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Carlisle Companies Incorporated (NYSE:CSL)
Q2 2021 Earnings Call
Jul 22, 2021, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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

James Giannakouros -- Vice President Of Investor Relations

Thank you, Zen. Good afternoon, everyone, and welcome to Carlisle's second quarter 2021 earnings conference call. We released our second 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 CFO. Today's call will begin with Chris discussing business trends experienced during the second quarter of 2021, views of what's to come and context around our continued progress toward and unwavering commitment to achieving Vision 2025. Bob will discuss the financial details of Carlisle's second quarter performance and current financial position. Following Chris and Bob's remarks, we will open up the line for questions.

But before we begin, please refer to slide two 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 the reports we file with the SEC before making an investment decision.

Today's presentation also contains certain non-GAAP financial measures. We have 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.

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

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks, Jim. Good afternoon, everyone, and thank you for joining us on our second quarter 2021 earnings call. While we recognize that there are still many people suffering from the continued effects of the pandemic globally and an uneven recovery, we hope all of you, your families, coworkers and friends are healthy, and you're reengaging as global economy is open.

I'm also pleased to report Carlisle's COVID-19 infection rates approach zero in the second quarter, which wouldn't have happened without our team's strict adherence to our safety protocols and commitment to each other across our global footprint. I'm also very pleased that Carlisle's performance continues to strengthen, as we further accelerate into the economic recovery.

Please turn to slide three. Vision 2025 has provided the clarity and consistency of direction that proved to be essential in guiding our efforts during the depths of the pandemic last year. It continues to guide us today, as we seek to leverage improving demand across our end markets in 2021 and beyond.

Vision 2025 provides Carlisle and our stakeholders a clear and direct vision that unites us in a collective goal, which in turn drives our priorities and everyday actions. We are very much on track to exceed the $15 of earnings per share targeted in Vision 2025.

Our performance in the second quarter of 2021 illustrates our continued solid execution toward our stated goals. Several highlights of this continued progress include: CCM's continued rebound in sales from the bottom of the pandemic in the second quarter of 2020.

As a reminder, CCM sales were down approximately 20% in the second quarter of last year. As we entered the third quarter of last year, we had already begun to see improvement, sooner than many industries, and that has continued sequentially through today.

That positive momentum drove 28% organic growth year-over-year at CCM in the second quarter of this year and added to a significant and growing backlog.

The rapid recovery from the lows of 2020 reinforced our confidence in this business. As we commented on in the fourth quarter 2020 earnings call, we envision 2021 being a year of challenges as pent-up reroofing demand returned rapidly, and supply chains, distribution channels, contractors and labor markets came under increasing pressure to deliver their services and meet customer expectations. Our conviction in the late fall of last year that all of the fundamental drivers of growth we saw prior to the pandemic were still in place, led us to take significant action on securing raw materials, ensuring production facilities were fully capable and putting in place pricing actions to offset what we anticipated to be significant raw material headwinds in the year.

Looking at the future, we continue to believe that the multi-decade trends in reroofing demand, increased emphasis on energy efficiency and tight labor markets will drive solid growth in our CCM business. As a result, we will continue to invest significant capital into our building products businesses. A few recently announced examples of our steadfast commitment to CCM's future include our plans to invest more than $60 million to build a state-of-the-art facility in Sikeston, Missouri where we will manufacture energy-efficient polyiso insulation; we're also constructing our sixth TPO manufacturing line in Carlisle, PA, which will produce the commercial roofing industry's first 16-foot wide TPO membranes.

We're breaking ground on Phase two of the EUR8 million expansion of our CCM Waltershausen Germany facility, which as a reminder, produces our unique EPDM-based Restorix product. And lastly, a significant investment in our R&D capabilities and manufacturing capacity in our Cartersville, Georgia spray foam insulation business.

Shifting gears to other parts of Carlisle. We continue to leverage the Carlisle Operating System to drive efficiencies across our platforms and geographies. And in the second quarter, COS delivered 1% savings as a percent of sales and continued to further its role as a culturally unifying continuous improvement foundation for Carlisle employees globally. In seeking to raise the return profile of Carlisle Companies, we continue to focus on optimizing our business portfolio. During the quarter, we announced the divestiture of CBF, and earlier this week, we announced an agreement to acquire Henry Company which we will talk about later. Both changes to our portfolio will enhance long-term value creation for our shareholders.

We continue to be a consistent and meaningful return of capital to our shareholders. Since 2016, we have returned over $1.8 billion in share repurchases alone. Bob will provide more details later, but we continue to be active in the capital markets opportunistically repurchasing shares when appropriate. We also anticipate continuing our long history of consistently raising our dividend. And when completed in August will be our 45th consecutive year. We're very proud of this symbolic act in the nature of nearly half a century of stability of our business model, financial profile and commitment to our shareholders.

