Summary of CARLISLE COMPANIES INC

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

Carlisle Companies Incorporated ("Carlisle", the "Company", "we" or "our") is a diversified manufacturing company focused on achieving profitable growth internally through new product development and product line extensions, and externally through acquisitions that complement the Company's existing technologies, products and market channels. Carlisle manages its businesses under the following four operating groups and reporting segments:

†          Construction Materials:  the "construction materials" business;

†          Transportation Products:  the "tire and wheel" business and the
"heavy-haul trailer" business;

†          Applied Technologies:  the "interconnect technologies" business and
the "foodservice products" business; and

†          Specialty Products:  the "off-highway braking" business and the
"refrigerated truck bodies" business.

The Company also reports and manages one business currently classified as "Discontinued Operations": the "power transmission belt" business.

While Carlisle has offshore manufacturing operations, the markets served by the Company are primarily in North America. Management focuses on maintaining a strong and flexible balance sheet, while striving for continued year-over-year improvement in sales, operating income and margins, globalization, and improving cash flow from operations. Resources are allocated among the operating groups based on management's assessment of their ability to obtain leadership positions and competitive advantages in the markets they serve.

During 2008, the Company began the implementation of the Carlisle Operating System, a manufacturing structure and strategy deployment system based on Lean and Six Sigma techniques and philosophies. The purpose of the Carlisle Operating System is to eliminate waste in all production and business processes, increase velocity, improve manufacturing efficiencies and reduce inventory.

For a more in-depth discussion of the results discussed in this "Executive Overview," please refer to the discussion on "Financial Reporting Segments" presented later in "Management's Discussion and Analysis."

Net sales of $604.6 million for the three months ended September 30, 2009 represented a 27% decline from net sales of $832.5 million during the three months ended September 30, 2008. Sales were down across all segments, with organic sales (defined as net sales excluding the impact of acquisitions and divestitures within the last twelve months as well as the impact of changes in foreign exchange rates) decreasing by 26% from the third quarter of the prior year, primarily as a result of lower volumes of product sold. The impact of foreign currency exchange rates on net sales was a reduction of less than 1% in the third quarter of 2009.

Net sales of $1.73 billion for the nine months ended September 30, 2009, decreased 26% from net sales of $2.35 billion in the nine months ended September 30, 2008. Sales decreased across all segments with organic sales being down 27% from the prior year. The acquisitions of Jerrik in September 2009, Carlyle in April 2008 and the Dinex foodservice business ("Dinex") in January 2008 contributed an additional $37.4 million of sales in the first nine months of the current year as compared to the same period of 2008. Approximately 1% of the sales decline was attributed to changes in foreign currency exchange rates.

result of significantly lower volumes of product sold year-over-year, partially offset by favorable raw material pricing, lower operating costs, and efficiencies gained through the Carlisle Operating System.

Operating income for the nine months ended September 30, 2009 of $172.1 million declined 21% compared to operating income of $217.2 million for the nine months ended September 30, 2008. The decrease was primarily attributable to significantly lower volumes of product sold in all segments, and to a lesser extent, plant restructuring expenses of $17.0 million. Favorably impacting 2009 results were a $27.0 million gain from a fire insurance recovery, increased selling prices, lower operating costs, and efficiencies gained through the Carlisle Operating System. Acquisitions contributed $4.9 million to current year results.

The Company's effective tax rate for continuing operations of 35.3% for the third quarter 2009 compares with an effective tax rate of 33.7% for the third quarter 2008. The Company's effective tax rate for the first nine months of 2009 was 32.9% as compared to 33.3% for the same period of 2008. The Company's effective tax rate varies from the statutory rate within the United States of 35% due primarily to the deduction attributable to U.S. production activities, earnings in foreign jurisdictions taxed at rates different from the statutory U.S. federal rate, and tax credits.

Income from continuing operations, net of tax was $45.0 million, or $0.73 per diluted share, for the three months ended September 30, 2009 and represented an 11% decline compared to income from continuing operations of $50.6 million, or $0.83 per diluted share for the same period in 2008. Income from continuing operations, net of tax was $110.7 million, or $1.79 per diluted share, for the nine months ended September 30, 2009, compared to income from continuing operations of $135.7 million, or $2.21 per diluted share for the same period in 2008.

