickup after many years of kind of a malaise.

Bob, do you want to add anything or...

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

No. I think it's covered, Chris.

Saree Boroditsky -- Jefferies, LLC -- Analyst

Okay, thanks for the question.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thanks, Saree.

Operator

And our next question comes from Garik Shmois with Loop Capital.

Garik Shmois -- Loop Capital Markets -- Analyst

Great. Thank you. Just with respect to CCM volumes you cited record bookings and that's clearly driving some of the strength here, but maybe you could flush out what you're seeing maybe from a regional or end-market standpoint, how is new construction versus reroofing and any region standout in particular?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I think the regions that still stand out -- being headquartered in Phoenix, one of the interesting things that we see is how strong building in the Southwest has been and obviously in Texas there's a lot of talk about the migration that occurs there. Florida we see that surprisingly I think, our business still pretty much everywhere has been pretty good. And one of the leading indicators, we've always said for years has been win resi construction is good, non-resi tends to follow. When you're building houses and expanding suburbs and things like that, you tend to draw a low on shopping centers and places to eat, Walgreens, CVS and those kind of things.

So I think across the U.S. it's been very good and you can see that in the resi as well. For new construction it's been a contributor. Bob and I have talked for a while about how anything north of zero probably really helps and it has been, we think, low single-digit for new. So that's been really good to add to what we articulated in this presentation and we have many times around how strong we think the reroofing backlog and growth in that has been and will be over the next decade.

So it's kind of an interesting thing here, but I mean really if it's -- thinking about hitting on all cylinders, it's pretty much doing it right now.

Garik Shmois -- Loop Capital Markets -- Analyst

That's encouraging. Wanted to shift to the price cost outlook. Is this -- you reiterated that is this predicated on getting or needing additional price increases or do you think what you secured so far this year should get you there just given the visibility that you have on the cost side?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes. And what I articulated about the cost side I think is a key part of that. Obviously, we are anticipating that suppliers will get their capacity back online and we'll see some modulation as we get into the third quarter and then into the fourth quarter. Obviously if things or anything substantial changes that throws it off. But given that I think where we are from a price perspective, I think our team was very proactive and got ahead of us and that's what's embodied in this flat call for the year.

Garik Shmois -- Loop Capital Markets -- Analyst

Great. And then just lastly, just wondering on the supply side for CCM. Just given how tight it is and recognizing that maybe some liable manufacturers will be able to get the production in line later on this year, but just given how strong the market appears to be for you and how strong the market appears to be when looking out over the next several quarters or several years, assuming a recovery, do you think we're on an inflection point? You've been talking about this for several years but do you think we'll truly we have an inflection point now for pricing in CCM?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Well, I can't speak for the rest of the market but I think given where we are on a variety of fronts, I mean first of all, the demand, the labor constraints, the productivity needs, you can get ESG, global -- there are lot of trends that just point to what we've been saying, which is this market is going to be a robust market and people are going to place a premium on having a supplier that will deliver every time with the right product, the right place. But also a high-quality product is innovative, takes labor hours off the roof, and our teams work over the last years and investing in our R&D center, and investing in training, investing in contractor education on application things like this leads us to believe that they're going to pay.

They will pay a premium for a company that delivers on their promises like that. And so I think for us going forward, we've had this pricing resolve for a while now, many years. And yes, I think our inflection point was 3 to 4 years ago. I think maybe the rest of the industry they get there, but I really think I would say here because if people don't deliver on those things, if you're not providing innovation, if you're not providing superior customer service, if you're not providing products that take labor off the roof and things like that, then I don't think the pricing situation is the same. Then you may not be at an inflection point still.

Garik Shmois -- Loop Capital Markets -- Analyst

No, understood. Thanks, again.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thank you.

Operator

And our next question comes from Joel Tiss with the Bank of Montreal.

Joel Tiss -- BMO Capital Markets -- Analyst

Hey, guys. How's it going?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Joel, how are you doing? Good to hear your voice.

Joel Tiss -- BMO Capital Markets -- Analyst

All right. Good to hear you guys too. Glad everyone's safe and sounds like happy and making everybody money. That's what it's all about.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thank you.

Joel Tiss -- BMO Capital Markets -- Analyst

Can you clarify what does price discipline mean in CFT?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Well, one of the things we know is that a large part over the years of our competitors' growth and profitability has come through price and that idea that same kind of thing is in CCM. You create innovative products, you provide excellent service and then you price it appropriately and you don't -- just because someone tells you the competitor has a good deal you don't lower price. You stick to pricing your product to the value it provides. So that's really what we mean there is that CFT now is delivering on time there. We've you got good customer service, we're working on some innovative products as we said in the call, half of the volume in the first quarter was through new products. So I think we're starting to build that business the way we wanted to, which where we could continue to get price and be disciplined in how we do it. We don't -- we're not getting into these price competition or selling the value.