Moving to slide four. Driven by the growing strength in our CCM business and momentum building at CFT, our revenue increased 22% year-over-year. CCM had outstanding performance, growing revenue 28% year-over-year. CFT continues to drive new product innovation and operational efficiencies to better leverage improving dynamics in its global end markets. Partially offsetting this growth was commercial aerospace, which continues to weigh on CIT with revenues declining 8% year-over-year in the quarter.

That said, aerospace orders have stabilized, and we have line of sight to continued sequential revenue improvement in 2021. While aerospace markets have been depressed, our team at CIT has remained focused on innovation and continuing our long-term commitment to our customers, and most importantly, preparing for the inevitable recovery.

Please turn to slide five. Carlisle Construction Materials segment continues to demonstrate its extremely durable business model and to execute very well in the face of numerous challenges. CCM volumes in 2021 are benefiting from work postponed in 2020 due to the COVID-19 pandemic. And given both material and labor constraints, we believe even more deferrals experienced in the first half of this year will only add to the pipeline of roofing contractors workload in the second half of 2021.

We maintain our strong conviction in the sustainability of 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. We continue to be very proud of the CCM team's ability to keep the Carlisle experience intact, managing a record level of incoming orders, ensuring we keep our contractors working and maintaining our commitment to being the best partner in the industry.

And I'd like to take a moment to acknowledge our procurement, manufacturing, logistics and customer service teams for their tireless and extremely dedicated work without which the Carlisle Experience wouldn't be possible. And as a reminder, by the Carlisle Experience, we mean ensuring delivery of the right product at the right place at the right time. We do this by deploying industry-leading investment in production and R&D capabilities. These investments have totaled over $300 million in the past five years.

We also continue to invest in best-in-class education for our channel partners on the latest roofing products and installation best practices, including over 20,000 hours of virtual learning courses during the pandemic. I mentioned our world-class customer service team that processed over 65,000 orders in the second quarter, a remarkable feat at nearly 2 times the normal quarter's activity. We continue to innovate and provide value-added products that ensure quicker, more efficient and safer installation of our building envelope systems and solutions in an increasingly labor and material-constrained environment. Finally and importantly, we continue to focus on producing products that contribute to a better environment for all stakeholders.

A few comments on our other businesses. CIT's second quarter results were in line with subdued expectations given the ongoing disruption in the commercial aerospace market. Despite a difficult past 18 months, the CIT team is taking significant actions to position CIT to be stronger when the market rebounds. We acted to create more -- a more rational footprint in 2020 and 2021, closing three of our facilities. And while these decisions are not taken lightly, they were necessary to position CIT to return to and exceed our legacy profitability levels when demand returns.

Also during this time, we have continued to invest in R&D in order to build our new product pipeline and support our customers. We continue to see some light at the end of the tunnel evidenced by improving leading indicators for commercial aerospace, including the expanding vaccine rollout, numbers of TSA daily screenings increasing from a low of 20% of normal last year to over 80% in July; growing activity at our aircraft manufacturers; and corresponding improvements in CIT's order books. All of this gives us confidence that CIT is positioned for sequential improvement going forward.

CFT delivered improved revenue and profitability performance in the second quarter, driven by its reenergized commitment to new product introductions, improved operational efficiencies, price realization from earning the value that comes with innovation and an improved customer experience. I'm very heartened by the progress the team has made over the last year in improving our sales and profitability, putting us back on track to achieve our expectations for this business. We expect the team to continue executing on its Vision 2025 growth strategy, and to deliver continued improvement moving into the second half of 2021.

Turning to slide six. Hopefully, everyone had the opportunity to listen to our call on Monday during which we introduced our agreement to acquire Henry Company, a best-in-class provider of building envelope systems that control the flow of water, vapor, air and energy and a building to optimize building sustainability. Henry delivered revenues of $511 million and adjusted EBITDA of $119 million or 23% margin in the last 12 months ended May 31, 2021. Bob will review more of the financial details related to Henry later in the call, but we expect Henry to add more than $1.25 of adjusted EPS in 2022.

All of us at Carlisle are very excited to work with the Henry team, which has a proven track record of growth, a very strong brand and a long history of new product innovation. The announced agreement to acquire Henry is another clear example of how we are executing on our Vision 2025 strategy to optimize our portfolio, which includes our efforts to expand further into the building envelope. For those of you new to Henry, let me give you a few examples of how, in practice Henry complements CCM.

Henry's large direct sales force who have been focused on helping architect specify waterproofing and air and vapor barriers can now assist in specifying CCM single-ply roofing solutions on the same buildings. Additionally, Henry has a presence in the residential and big box marketplaces, markets not previously a substantial part of CCM's business.

Moving to slide seven, our ESG efforts also continue to gain momentum. In April, we published our 2020 sustainability report, which built on the foundations of our first report in 2019. And for the first time, the 2020 report disclosed in detail how Carlisle was tracking on the global reporting initiative, or GRI standards. We're also in the process of establishing achievable water, energy and emission reduction targets based on detailed audits of our global facilities.