Sales and Earnings

Consolidated Results of Continuing and Discontinued Operations

Net sales of $604.6 million for the three months ended September 30, 2009 represented a 27% decline from net sales of $832.5 million during the three months ended September 30, 2008. Sales were down across all segments, with organic sales decreasing by 26% from the third quarter of the prior year, primarily as a result of lower volumes of product sold. The impact of foreign currency exchange rates on net sales was a reduction of less than 1% in the third quarter of 2009.

Net sales of $1.73 billion for the nine months ended September 30, 2009, decreased 26% from net sales of $2.35 billion in the nine months ended September 30, 2008. Weak demand contributed to decreased sales across all segments with organic sales being down 27% from the prior year. The acquisitions of Jerrik in September 2009, Carlyle in April 2008 and Dinex in January 2008 contributed an additional $37.4 million of sales in the first nine months of the current year as compared to the same period of 2008. Approximately 1% of the sales decline was attributed to changes in foreign currency exchange rates.

Cost of goods sold of $462.3 million for the quarter ended September 30, 2009 decreased $206.1 million, or 31% from $668.4 million in the third quarter of 2008, on a decline in net sales of 27%. The decline was attributable to lower volumes of product sold and lower raw material cost, partially offset by higher unabsorbed overhead cost as a result of decreased production.

Cost of goods sold of $1.36 billion for the nine months ended September 30, 2009, decreased $523.8 million, or 28% lower than $1.89 billion of cost of goods sold during the prior year period, on decreased sales of 26%. The decline was attributable to lower volumes of product sold and lower raw material costs, partially offset by higher unabsorbed overhead costs resulting from decreased production.

Gross margin (net sales less cost of goods sold expressed as a percent of net sales) increased from 19.7% in the third quarter of 2008 to 23.5% in the third quarter of 2009. The gross margin improvement was driven primarily by an overall reduction in year-over-year raw material costs. Gross margin improved from 19.7% in the nine months ended 2008 to 21.5% in the nine months ended 2009 primarily reflecting increased selling prices which were implemented in the second half of the prior year in response to significantly higher raw material costs and lower raw material costs in the current year.

Selling and administrative expenses of $66.6 million for the quarter ended September 30, 2009 were $12.5 million, or 16%, lower than $79.1 million for the quarter ended September 30, 2008. Expenses were down across all segments. The reductions were primarily in commissions, advertising, and other compensation expenses reflecting lower sales and headcount reductions. As a percent of net sales, selling and administrative expenses were 11.0% and 9.5% for the three months ended September 30, 2009 and 2008, respectively.

Selling and administrative expenses of $207.1 million for the nine months ended September 30, 2009, were $27.8 million, or 12%, lower than the $234.9 million in the nine months ended September 30, 2008 and primarily reflected reductions in commissions, advertising, and other compensation expenses resulting from lower sales and headcount reductions. Results in the current year included $2.3 million of expenses related to senior management severance. As a percent of net sales, selling and administrative expenses were 11.9% and 10.0% for the nine months ended September 30, 2009 and 2008, respectively.

Operating income in the third quarter of 2009 was $70.7 million, a 14% decline as compared to operating income of $81.8 million for the third quarter of 2008. The reduction of operating income was primarily the result of significantly lower volumes of product sold as compared to the prior year, partially offset by favorable raw material pricing, lower operating costs, and efficiencies gained through the Carlisle Operating System.

Interest expense, net was $2.0 million for the quarter ended September 30, 2009, compared to interest expense, net of $6.1 million for the quarter ended September 30, 2008. Interest expense, net for the nine months ended September 30, 2009, was $7.0 million compared to $15.3 million in the prior year period. The decrease in interest expense for the three and nine month periods was due to the reduction in outstanding debt and more favorable short-term interest rates in 2009.

Income from continuing operations, net of tax was $45.0 million, or $0.73 per diluted share, for the three months ended September 30, 2009, down 11% compared to income from continuing operations of $50.6 million, or $0.83 per diluted share for the same period in 2008. Income from continuing operations, net of tax was $110.7 million, or $1.79 per diluted share, for the nine months ended September 30, 2009, compared to income from continuing operations of $135.7 million, or $2.21 per diluted share for the same period in 2008. Current year results included an after-tax gain of $16.8 million, or $0.27 per share, related to insurance recoveries, partially offset by after-tax expense of $15.2 million, or $0.25 per diluted share, related to restructuring expenses.

