CLARCOR Inc. (NYSE: CLC): -0- *T Fiscal Fourth Quarter and Full
Year 2005 Highlights (Amounts in thousands, except per share data
and percentages) Quarter Ended 12/3/05 11/27/04 % Change
----------------------------------------------------------------------
Net Sales $241,524 $207,493 16.4 Operating Profit $38,807 $31,071
24.9 Net Earnings $25,038 $21,547 16.2 Diluted Earnings Per Share
$0.48 $0.42 14.3 Average Diluted Shares Outstanding 52,353 51,918
0.8
----------------------------------------------------------------------
Year Ended 12/3/05 11/27/04 % Change
----------------------------------------------------------------------
Net Sales $873,974 $787,686 11.0 Operating Profit $118,492 $98,177
20.7 Net Earnings $76,393 $63,997 19.4 Diluted Earnings Per Share
$1.46 $1.24 17.7 Average Diluted Shares Outstanding 52,216 51,507
1.4
----------------------------------------------------------------------
*T Fourth Quarter and Full Year 2005 Operating Review CLARCOR Inc.
(NYSE: CLC) reported today that fourth quarter 2005 sales and
operating profit increased by 16% and 25%, respectively, compared
to the same quarter in 2004. Fourth quarter net earnings and
earnings per share increased by 16% and 14%, respectively, compared
to 2004. Fourth quarter operating margin improved to 16.1% in 2005
compared to 15.0% in 2004. For the full year 2005, sales increased
by 11%, operating profit by 21%, net earnings by 19% and earnings
per share by 18%. Operating margins improved to 13.6% from 12.5% in
2004. The impact on sales and operating profit from foreign
currency fluctuations was not material. Fiscal 2005 was a 53-week
year compared to 2004 which was a 52-week year; 2005's fourth
quarter was a 14-week period compared to 2004's fourth quarter
which was a 13-week period. On a same-weeks basis, sales in the
fourth quarter of 2005 rose 8% and operating profit rose 16%
compared to 2004. On a same-weeks basis, full year 2005 sales rose
9% and operating profit rose 18% compared to 2004. There were
several items in the fourth quarter and for the full year of 2005
and 2004 that affected operating results: -- The Purolator EFP and
Niagara acquisitions in September 2004 and March 2005 added
incremental sales in 2005 of $24 million. -- In the third quarter
of 2005, CLARCOR recorded a $1.2 million or $0.02 per share benefit
arising from a settlement of a tax issue involving a deduction for
costs incurred at a subsidiary. -- Costs to relocate the company's
headquarters to Franklin, TN were approximately $2.2 million for
fiscal 2004 or approximately $0.03 per share. Relocation costs
incurred in the fourth quarter of 2004 were approximately $0.3
million. There were no relocation costs incurred in 2005. -- Tax
benefits arising from the American Jobs Creation Act of 2004
increased after-tax earnings in the fourth quarter and the full
year of 2004 by approximately $1.2 million, or approximately $0.02
per share. Norm Johnson, CLARCOR's Chairman and Chief Executive
Officer, said, "Fiscal 2005 marked CLARCOR's 13th consecutive year
of earnings growth. Fourth quarter sales and earnings were
significantly stronger than we originally expected even after
adjusting for the extra week this quarter. Product demand was
robust, particularly for our higher margin products, in all three
of our business segments, both in domestic and international
markets. "Engine/Mobile Filtration sales climbed 22% in the fourth
quarter of 2005 compared to the same period in 2004 and 13% on a
same-weeks basis. Sales of heavy-duty filters through our
traditional aftermarket distribution and OEM dealers, both in
domestic and international markets, were strong throughout the
quarter. We experienced strong growth not only in the on-road truck
market, but in off-road applications for construction, mining and
agricultural equipment as well. Significant new product
introductions, both for liquid and air filter products, and price
increases spurred growth during the quarter and for the full year.
Locomotive filter sales also grew driven by the increase in freight
shipped on North American railroads. Based on current trends, we
anticipate continued strength in 2006. "Industrial/Environmental
Filtration sales rose by 11% from last year's fourth quarter and 3%
on a same-weeks basis. Prior acquisitions had an immaterial impact
on sales and operating profit during the quarter. Sales of HVAC
filters rebounded after several quarters of static demand. Aviation
fuel, defense and fluid power filter product demand continued to be
very strong in the fourth quarter, as they have been throughout
2005. Demand was weak, and certainly below our expectations, for
filters sold into the oil and gas market, but we believe this is
temporary. Order patterns for oil and gas filter applications are
irregular and the continuing demand and cost for oil and gas bodes
well for increased drilling and production levels for many years.