Joel Tiss -- BMO Capital Markets -- Analyst

Okay. So that's smart like it's established yourself as the premium brand, and they are a premium brand there.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes. A premium brand.

Joel Tiss -- BMO Capital Markets -- Analyst

Can you talk a little bit about CIT? I'm sure you have a little more sort of insight just into what the customers are thinking and I'm thinking more '22 and '23. I'm not really thinking about the second quarter, but anything you can help us with because I know we went into kind of this time last year, there was a little too much inventory in the channel and is that all cleaned out? And just give us maybe a little bit of a deeper look of how that's setting up for the next like, three years?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Yes, I think it's all, Joel. I mean, it all depends on travel. We are seeing increased travel at least, we're seeing increased leisure travel, certainly in the U.S. I know China travel has picked up too, I've looked at that. I think Europe's a little bit soft still. I think what has to really start to come back and we hope we're going to see that this summer and I think we feel it will come back, is the business traveler and the international traveler. And so that's what we're looking at. And then when we start seeing revenue improve it and our major airlines, then we can start thinking about them adding routes back and adding planes back into service.

And I think that's happening right now. I mean the things that we hear are, there is a backlog in simulators where pilots have to keep recertifying that, that seems to be everybody starting to ramp up again. I think we're seeing more planes being brought out of backlog from those places where they've been stored. And then we have seen some increase in orders from airlines -- certain airlines too, aircraft base actually. So all those things point to us to say that as we get into the back half of 2021, we should start to see things really improving and then 2022 should bring us back to profitability in that and then marching forward from there.

Joel Tiss -- BMO Capital Markets -- Analyst

Okay. So it sounds like maybe just a little bit too early to have a clear view or whatever. And can you just talk quickly about acquisition valuation and then I'll leave you guys alone. And thank you very much for the time.

D. Christian Koch -- Chairman, President and Chief Executive Officer

No problem. The -- actually I think the trend that's happened over the last couple of years, you know it well but there has been increasing amounts of money in the market with decreasing amount of assets and so multiples continue to increase. I think we saw with the Firestone deal. So I think we're somewhere around 12, which for construction products compared to five years ago is probably a couple of turns higher than it would have been. So, yes, as long as we have money out there and we have strategics and sponsors out there looking for assets to buy and deploy capital and now we have SPACs and other things, demand is high for assets and multiples continue to rise.

Joel Tiss -- BMO Capital Markets -- Analyst

And can you do anything creative to get through, Bob, screens like buying things for stock or not really?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Bob's not a creative guy, so I can't do anything creative because he won't respond to it, Joel. He's just being a potato. So I -- we just have to make sure we're finding assets that have great synergies and good strong organic growth programs embedded in their businesses. And I think when you look at where we are in the construction products or in CFT or even in CIT and medical, there are businesses that have great products, that have good runways with strong organic growth and luckily in those markets we now -- even in medical, we've got basis that are big enough that we can make acquisitions and get synergies out of it. And so I think that's the only way we can make the model work is, we have to have good strong organic growth and leverage with those synergies.

Joel Tiss -- BMO Capital Markets -- Analyst

Okay, great. Thank you so much.

D. Christian Koch -- Chairman, President and Chief Executive Officer

You bet.

Operator

[Operator Instructions] And our next question comes from Kevin Hocevar with Northcoast Research.

Kevin Hocevar -- Northcoast Research Holdings, LLC -- Analyst

Hey, everybody. Nice start to the year there.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thanks, Kevin.

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Thank you.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Wondering if -- Bob, I want to revisit you mentioned CCM margins you expected to be flat in the second quarter compared to the prior year-end. I guess, the sales are expected to be up over 20% and price cost just a small headwind. I guess, why would that be the case, what would be the offset there?

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Well, it's a little bit of the price cost. As Chris mentioned that we think the second quarter is going to be the toughest compare and then growing into the back half, so it's...

Kevin Hocevar -- Northcoast Research Holdings, LLC -- Analyst

Okay. And in terms of the -- you guys I mentioned in metal roofs -- I think you had mentioned in the prepared remarks, when you're talking about CCM metal roofing in Europe did well, wondering if you could just give a little bit more color there. And you didn't. -- I don't think you mentioned polyurethanes so curious what you're seeing out of each of those businesses within CCM?