Turning to diversity. During the course of April, Carlisle employees participated in the CEO Action for Diversity & Inclusion Day of Understanding. The Day of Understanding created a singular focal point in our year and is an opportunity for leaders to guide open dialogue about diversity in their workspace. Carlisle has been a member of the PwC-led CEO Action for Diversity & Inclusion since 2018 and an organization that now includes over 2,000 CEO signatories.

In order for Carlisle employees to participate in our ongoing success, we issued a special stock option grant or equity equivalent of 100 shares to employees on May 2, 2018. Those shares vested in the second quarter of 2021 having appreciated almost 80%. For each participating employee, this meant a gain of over $8,000. I'm very pleased the share has performed so well for our employees, because Carlisle's success wouldn't be possible without their efforts.

Finally, one area where we have made significant improvement is in our industry-leading safety record. Our incident rate of approximately one quarter of the industry average demonstrates the work that has been done by all employees to ensure a safe workplace. While staying ahead of the industry is important, in the past six years, our incident rate has fallen 52%. Of all of our tracked metrics, this is especially meaningful because reducing employee injuries by 50% has had a tangible benefit and meaningful impact on people's lives.

To continue to drive the importance of safety in our operations in early 2020, we announced Path to Zero, which represents our commitment to creating the safest possible work environment and features the goal of zero accidents and zero industries. This program was launched globally in the second quarter of this year.

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

Robert M. Roche -- Chief Financial Officer

Thanks Chris. As Chris mentioned earlier, we had a very solid second quarter. I'm especially pleased about the margin expansion at CCM, CIT coming off market lows and positioned to deliver sequential growth for the next few quarters; CFT's order book improving; our disciplined approach to capital deployment in the form of share repurchase and dividends; continued investment in our high ROIC businesses to drive organic growth; and our portfolio optimization actions, including divesting CBF and the announced agreement to acquire Henry Company.

Please turn to the revenue bridge on slide eight of the presentation. Revenue was up 22% in the second quarter driven by CCM and CFT, offset by the well documented commercial aerospace declines at CIT. Organic revenue was up 20.7%. CCM and CFT each delivered greater than 25% organic growth in the quarter. Acquisitions contributed 0.4% of sales growth for the quarter, and FX was a 90 basis point tailwind.

On slide nine, we have provided an adjusted EPS bridge, where you can see second quarter adjusted EPS was $2.16, which compares to $1.95 last year. Volume, price and mix combined were $1.30 year-over-year increase. Raw material, freight, and labor costs were a $0.95 headwind. Interest and tax together were a $0.01 headwind. Share repurchases contributed $0.07, and COS contributed an additional $0.12.

Higher OpEx was a $0.32 headwind year-over-year, half of which is related to the May vesting and cash settlement of stock appreciation rights granted to all Carlisle employees outside the US in 2018, with the remainder reflecting the resumption of more normalized expense level versus last year's cost containment measures taken in the depths of the pandemic.

Now, let's turn to slide 10, our second quarter performance by segment in more detail. At CCM, the team again delivered outstanding results with revenues increasing 27.5% driven by volume and price, along with 70 basis points of foreign currency translation tailwind.

All of CCM's product lines delivered 20% growth with particular strength in architectural metals and spray foam insulation. CCM effectively managed raw material inflation headwinds experienced in the quarter with disciplined pricing, proactive sourcing and allocating products to strategic customers.

Adjusted EBITDA margin at CCM was 21.5% in the second quarter, a 60 basis point decline from last year driven by higher raw material prices, partially offset by volumes, price, and COS savings. Despite raw materials being a headwind in the second quarter, we continue to anticipate net neutral price raws for the full year. Adjusted EBITDA grew 24% to $201.2 million, again, demonstrating the earnings power of our CCM business.

Please turn to slide 11, our CIT results. CIT revenue declined 8.2% in the second quarter. As has been well publicized, this decline was driven by the pandemic's continued impact on commercial aerospace markets. We still anticipate a prolonged recovery in aerospace, but are optimistic there will be resumption in growth as we enter the second half of the year.

CIT's medical platform continues to build a robust pipeline of projects with an increasing backlog. We continue to expect sequential improvement from pent-up demand as the impacts of COVID hospital capex and postponed elective surgeries ease. CIT's adjusted EBITDA margins declined year-over-year to 8%, driven by commercial aerospace volumes, partially offset by price, COS and lower expenses. Given the positive indicators, we are optimistic that CIT will deliver sequentially improving financial performance into the second half of 2021.

Turning now to slide 12. CFT's sales grew 54% year-over-year. Organic revenue improved 44.3% and acquisitions added 3.6% in the quarter. FX contributed 6%. CFT is well positioned to accelerate through the recovery due to continued stabilization in key end markets driven by an improved industrial capital spending outlook in 2021, coupled with new product introductions, would have included $4.1 million of incremental new product sales in 2021 year-to-date, along with our continued pricing results. Adjusted EBITDA margins of 15.9% or over 100 basis point improvement from last year. This improvement primarily reflects volume, price and mix.