Income from discontinued operations, net of tax, for the three months ended September 30, 2009 was $1.6 million which compared to a loss from discontinued operations, net of tax, of $0.2 million for the same period in 2008. In April 2008, Carlisle announced plans to dispose of Power Transmission and Motion Control.

During the first quarter of 2009, the Company made the decision to exit, rather than sell, the on-highway friction and brake shoe business to dispose of the assets as part of a planned dissolution. The disposition of the friction and brake shoe assets has been substantially completed with only the sale of certain real estate remaining. The Power Transmission business remains in discontinued operations and continues to be marketed for sale, while operating profitably and generating positive cash flows.

Loss from discontinued operations, net of tax, for the nine months ended September 30, 2009, was $2.0 million, or $0.03 per diluted share, which compared to a loss from discontinued operations, net of tax, of $93.6 million, or $1.52 per diluted share for the same period in 2008. The 2008 loss includes an after-tax impairment charge on the assets of the Power Transmission and Motion Control businesses of $89.5 million.

Net income of $46.6 million, or $0.75 per diluted share, for the quarter ended September 30, 2009 compared to net income of $50.4 million, or $0.82 per diluted share, for the quarter ended September 30, 2008. Net income of $108.7 million, or $1.76 per diluted share, for the nine months ended September 30, 2009 compared to a net income of $42.1 million, or $0.69 per diluted share, for the nine months ended September 30, 2008. Results for the first nine months of 2008 were negatively impacted by an $89.5 million, or $1.47 per diluted share, after-tax impairment charge of assets related to discontinued operations.

Acquisitions

On October 1, 2009, the Company acquired the remaining interest in Japan Power Brake, Inc. ("JPB"), a leading provider of high performance braking solutions for off-highway equipment, primarily in the mining and construction industries in Japan, for a purchase price of approximately $4.8 million. JPB is located in Atsugi, Japan and is under the management direction of the off-highway braking business that is included in the Specialty Products segment.

On October 1, 2009, the Company acquired 100% of the equity of Electronic Cable Specialists ("ECS"), a leading provider of electrical and structural products and services for the aviation, medical and industrial markets, for a purchase price of approximately $44 million. The acquisition of ECS expands Carlisle's product and system reach into additional avionics applications and strengthens Carlisle's engineering and design capabilities. The acquisition will allow for reduction of expenses through consolidation of certain sales, general and administrative functions and through in-house production of certain components which were previously purchased by ECS from third parties. Carlisle also expects to achieve increased sales from its existing customer base with the addition of the engineering and design capabilities of ECS. ECS is located in Franklin, Wisconsin and is under the management direction of the interconnect technologies business that is included in the Applied Technologies segment.

On September 18, 2009, the Company acquired the assets of Jerrik, a leading provider of highly engineered military and aerospace filter connectors, for a purchase price of approximately $33 million. The acquisition expands the Company's range of products serving the defense and aerospace markets. The acquisition will allow for reduction of expenses through consolidation of certain sales, general and administrative functions and through in-house production of certain components, which were previously purchased by Jerrik from third parties. Jerrik is located in Tempe, Arizona and is under the management direction of the interconnect technologies business that is included in the Applied Technologies segment.

On April 28, 2008, the Company acquired 100% of the equity of Carlyle, a leading provider of sophisticated aerospace and network interconnection solutions, for a purchase price of approximately $194 million. Carlyle is located in Tukwila, WA, and is under the management direction of the interconnect technologies business that is included in the Applied Technologies segment.

On January 25, 2008, the Company acquired 100% of the equity of both Dinex International, Inc. and Proex, Inc., leading suppliers of foodservice products to the healthcare and other institutional industries, for approximately $96 million. Dinex has facilities in Glastonbury, CT, and Batavia, IL, and is under the management direction of the foodservice business that is included in the Applied Technologies segment.

Financial Reporting Segments



The following table summarizes segment net sales and operating income.  The
amounts for each segment should be referred to in conjunction with the
applicable discussion below.


