If there's a special place in business history reserved for companies that exemplify smooth operations, then the Boring portfolio's most senior holding, diversified manufacturer Carlisle Companies (NYSE: CSL), may rightly claim its place there. Carlisle issued first-quarter results last week that were right in step with its operating performance over the last five years. The funny thing is, they beat analysts' EPS estimates by 6 cents.

How can the Street fail to predict Carlisle's results when the company has been so steady? It's because, while results have stayed remarkably consistent, the business itself is remarkably protean. In spite of the fact that it has made 25 -- count 'em, 25 -- acquisitions during those years, and two more in the first quarter of this year, its financial statements show nary a blip. That's what makes Carlisle so exceptional.

Carlisle assimilates others into its collective as efficiently as the Borg.

Acquisitions have always played a significant role in Carlisle's business plan. The company even maintains a section on its corporate website concerned with acquisitions and acquisition criteria (reminiscent of Berkshire Hathaway (NYSE: BRK.A), now that I think about it).

Carlisle has shown magnificent prowess in turning these purchased assets into sales. In spite of the huge number of deals, it has kept its return on assets (ROA) fairly constant, registering between 9.5% and 10.4% in each of those years.

Since I think that ROA is a useful metric for Carlisle, I'd like to elaborate on it. ROA is, in its most basic formulation, income divided by assets. Notice that this equation can be broken into two other common metrics, net margin (income divided by sales) times asset turnover (sales divided by average assets):

```income   income   sales
------ = ------ x -----
assets   sales    assets
```
(Recall from math classes of yore that the sales in the denominator of one fraction and the sales in the numerator of the other fraction cancel each other out, leaving income and assets all alone.)

Return on assets, then, tells us how profitably the company produces and sells its products, as well as providing an indication of how effectively it generates sales from assets.

Here's how Carlisle has performed over the past five fiscal years (FY):

```            FY99   FY98  FY97  FY96  FY95
Sales (MM)  \$1611  1217  1261  1017  823
Income (MM) \$96    85    71    55    45
Assets (MM) \$1081  1024  861   743   542
Net Margin   5.9%  5.9   5.6   5.6   5.4
Asset Turns  1.5   1.6   1.6   1.6   1.6
```
Carlisle has doubled its asset base through acquisitions and debt offerings over the last five years. Sales and income, meanwhile, have grown almost exactly apace with the changing face of the company's asset base over the period, yielding nearly identical -- but slightly improving -- net margins and asset turns.

That's just amazing consistency. It shows that management has been extremely effective in identifying assets for purchase that suit the company's business perfectly and can be integrated seamlessly. To do this 25 times in a row -- well, it leaves me speechless.

When we last discussed Carlisle in this space about six months ago, the company had just backed away from a proposed merger with Titan International (NYSE: TWI). That acquisition, valued at about \$600 million, would have been the largest transaction in Carlisle's history. No previous deal has cost more than \$100 million.

When Carlisle's management discussed the Titan deal, which Dale Wettlaufer faithfully recorded, they emphasized advantages the company would derive. Titan's golf, lawn & garden, and all-terrain vehicle (ATV) tire divisions -- about 25% of the company -- would mesh well with Carlisle Tire & Wheel, they said, and Titan's distribution channel would provide an optimal sales outlet.

The rest of Titan presented some challenges, the company acknowledged. Managing the large-scale merger would be tough, since the other 75% of Titan's business was new to Carlisle, and Titan had had significant labor problems in the previous two years that had substantially impacted operating margins. Titan was a troubled company that Carlisle would have to work to fit into its tightly controlled operations.

This deal had left a lot of observers wondering whether Carlisle could so efficiently manage such a large transaction. Since only about 25% of Titan's business overlapped with Carlisle, there was plenty of concern that Carlisle wouldn't have had enough control over the management of the other 75%. That would have meant that a large chunk of Carlisle's asset base was not as likely to produce the consistent sales and income that investors had come to expect.

In the end, Carlisle realized that the deal would not redound to its benefit, so they backed away from it. Dale rightly praised management for having the discipline not to do a deal, in spite of the negative impression the withdrawal gave Wall Street.

Carlisle kept talking with Titan, however, and their discussions have now borne fruit. Last week, the company announced that it had struck a deal with Titan to acquire Titan's tire and wheel business in a cash transaction at a price not to exceed \$95 million. Carlisle will purchase two plants and lease another. Titan has decided to exit the lawn & garden and ATV wheel and tire business. The two companies have signed a five-year non-compete supply agreement, whereby Titan will purchase wheels and tires from Carlisle for its distribution outlets.

This seems to me to be the best of both worlds for Carlisle. It will buy the business it wants from Titan -- not the non-synergistic 75% -- at a lower price, without the headaches associated with merging corporate cultures. What's more, Carlisle should experience none of Titan's labor problems, since the three plants it will get are non-union. Carlisle itself has a history of very positive labor relations, so there is reason to think that the plants will blend smoothly into Carlisle's culture. Furthermore, Carlisle will inherit Titan's market share and distribution network.

With this new deal, there seems little reason to doubt whether Carlisle can integrate the acquired assets into its existing businesses. Quite the opposite, in fact. It provides Carlisle with some much-needed capacity for tire and wheel production in a market the company already knows well. It even removes a competitor and creates new sales channels.

That's what I call great management. Carlisle ended up getting exactly what it can use from Titan, as it seems to do in every transaction it completes.

Carlisle is so Boring, it's scary.

By now, you shouldn't have to ask how results from the first quarter were. Sales of \$434 million and net income of \$25.5 million produced a net margin of -- you guessed it -- 5.9%. Assets are turning at a 1.6 run rate, while ROA's run rate is 10.6%.

The more things change at Carlisle, the more they stay the same.

-- Brian Lund, TMF Tardior on the boards.