On slide 13 and 14, we show selected balance sheet metrics. Our balance sheet remains strong. We ended the quarter with $713 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.

In the quarter, we repurchased 643,000 shares for $116 million bringing our 2021 year-to-date total to 1.6 million shares for $266 million. We paid $28 million of dividends in the second quarter, bringing our 221 total to $56 million. We invested $32 million of capex into our high-returning businesses to drive organic growth, bringing our 2021 total to $55 million. A few examples of these investments include our new Missouri Polyiso facility, expansion of our TPO line Carlisle, PA, and investment in our spray foam capabilities in Cartersville, Georgia.

In addition, as has been noted, we announced an agreement to purchase Henry Company for $1.75 billion. Henry generated revenue of $511 million and adjusted EBITDA of $119 million, representing a 23% EBITDA. Additionally, Henry was expected to deliver $100 million of free cash flow in our first year of ownership. We also expect meaningful cost synergies of $30 million by 2025.

Finally, we expect Henry to be immediately accretive to Carlisle's EBITDA margin, adding over $1.25 of adjusted EPS in 2022. Free cash flow for the quarter was $64.6 million, a 54% decline year-over-year due to increased working capital usage related to our high sales growth of 22%.

Turning to slide 15, you can see the outlook for 2021 in corporate items. Corporate expense is now expected to be approximately $125 million, up from the previous estimate of $120 million. The increase is wholly related to the vesting and cash settlement of our stock appreciation rights discussed earlier. We expect depreciation and amortization expense to be approximately $210 million. We still expect free cash flow conversion of approximately 120%. For the full year, we continue to invest in our business and expect capital expenditures of approximately $150 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, restructuring is expected in 2021 to be approximately $20 million.

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

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks, Bob. Entering the third quarter, we continue to be very optimistic about the remainder of 2021 from record backlogs at CCM to supportive trends in CIT aerospace markets to growing strength at CFT, coupled with excellent sourcing and price discipline and significant traction on our ESG journey, we are confident in our ability to deliver solid results for all Carlisle stakeholders.

For full year 2021, we anticipate the following: At CCM, as previously mentioned, the trends that began in Q3 2020 gain momentum as we moved into 2021. We anticipate this momentum to carry over in the third and fourth quarters of 2021. Considering this momentum, coupled with record backlogs stemming from project deferrals that occurred in 2020, positive momentum in our newer businesses of architectural metals and spray foam and expansion of our European business, we are increasing our anticipated revenue growth to high teens in 2021.

At CIT, we are encouraged by leading indicators trending positive, but it remains difficult to gauge when a complete recovery in commercial aerospace will occur. 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 market strengthening and improvements in the team's execution of our key strategies, we now expect mid-teens revenue growth in 2021. And finally, for Carlisle as a whole, we are now increasing our expectations to mid-teens revenue growth in 2021.

As we pass the midpoint of 2021, we are tracking to deliver our Vision 2025 goals of $8 billion in revenues, 20% operating income and 15% ROIC, all driving to exceed $15 of earnings per share by 2025. Despite lingering uncertainties around COVID, supply chain constraints, and what we perceive as near-term raw material inflation, Carlisle's employees across the globe remain focused on the execution of the strategies and key actions that support Vision 2025. Our team continues to embody a positive and entrepreneurial spirit, a commitment to continuous improvement and a focus on delivering results for the Carlisle shareholder.

Given our 100-year-plus 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. Zen, we're now ready for questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Bryan Blair of Oppenheimer.

Bryan Blair -- Oppenheimer -- Analyst

Thanks. Good afternoon, guys.

Chris Koch -- Chairman, President and Chief Executive Officer

Good afternoon, Bryan.

Bryan Blair -- Oppenheimer -- Analyst

Great performance in CCM. Actually, we're flirting with normal seasonality, sequential seasonality, which I didn't think was possible. Given the supply chain constraints that you've called out and that are so pervasive. To what extent did raw material availability, freight, other constraints impact CCM's ability to meet demand in the quarter?

Chris Koch -- Chairman, President and Chief Executive Officer

Well, as we discussed, the team did a great job managing it, and I don't think it really impacted their ability to meet the demand that was present in the quarter. Obviously, the surge in orders takes into account some more reserve that are for the third quarter and fourth quarter, and we continue to work to fulfill all of those. But the team did a great job in meeting all the demand that was put through it in the second quarter.

Bryan Blair -- Oppenheimer -- Analyst

Understood. And thinking about the third quarter, are there any incremental watch items in terms of the listed constraints that we should think about in terms of CCM's ability to meet demands. And an extension of that, what kind of growth rate are you assuming as we bridge to the high-teens guide?

Chris Koch -- Chairman, President and Chief Executive Officer

Yeah, Bryan. We don't see -- I mean again, there's a lot going on in the world with delta variant and everything else, but we don't see a lot of changes from what happened in the second quarter going into the third. We would expect raw materials to, I'm going to say, loosen up a little. They have been loosening up since the beginning of the year more and more since the problems in Texas and the freeze and everything. So we can -- we see that continuing slightly. So we don't see a lot of watch out items on our list and we're going in today.