                   Three Months Ended          Increase           Nine Months Ended          Increase
In millions,         September 30,            (Decrease)            September 30,           (Decrease)
except
percentages         2009         2008      Amount    Percent      2009        2008       Amount    Percent
Net Sales
Construction
Materials        $    340.1    $  448.1   $ (108.0 )     -24 %  $   862.2   $ 1,171.8   $ (309.6 )     -26 %
Transportation
Products              129.2       205.2      (76.0 )     -37 %      470.8       691.0     (220.2 )     -32 %
Applied
Technologies          105.8       131.2      (25.4 )     -19 %      311.5       350.7      (39.2 )     -11 %
Specialty
Products               29.5        48.0      (18.5 )     -39 %       89.7       134.4      (44.7 )     -33 %
                 $    604.6    $  832.5   $ (227.9 )     -27 %  $ 1,734.2   $ 2,347.9   $ (613.7 )     -26 %

Operating
Income
Construction
Materials        $     60.3    $   60.8   $   (0.5 )      -1 %  $   116.7   $   129.8   $  (13.1 )     -10 %
Transportation
Products                4.0         8.7       (4.7 )     -54 %       44.9        53.7       (8.8 )     -16 %
Applied
Technologies           13.2        12.7        0.5         4 %       30.4        36.0       (5.6 )     -16 %
Specialty
Products                0.9         8.2       (7.3 )     -89 %        5.9        21.7      (15.8 )     -73 %
Corporate              (7.7 )      (8.6 )      0.9        10 %      (25.8 )     (24.0 )     (1.8 )      -8 %
                 $     70.7    $   81.8   $  (11.1 )     -14 %  $   172.1   $   217.2   $  (45.1 )     -21 %

Construction Materials

Third quarter 2009 net sales declined 24% to $340.1 million from $448.1 million, and operating income was $60.3 million compared to $60.8 million for the same period in 2008. The decrease in sales was primarily attributable to a 22% reduction in the volume of products sold across all product lines, and a 1.5% decrease in selling prices. Net sales of $862.2 million for the nine months ended September 30, 2009 decreased 26% as compared with $1.17 billion for the same period in 2008. A 28% decline in the volume of products sold was slightly offset by a 1.9% increase in selling prices.

Third quarter 2009 operating income was $60.3 million compared to $60.8 million in the third quarter of 2008. Operating margins increased from 13.6% in 2008 to 17.7% in the current year. The improvement in margins was due to the combination of favorable raw material costs, reduction in selling and administration expenses and efficiency gains from the Carlisle Operating System as well as continued improvements in the operating performance at Insulfoam and the waterproofing business. Partially offsetting the favorable impact of these items in the third quarter of 2009 was a 1.5% decrease in selling prices.

Operating income of $116.7 million for the nine months ended September 30, 2009 decreased 10% as compared with $129.8 million for the same period in 2008 primarily reflecting lower sales. Operating margins improved to 13.5% in the first nine months of 2009 compared to 11.1% in the first nine months of 2008 primarily due to favorable raw material costs, increased selling prices as well as a reduction in selling and administrative expenses and efficiency gains from the Carlisle Operating System.

Net sales and operating income are generally higher for this segment in the second and third quarters of the year due to increased construction activity during these periods. Recent trends indicate sales and operating income may continue to be negatively impacted by the downturn in commercial construction. Competitive pricing pressures and uncertainty regarding raw material costs may place further negative pressure on operating income in future periods.

Transportation Products

Third quarter 2009 net sales declined 37% to $129.2 million from $205.2 million in the third quarter of 2008. A 39% drop in the volume of product sold was slightly offset by a 1.9% increase in selling prices. Continued softness in market demand adversely impacted sales in all product lines, with the largest declines in the trailer business where sales decreased by 64% as compared to the third quarter of 2008. Net sales of $470.8 million for the nine months ended September 30, 2009 decreased 32% as compared with $691.0 million for the same period in 2008 representing a 36% decline in the volume of product sold, offset by a 4.8% increase in selling prices.

Third quarter 2009 operating income was $4.0 million as compared to income of $8.7 million in the third quarter of 2008. Operating margin fell to 3.1% in the third quarter of 2009, down from 4.2% in the third quarter of 2008. Improved selling prices and favorable raw material pricing positively affected third quarter results, but were more than offset by the negative impacts of the lower volumes of product sold as well as restructuring costs from previously announced plant consolidations.

Operating income of $44.9 million for the nine months ended September 30, 2009 decreased 16% as compared with $53.7 million for the same period in 2008. Operating margin in the first nine months of 2009 was 9.5%, up from 7.8% in the first nine months of 2008. Improved selling prices as well as a $27.0 million fire insurance recovery gain favorably impacted year to date results, which were partially offset by plant restructuring costs of $16.3 million.

