CARLISLE COMPANIES INCORPORATED Carlisle Companies Incorporated ("Carlisle", the "Company", "we", "us" or "our") is a diversified, global portfolio of niche brands and businesses that manufactures highly engineered products and solutions for its customers. Driven by our strategic plan, Vision 2025, Carlisle is committed to generating superior shareholder and stakeholder returns by combining an entrepreneurial management style under a center-led approach, and balanced capital deployment, all with a culture of responsible stewardship and continuous improvement as embodied in the Carlisle Operating System ("COS"). Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of Company management. All references to "Notes" refer to our Notes to Condensed Consolidated Financial Statements in Item 1 to this quarterly report on Form 10-Q. Executive Overview Carlisle's global team has persevered throughout a challenging second quarter. We are prudently adjusting our business operating norms in response to intensified and necessary health and safety guidelines, and declines in demand. We intend to stay on a course of responsible business activity to maintain a stable foundation for the post-COVID-19 recovery we know will arrive. However in the near-term, all companies, including Carlisle, must brace for adjustments to business structures, employment, and pay policies as the timing remains unclear of a return to acceptable levels of safety to allow increased personal and economic activity. While Carlisle is in a strong position to weather a prolonged economic downturn, we are making necessary adjustments to our cost structure where appropriate to maintain that strength. We remain committed to emerging in a very strong financial position, and in a position to leverage anticipated future growth. During the second quarter financial results, our performance was led by a resilient Carlisle Construction Materials ("CCM"). While the quarter began with April's volumes down in excess of 30 percent, we saw strong recovery in shipments through May and June, and we continue to benefit from the overall resumption of construction activity in both theU.S. andEurope . AtCarlisle Interconnect Technologies ("CIT"), we, like many others, were taken aback by the record global decline in aerospace production and the accompanying ripple effects through the supply chain. The reality is that this crisis has devastated many aerospace participants. Our ongoing actions to restructure and rightsize our manufacturing footprint over the past few years, combined with accelerated restructuring taken in 2020, have positioned us to maintain profitability even as demand in the aerospace industry reset materially in the second quarter. CIT's medical technologies platform, on the other hand, grew revenue 15 percent organically year-over-year during the second quarter driven by increased demand for COVID-19 related patient monitoring equipment. Recently acquiredProvidien, LLC ("Providien") also continued to perform well. AtCarlisle Fluid Technologies ('CFT"), results each month improved throughout the second quarter and we continue our steady progress on the initiatives laid out in Vision 2025. Unfortunately, volume declines of over 30 percent weighed heavily on operating income results. Despite this, we remain committed to this platform and continue to add product breadth by investing in new products, such as our market differentiated fluid handling system for spray foam that launched in the second quarter. The pandemic crisis extended the pressureCarlisle Brake & Friction ("CBF") was already experiencing in the global off-highway vehicle markets, offsetting the significant actions taken the past few years in this business, including the Tulsa to Medina plant consolidation and obtainingFederal Aviation Authority Parts Manufacturer Approvals for aircraft carbon brakes. Given the actions taken over the past several years, its strong market position, and traction on new technology introductions, we expect CBF to leverage any improvements in volume well and await recovery from the pandemic. As always, we remain very focused on maintaining our financial and strategic flexibility to be able to best leverage future opportunities. During the first six months of 2020, we demonstrated this strength by paying our dividend of$56.0 million , deploying$48.5 million into capital expenditures and investing$28.5 million into research and development. As of the end of the second quarter, we have a strong cash position of$737.7 million with$1.0 billion undrawn on our revolving credit facility (the "Facility"). We enter the second half of 2020 cautiously optimistic and with confidence in our ability to deliver longer-term on Vision 2025. Needless to say, the COVID-19 pandemic continues to negatively impact our operations. The uncertainties remaining around the pandemic, including the length and severity of the economic downturn and continued tension withChina , likely will result in a choppy path to ultimate recovery, and we are unable to predict the full extent or duration of these events on Carlisle at this time. However, given our strong balance sheet and cash flow generating capabilities, we are well prepared to navigate the future while maintaining our disciplined and opportunistic capital deployment strategy. 24 --------------------------------------------------------------------------------
Summary of Financial Results
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per share amounts) 2020 2019 2020 2019
Revenues $ 1,024.2 $ 1,314.8 $ 2,054.4 $ 2,386.7
Operating income $ 113.4 $ 207.2 $ 216.1 $ 321.9
Operating margin percentage 11.1 % 15.8 % 10.5 % 13.5 %
Income from continuing operations $
75.4
$ - $ (0.1) $ - $ 1.9
Diluted earnings per share attributable to common shares: Income from continuing operations
$
1.36
$ - $ - $ - $ 0.03
Items affecting comparability:(1) Impact to operating income $
17.4
$ 13.7 $ (1.9) $ 25.1 $ 2.9 Impact on diluted EPS from continuing operations $
0.25
(1)Items affecting comparability primarily include acquisition related costs, exit and disposal costs, facility rationalization costs, litigation settlement costs, gains from divestitures, idle capacity and labor costs, net of subsidies, losses on debt extinguishment and discrete tax items. Tax effect is based on the rate of the jurisdiction where the expense is deductible. Refer to Items Affecting Comparability in this MD&A for further information. Revenues decreased in the 2020 periods primarily reflecting lower volumes in all of our segments, which were impacted by the global economic slowdown due to COVID-19. Contributions from acquisitions, primarilyProvidien , partially offset the decrease in volume. The decrease in operating income in the 2020 periods primarily reflected lower volumes as well as lower production levels increasing per unit costs and wage inflation. The decrease in operating income was partially offset by raw material savings, particularly in our CCM segment, lower incentive compensation and travel costs, and savings from COS. Diluted earnings per share from continuing operations decreased primarily from the above operating income performance ($1.24 per share in the second quarter of 2020 and$1.40 per share in the first six months of 2020) and a higher effective tax rate in the second quarter of 2020 ($0.07 per share). The decrease was partially offset by reduced average shares outstanding ($0.06 per share in the second quarter of 2020 and$0.08 per share in the first six months of 2020) resulting from our share repurchase program. We generated$226.3 million in operating cash flow in the first six months of 2020, and utilized cash on hand and cash provided by operations to return capital to shareholders through dividends and share repurchases, and fund capital expenditures. Consolidated Results of Operations
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