We'd expect, I'm going to say, normal growth. You expect third quarter to be somewhat higher than the second quarter. So I think the growth rate will continue going into the third with normal -- like you said, normal seasonality where third quarter's larger than the second, and then shrinking a bit in the fourth as always happens into the winter months.

Robert M. Roche -- Chief Financial Officer

Yeah. And Bryan, I would just add one thing that I think we -- the results were encouraging, and it's interesting to talk about normal seasonality, but we really are still in the midst of an extraordinary time just as impactful was going down was last year into the declines we had. I think coming back has been something that is not normal. And I think the CCM team has done a superb job of managing through all of that, like you said, and getting close to normal seasonality, but we still want to communicate the fact that it's a very difficult environment throughout the business from supply chain all the way to order entry as we discussed.

Bryan Blair -- Oppenheimer -- Analyst

Completely understood. One last one for me, in the revised high-teens sales growth guide for CCM, how should we think about the volume-first price contribution for the year?

Robert M. Roche -- Chief Financial Officer

Yes, Bryan, that's mostly going to be price but there is some volume increase in there as well.

Bryan Blair -- Oppenheimer -- Analyst

Okay. So the step up from low double digits to high teens is mostly price?

Robert M. Roche -- Chief Financial Officer

Yeah, mostly price as raw's continue to increase, we, as discussed, needed to continue to increase price to keep up with that.

Bryan Blair -- Oppenheimer -- Analyst

Got it. Okay. Thanks guys.

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks Bryan.

Operator

Your next question comes from the line of Tim Wojs of Baird Equity Research.

Tim Wojs -- Baird Equity Research -- Analyst

Good afternoon.

Chris Koch -- Chairman, President and Chief Executive Officer

Good afternoon.

Robert M. Roche -- Chief Financial Officer

Hi, Tim.

Tim Wojs -- Baird Equity Research -- Analyst

Nice work. I guess first question, could you just talk a little bit about how you're managing the backlog. Just there's chatter that like people are double ordering and trying to get products from anybody they can. So how are you kind of controlling that just to make sure that you actually have real backlog?

Robert M. Roche -- Chief Financial Officer

Well, certainly, we can't -- we don't know because we don't have the customers' mind as to what's a real order and what's not a real order. We treat all orders the same and then what we're really doing is just prioritizing them based on the necessity of shipping. And in addition to that, obviously, a customer, an existing customer that's been a longtime customer for Carlisle is going to be prioritized over someone that's being opportunistic. So I think, again, we're doing in a very rational way. And we're attempting to maintain that Carlisle Experience and ensuring that the contractors that needed to have that product there. And making sure that we're not having any inventory or products sit around somewhere on a job site or in a warehouse, but the people that need the product to put on the roof or getting it done. And I think the team is doing a good job of that. But obviously, that involves a lot of heavy lifting on the part of the sales force on the part of customer service to coordinate a lot of work there.

So I think as we -- to your point on the extra ordering, as we get through the year, we don't see it impacting the projections that we've made. That will sort itself out as we begin to continue to fulfill these orders. And then I'd say just we'll check in as we get closer to the winter and we'll know where we are. So as I mentioned to Brian, it's such evolving environment, and this recovery has been so rapid and the demand has been in a lot of industry's, so strong that I think we just focus on the near term and make sure, again, that we're delivering on that Carlisle experience for the contractor that needs it today.

Tim Wojs -- Baird Equity Research -- Analyst

Okay. Okay. Good. And then I think you guys are definitely taking share. Where would you kind of peg the market at relative to your high-teens sales growth? And I guess what's your confidence that once some of these supply chain issues settle down that you can hang on to some of that share gain longer term?

Chris Koch -- Chairman, President and Chief Executive Officer

Well, I'll take the last one first. I think we view these -- last year and this year, these disturbances, these really trying times as opportunities and probably the best opportunity for contractors, distributors, end users, architects to see the really true Carlisle experience and the work that our team does. I mean when everything is going smoothly, you don't understand that, how powerful that experience is. And so what I would hope is that as we are introduced to new customers as people that are with other suppliers decide to try Carlisle that they are overwhelmed by the experience and decide to make that permanent shift. Is that always occur. I can't tell you what level of people -- or what percentage of the people that get material from us for the first time stay with us. But my guess is that it's contributed to our growth over the last few years, and we'll continue to do that. So that's our goal, to continue to perform well, continue to perform better than anyone else and make sure that people see that and want to be part of that team.

I think on the other side of the growth side, and Bob may have some comments on that. But I think that the industry right now and the recovery probably market shares have not moved much relative to overall demand just because demand has been so heavy. So again, what I would look for is to run through the year, let's sort out those orders you talked about that there may be some over ordering and then get into 2022, hopefully, we'll have a more normal year. And then we'll be able to assess our progress versus the industry and versus our competitors. Bob, do you want to add anything?