The fire insurance gain was the result of insurance recoveries related to a fire at the Company's facility in Bowdon, GA, which occurred in November 2008. For more information see Note 4 to the Consolidated Financial Statements.

The Company has undertaken several consolidation projects within this segment in efforts to reduce costs and streamline its operations. Descriptions of these projects are set forth below:

† In the fourth quarter of 2008, the Company began consolidating nineteen of its distribution centers located throughout the United States and Canada into nine existing facilities. These consolidations were completed in the second quarter of 2009.

† In the first quarter of 2009, the Company began the consolidation of three wheel manufacturing plants located in California into one facility in Ontario, CA. In the second quarter of 2009, the Company also began the closure of its wheel manufacturing operation in Mexico. These consolidations are expected to be completed by the end of 2009.

† In the first quarter of 2009, the Company announced plans to consolidate its pneumatic tire manufacturing operations in Buji, China into its manufacturing operation in Meizhou, China and is expected to complete this consolidation by the end of 2009. Also, in the third quarter of 2009, the Company announced plans to consolidate its tire manufacturing operations in Heflin, AL, Carlisle, PA, and portions of Buji, China into a new facility in Jackson, TN, the purchase of which was

completed in the third quarter of 2009. The consolidation of tire manufacturing operations into Jackson, TN is expected to be complete by the end of 2010.

† At its heavy-haul trailer business, in the second quarter of 2009, the Company announced plans to consolidate its Brookville, PA facility into the operations located in Mitchell, SD and West Fargo, ND. This consolidation is expected to be complete by the end of 2009.

The Company expects the total cost of these consolidation projects will be approximately $36.1 million, of which $17.1 million has been incurred through September 30, 2009, $4.2 million is expected to be incurred in the fourth quarter of 2009, and $14.8 million is expected to be incurred in 2010. Amounts expected to be incurred through the remainder of 2009 and 2010 relate primarily to employee termination and other costs associated with the relocation of employees and equipment.

Cost savings related to these consolidations, primarily resulting from the reduction of operating costs, are expected to approximate $21 million per year, with approximate cost savings of $7.4 million in 2009.

The Company recorded $4.1 million of expenses in the third quarter of 2009 related to these consolidation projects. Of that amount $2.2 million related to employee termination, $1.7 million related to other costs primarily associated with the relocation of equipment, and $0.2 million related to asset impairment charges. In the first nine months of 2009, the Company recorded $16.3 million of expenses, including $9.7 million in asset impairment charges, $3.1 million in employee termination costs, and $3.5 million of other costs consisting primarily of contract termination and relocation expenses.

Net sales and operating income for the tire and wheel business are generally higher in the first half of the year due to peak volumes of product sold in the outdoor power equipment market; however, current economic conditions have suppressed sales in the first nine months of this year, and it remains uncertain to what extent future quarters will be impacted. Other issues that could negatively impact sales and operating income in future periods include:

† Though raw material prices appeared to have stabilized earlier in 2009, the Company has seen upward pressure in recent months, and prices could escalate higher in future periods.

†          The Company could face negative pricing pressure in subsequent
quarters.

†          The Company could be negatively impacted by cost and availability of

shipping channels and the amount of time required to ship product manufactured in China.

† The consolidation of its tire operations into Jackson, TN is a significant project, and though the Company believes the expense projections and anticipated savings have been carefully prepared, unforeseen events due to the size and length of the project may result in increased costs or a reduction in cost savings compared to current estimates.

† Reluctance of customers to make capital expenditures and lack of credit availability may continue to negatively impact the heavy-haul trailer business in subsequent quarters.

Applied Technologies

Third quarter 2009 net sales declined 19% to $105.8 million from $131.2 million in the third quarter of 2008. The largest sales declines were in the aerospace, test and measurement and core foodservice markets. Net sales of $311.5 million for the nine months ended September 30, 2009 decreased 11% as compared with $350.7 million for the same period in 2008. Organic sales were down 19% in the first nine months of 2009 reflecting general economic conditions, as well as production delays in the aerospace market. The acquisitions of Dinex, Carlyle and Jerrik contributed $37.4 million of net sales in the current year.

. . .