D. Christian Koch -- Chairman, President and Chief Executive Officer

Well, we're really pleased with Europe and the new management team that came in a little bit while back. A impressive leader and how things have really solidified. And we invested in expansion in Waltershausen and we're really pushing our new products and that's going to continue to be a good story. So I just think the store in Europe is just a new management team with a really exciting outlook, a really get-it-done attitude and Georg, the gentlemen we brought in is a very experienced in European construction products market. He's run some big businesses and I think he has great strategic direction. So that's fun to watch happen. We love that when people come in with great skill sets and can apply their craft at Carlisle.

Architectural Metals is another great story. I mean, both leaders of the businesses at Drexel and Petersen are doing a great job. I think Petersen had a record month -- all-time record month in March, so that team is doing a great job. They're also doing an excellent job of getting supply and maintaining price. I think they had some very improved margins as we headed into March on a year-over-year basis and historically were improved as well. The Drexel team continues to do a great job as well there.

And then polyurethanes is great. The only issue in polyurethanes is really -- for us right now is that some of the materials are hard to come by across the industry and everyone is kind of suffering on the MDI and polyol. And so we probably can't get as much as we would like to have and that's really the only thing I think that's constraining the growth in that market, and that's a market where we have projected high single-digit growth to polyurethanes and we still think that growth is there. That product line continues to be more and more accepted and desired in homes for its insulating properties and vapor barrier properties and it's just a very high-performing installations. So they're are three great segments for CCM, they were three great additions and we like what the management teams are doing and how they're creating value. Bob, you want to add anything to that?

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

No.

Kevin Hocevar -- Northcoast Research Holdings, LLC -- Analyst

And last one for me. Out of curiosity, it seems like you guys have always focused on GAAP EPS and GAAP EBIT. You've always provided the adjusting items but it always seem like the focus was the GAAP at the end of the day. But it seemed like in this quarter the focus seemed to shift to adjusted EPS and adjusted EBITDA I guess as opposed to GAAP EBIT. So just curious what -- the reason that you're shifting the focus there and is it -- are you also shifting it internally in terms of bonuses or anything in terms of how you're compensating your employees more tied to adjusted EBITDA as opposed to GAAP EBIT or -- Yes, just curious the shift there.

D. Christian Koch -- Chairman, President and Chief Executive Officer

So I don't really think there has been much of a change. There's certainly nothing with this respect to compensation or anything that happening in Carlisle. We're a GAAP company and our most important metric is cash flow obviously and then return on invested capital. So we're still the same as we were. The move to add information and that's really what we did is we added information. We obviously have to report GAAP so anything we're doing is adding it was really driven by the investment community and our shareholders, and they desire for more information quicker and trying to take some work off of their plate.

I mean we obviously would send our GAAP and say to our -- to investors and others you have it, you can make the adjustments, but I think for us to do that we're going to advance and try to just make it a little bit easier to digest the information in a more rapid timeframe, and to take some burden off of the investment community and the analysts that are doing the work on. It was really the reason to do it, and hopefully that in turn will produce a better understanding of the Carlisle story, and what's driving value here. So that's all it was. It's not going to drive any changes in our performance and how we work and how we measure our capital investment or acquisitions. Just an effort to provide more granularity to the investment community.

Kevin Hocevar -- Northcoast Research Holdings, LLC -- Analyst

Okay, good. Yes. That's very helpful. So I appreciate that. I'll get back.

Operator

There are no further questions at this time. I'll turn the conference back over to Chris for closing remarks.

D. Christian Koch -- Chairman, President and Chief Executive Officer

Thanks, Kavita. This concludes our first quarter 2021 earnings call, and I want to thank everybody for your participation and we look forward to speaking with you at the next earnings call. Thanks and stay safe.

Operator

[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Jim Giannakouros -- Vice President, Investor Relations

D. Christian Koch -- Chairman, President and Chief Executive Officer

Robert M. Roche -- Vice President, Chief Financial Officer, Investor Relations

Bryan Blair -- Oppenheimer & Co. Inc. -- Analyst

Timothy Wojs -- Robert W. Baird & Co. -- Analyst

Saree Boroditsky -- Jefferies, LLC -- Analyst

Garik Shmois -- Loop Capital Markets -- Analyst

Joel Tiss -- BMO Capital Markets -- Analyst

Kevin Hocevar -- Northcoast Research Holdings, LLC -- Analyst

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