Robert M. Roche -- Chief Financial Officer

That's good, Chris.

Tim Wojs -- Baird Equity Research -- Analyst

Okay. Good. I'll hop back in queue. Thanks guys.

Robert M. Roche -- Chief Financial Officer

Yeah. Thanks, Tim.

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks, Tim.

Operator

Next question comes from the line of Joel Tiss from Bank of Montreal.

Joel Tiss -- Bank of Montreal -- Analyst

Hey, guys. How's it going?

Chris Koch -- Chairman, President and Chief Executive Officer

Hey, Joel.

Joel Tiss -- Bank of Montreal -- Analyst

All right. So I'm going to switch gears a little bit. I wonder it's kind of an off-the-wall question. But, you think it would make any sense for you guys to think about like spinning out everything that's not CCM? That would kind of accelerate your move to 2025, maybe not on the revenue side, but certainly on the margin side.

Chris Koch -- Chairman, President and Chief Executive Officer

Well, I don't think it would make any sense right now. And the only reason I say that is, I think that certainly, valuations -- it would be very hard to find a valuation from a purely pragmatic perspective on any business given CCM's declines and given the fact that CST has not probably reached its full potential after the years of work we put into it, but there's still more to come.

So what I would -- yeah, I would just say, that's probably not a thought that's now in our mind. I mean, we want to continue to boost the building products portion of our business around CCM. Adding Henry does that. That gives us a lot to digest and to focus on. I think we wait until things get through the sustainable growth recovery that -- and runway that we see in CIT and CFT.

And then, Joel, as we've always done, we just assessed the portfolio, and I think that's something that's gone back as long as I've been at Carlisle, everything from divesting of Carlisle Tire & Wheel, motion control, food service and making additions like Accella, Petersen and that. We're always looking at the portfolio and obviously, we make all our decisions based on what's best for the Carlisle shareholders. So it's something we always look at, but I don't see any actions in the near term.

Joel Tiss -- Bank of Montreal -- Analyst

And then, as you build out your building envelope and it's starting to get pretty serious, is there any way -- or to team up with like a carrier or a train or someone who's doing sort of building assessments to help the buildings get more efficient and lower their costs and all that. Is there any way to team up with those guys to get like spec-ed into to being part of that energy audit and helping them get to their goals?

Chris Koch -- Chairman, President and Chief Executive Officer

Sure. And I think -- I don't know about those two companies in particular. But I do know that every day, our teams and CCM through their connections with the industry organizations, through their connections to architects, through large building owners, people who are putting in warehousing, data centers, things like that, you can't help but think that as ESG, as energy efficiency becomes a bigger priority for all those end users and building owners that they're going to almost drive cooperation so that we're getting -- we're making sure that as we're putting on that building envelope and ensuring that it's a -- it's got great insulation, vapor, water, air barriers, things like that. That they're also asking the provider of that energy unit, that's either heating and cooling, to participate and have some coordination.

I think a lot of that occurs at the design level with architecture and specifies and as we mentioned, both with Carlisle and with our Henry team, they're going to spend a lot of time with those organizations. So I think you're on the right track. I just -- I can't comment on carrier or train, because I just don't know. But I would imagine those conversations are being had.

Joel Tiss -- Bank of Montreal -- Analyst

Well, that's great. Thank you very much.

Robert M. Roche -- Chief Financial Officer

You bet, Joel.

Chris Koch -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Next question comes from the line of Saree Boroditsky of Jefferies.

Saree Boroditsky -- Jefferies -- Analyst

Hi. Good afternoon.

Chris Koch -- Chairman, President and Chief Executive Officer

Good afternoon.

Robert M. Roche -- Chief Financial Officer

Good afternoon, Saree.

Saree Boroditsky -- Jefferies -- Analyst

Within CIT, could you just talk about what you saw in the quarter from medical versus aerospace? And then how do those growth rates are expected to look for the remainder of the year? And then, any color as we start to think about 2022.

Robert M. Roche -- Chief Financial Officer

Yes, I'll take the last one first, Saree. I mean I don't think we're ready to talk about 2022 yet. Now certainly, we expect growth at CIT and continued ramp in our profitability, but we're a long way from what's going to happen with aerospace getting into 2022 at this point in time. Medical versus aerospace in the quarter were almost the same decline and that's largely due to the massive orders -- or I'm going to say, revenue we saw last second quarter. If you remember, we talked about a big spike in orders when COVID hit in shipments in the quarter, so, -- in medical. So, that's why it was relatively flat. But we expect acceleration -- faster acceleration in medical going to the end of the year than we do in aerospace, but we expect some growth in aerospace.

Saree Boroditsky -- Jefferies -- Analyst

Got it. And then you raised the outlook for CFT. Could you just talk about the outlook for industrial capex projects? What are you hearing from customers? And then again, I'll just ask should that strength continue as you think about going into next year?

Chris Koch -- Chairman, President and Chief Executive Officer

I think we see the industrial space continuing to improve out of the depths of 2020 and improvement in production. And that, I think the other thing that I would remind you is CFT, we did have some difficulties when we first bought that business and there were share losses. And I think part of the gains are getting back what is what I would call their rightful share through their innovation and new products and really good work by the teams in communicating the value proposition.

So, I think it's a combination of that, that markets are improving. Industrial markets are improving. We think they'll continue to improve globally as we go throughout the year. And then I think there's a piece of that, too, that is just getting its stride back and becoming a solid Carlisle company. Bob, do you want to add anything?

Robert M. Roche -- Chief Financial Officer

Nope, that was clear, Chris.

Saree Boroditsky -- Jefferies -- Analyst

Thanks for taking my questions. I'll pass it on.

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks Saree.

Operator

Next question comes from Kevin Hocevar of Northcoast Research.

Kevin Hocevar -- Northcoast Research -- Analyst

Hey, good afternoon everybody. Nice job there. Chris, I'm trying to wrap my head around one of the comments you made, I think, in your prepared remarks. I think you had mentioned in the CCM business, you had received 65,000 orders in the quarter, which is double the usual amount. So, I guess I'm just trying to understand what that means. I mean is that -- again, a sign that there's some double ordering going on, is it maybe distributors trying to build some inventory, even maybe contractors get some product on the job site, even if they don't need it yet, just because things are so tight? Is it backlog building in a pretty material way. I guess -- and does that mean there'll be less orders in the third and fourth quarter? Is it some panic buying? I guess I'm just trying to understand because it seems like a pretty interesting stat I'm just in my head around. I'm curious if you can just elaborate on that a bit.

Chris Koch -- Chairman, President and Chief Executive Officer

Yes, well, I think one of the things that we probably will need to do later is give the reference point in 2019 because without that reference point, double the previous period, you don't have a good reference for where we were in 2019 to gauge that. I think the other thing is on the double ordering, I'd be careful about that because as we know last year, people were not ordering.

We talked at length about how distribution going into the season had cut back on orders. People were concerned about whether they'd be on the job. I mean, it was only a year ago that states like Pennsylvania and cities like Boston weren't allowing contractors on the job site. In certain cases, they were increasing the PPE and the other protocols making more difficult. We were having inspections occurring virtually. It was hard to get permits pulled because governmental agencies were shut down. So -- and we think that now we're in the second quarter, but you have to remember, that was -- some of that stuff, there was still concern in the first quarter the things were happening. And we did get ahead of it in production, as we mentioned.

We got to ahead in our pricing, but there's still some lag there out in the market until the confidence came back that the contractor and the distributors that would be able to function somewhat normally. So I think there is a surge there. And I think a lot of those orders -- I have no reason to believe that most of them actually occurred in the quarter aren't real, because I do think there's pent-up demand, people were waiting. That's what we talked about is demand to continue to build. And if you think about even not including 25% of the orders in a year and letting them build in the back half of 2020 and then the first quarter of 2021, one would expect a pretty substantial surge in the second quarter of this year.

And then we'll just need to monitor. And when we get to the third quarter of this year, it will be -- we can do that same check and then have a comparison because we've been through the heavy and last part of the season getting into the winter months. So I won't read too much into it other than demand is strong, and we are coming out of this pandemic strong and people are gaining confidence and they're placing orders and they're getting back on the roof, and they got a lot of backlog to make up. Yes.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay. That's helpful. And in terms of the increased guidance, just one quick question there. So the low double-digit to high teens increase in CCM. It sounds like the majority of that is pricing. Is that pricing increase based on what you've currently kind of realized between price increases that have already taken effect? Or -- I know there's also like an August increase you have out there for a lot of roofing products. Is there some assumptions of future pricing as well baked into that guidance?

Robert M. Roche -- Chief Financial Officer

No. That includes, obviously, the announced price for August. But no, nothing beyond that at this point.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay. Got you. And then just last question. What was -- in terms of the price cost dynamics, what was that in the second quarter? And it sounds like the expectation is a continuation of neutral for the year. So is there any change in the expectation of -- I mean, obviously, there's been a lot of moving pieces since three months ago in terms of the inflation expectations and the pricing expectations. So -- but maybe -- is the kind of the trajectory, it sounds like it might not be the expectation of the net of that might not be all that different. But curious what it was in the quarter and then kind of the -- how you see that playing out in the balance of the year?

Robert M. Roche -- Chief Financial Officer

Yes. Certainly, the net's not different. But certainly, with our increase in revenue based on price, we've gotten a lot more cost pressure, and assumed a lot more price traction over the last three months. As costs have continued to rise and be up there, we are a lot more confident that we need the price to cover it. Q2 was about $25 million negative as we expected and we expect to make that up in the second half of the year. More in the fourth quarter than the third quarter, but positive in both those quarters to make up for what we were short this quarter.

Kevin Hocevar -- Northcoast Research -- Analyst

Okay. All right. Thank you very much.

Robert M. Roche -- Chief Financial Officer

Thanks, Kevin.

Operator

Next question comes from the line of Garik Shmois of Loop Capital.

Garik Shmois -- Loop Capital -- Analyst

Thanks for taking my question. Chris, just curious, you made a comment in your prepared remarks around allocating products to strategic customers. I'm just wondering if you could expand on that. Is it really more of a function that because you're effectively at full capacity, you can be selective and service your, I guess, higher-margin, higher-quality customers? Or any kind of additional color on that comment would be helpful.

Chris Koch -- Chairman, President and Chief Executive Officer

Yes. I think that our customers, we have some -- a lot of very loyal customers that work very hard to make sure Carlisle is specified and chosen throughout the world actually. And we don't want to make decisions in a quarter, and we want to have share gains, but we want to make sure that the work we're doing with people because it is pretty extensive.

We spend a lot of time working with our contractors on things like warranty inspections and on helping prepare quotes in that, that we always want to strategically give our efforts to those distributors, contractors, those that are with us for the long run and have invested significantly in the Carlisle brand. So, I don't think it's anything -- while we stated, I don't think it's anything other than our normal practice there that we expect a lot out of our partners, and they would expect a lot out of us in terms of loyalty as well.

Garik Shmois -- Loop Capital -- Analyst

Okay. Thanks. And just on the building envelope business, you called out spray foam and metal roofing going book over 40% in the quarter. It sounds like that the entire building envelope business was up over 20% in the quarter. What's the outlook there? I guess what I'm asking, given that business has been more exposure to housing, is there any pause that you might be seeing at all just with the pause in new housing, just given the inflation in the market and the builder is pulling back a bit. Any help on the building that would be extremely helpful.

Chris Koch -- Chairman, President and Chief Executive Officer

No, I think on the metal side, Petersen is pretty much a commercial metal business. And I think there -- we're seeing a lot of movement into metal as it becomes architecturally more attractive as it has some renewable and recyclable aspects to it. We're just finding, it's gaining traction. There's some very positive trends there. And Petersen has done an excellent job of adopting the Carlisle experience, which they probably call it the Petersen experience before, but it's a great brand with great coverage and good relationships.

On the Drexel side, which is a little bit more on the residential side. Again, we're seeing people are choosing metal roofs in a lot of cases. There's more interest in Drexel has a very unique value proposition where they are actually preparing that work right on site and driving a lot of value. So as that team gets out and demonstrates the value proposition, they're gaining a lot of traction.

On the spray foam side, we originally bought Accella. We talked about that high single-digit industry growth rate as people would adopt foam as a far superior insulator and some -- in certain cases, vapor barrier components to it. And what we're really just seeing is that continued traction versus other forms of insulation. And certainly, here in the Southwest with the heat and even in the north, I know being from Minnesota and living in Arizona, spray foam insulation just provides a superior solution for the space and the wall cavity and just drives great performance, and we see it just continuing to gain share in the marketplace.

So I think the trends are positive for both. And then we -- on top of that, we're adding very positive unique value propositions with each business. And I would be remiss, if I didn't say that the partnership between CFT, with their newly launched spray foam equipment, which provides superior on-ratio performance. It's got better heating capabilities in the competition. a much better performing product coupled with our spray foam coming out of CCM has also created a lot of interest with the end users and is helping us drive the preference for our brands. So actually, we're excited about all of those businesses and what they've done.

Garik Shmois -- Loop Capital -- Analyst

Okay. And I guess just one follow-up. In the guide, you took your CCM guidance up largely on price. Was there any change to the underlying assumptions on the envelope side of the CCM?

Robert M. Roche -- Chief Financial Officer

No, Garik, they're mostly in line. And those are up in price as well. Commodities that go into metal roofing and in the spray foam are just as volatile as the flat roofing commodity. So we need to get price in those as well to keep up with our flat price cost.

Garik Shmois -- Loop Capital -- Analyst

Okay. Fair point. Thanks, again.

Chris Koch -- Chairman, President and Chief Executive Officer

Yeah. Thank you, Garik.

Operator

There are no further questions at this time. I would now like to turn the call back to Chris. Please go ahead.

Chris Koch -- Chairman, President and Chief Executive Officer

Thanks, Zen. And thanks, everybody. This concludes our second quarter 2020 earnings call -- or 2021, excuse me. And thanks for your participation. We look forward to speaking with you at our next earnings call.

Operator

[Operator Closing Remarks]

Duration: 53 minutes

Call participants:

James Giannakouros -- Vice President Of Investor Relations

Chris Koch -- Chairman, President and Chief Executive Officer

Robert M. Roche -- Chief Financial Officer

Bryan Blair -- Oppenheimer -- Analyst

Tim Wojs -- Baird Equity Research -- Analyst

Joel Tiss -- Bank of Montreal -- Analyst

Saree Boroditsky -- Jefferies -- Analyst

Kevin Hocevar -- Northcoast Research -- Analyst

Garik Shmois -- Loop Capital -- Analyst

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