We expect to see an upturn in sales of these products in 2006.
Demand in Europe for our sewage treatment systems and highway water
runoff systems continue to be solid. We also experienced increased
orders in the fourth quarter for filtration systems sold into the
capital goods markets, such as dust collectors, electrostatic
precipitation equipment and oil purification systems. "We continue
to improve the cost structure and manufacturing efficiencies in our
Industrial/Environmental companies. We realized a small improvement
in margin in 2005, though it was below the one percentage point per
year goal we have set for ourselves. We expect further improvement
in 2006 towards our goal of a 10% annual operating margin as we
continue to rationalize our manufacturing operations to reduce cost
and improve productivity, and increase sales of the higher margin
products in our liquid process filtration line. "Our Packaging
segment had an exceptionally strong 2005. Sales increased 23% in
the fourth quarter of 2005 compared to the fourth quarter of 2004
and operating profit improved by 27%. For the full year, sales grew
by 10% and operating profit by 32%. On a same-weeks basis, sales
increased by 8% for the year and operating profit grew by 30%. The
improvement in sales was due to the introduction of a wide array of
new packaging designs, primarily in partnership with major consumer
product companies, and price increases. Demand was strong for both
metal and plastic packaging products. The improvement in operating
profit was due to continuing emphasis on cost reductions and
improving plant productivity. Operating margins improved to 8.7% in
2005 from 7.3% in 2004. We expect that sales will continue to grow
in 2006 with further improvement in operating margins. "During
2005, cash from operations totaled $89 million, a 24% increase over
$72 million operating cash flow in 2004. Capital expenditures for
the quarter and the year were $7 million and $24 million,
respectively. During the fourth quarter, we repurchased
approximately $8 million of our common stock and over $10 million
for the full year. During 2005, our Board of Directors authorized a
two-year $150 million share repurchase program and we expect to
continue to repurchase additional shares in 2006. "Our effective
tax rate in the fourth quarter 2005 was 34.3%. This was an increase
from the fourth quarter in 2004 due to the benefit we recorded last
year from the American Jobs Creation Act of 2004. The fourth
quarter 2005 rate was better than we had expected as pre-tax income
in lower tax rate locales, primarily in Asia, grew more quickly
than pre-tax income in higher tax countries. In 2006, we expect our
effective tax rate to be approximately 35.5% to 36.0%, which is
less than our historic tax rate and again due to our expectation of
faster growth in Asia. "We expect capital expenditures in the range
of $25 to $30 million in 2006, up from $24 million in 2005. Capital
spending will be focused on the development of new products,
including the development of new filter media, additional
manufacturing and warehouse space, additional production capacity
and new enterprise planning systems. "In late November 2005, we
were informed by a major customer of our Industrial/Environmental
segment of their plans to manufacture, at their non-US plants,
products we currently sell to them manufactured at our domestic
plants. We are uncertain as to the timing and extent of this
change. We estimate it could amount, for 2006, to a loss
approximating $11 million in sales and $1.8 million in operating
profit. We plan to offset this by consolidating our manufacturing
lines for these products which will improve our overhead absorption
and expanding our sales of products that directly compete with this
customer where we believe we have a significant manufacturing cost
and freight advantage. We believe that by selling these products
under our own brands and by removing one layer from the
distribution channel, we will be able to increase our selling
margins for these products. We are proceeding aggressively to
implement these changes. In addition, we have raised the prices of
products that we will continue to sell to them. As we learn more
about the extent of our customer's plans and the effect on CLARCOR,
we will provide additional information in the future. "We are
concerned, as are many other U.S. companies, at increasing costs
for certain raw materials, energy and health care. Each of these
costs grew by double-digit percentages in 2005 and this may
continue in 2006. We have been able to increase our prices to
offset much of these cost increases and will continue to do so in
2006. Although continuing increases in interest rates will not be
good for the economy, either in the U.S. or abroad, we are
fortunate to have low levels of debt and strong cash flow. Yet,
even with these headwinds and the potential loss of sales discussed
in the preceding paragraph, we expect 2006 to be our 14th record
year in both sales and earnings for CLARCOR, with continued strong
cash flow and diluted earnings per share in the range of $1.52 to
$1.60. This estimate includes the effect of the recently enacted
requirement to expense stock options, which will impact CLARCOR in
2006 by approximately $0.03 per share." CLARCOR will be holding a
conference call to discuss the fourth quarter and full year results
at 10:00 am CST on January 19, 2006. Interested parties can listen
to the conference call at www.clarcor.com or www.viavid.com. A
replay will be available on these websites and also at 888-203-1112
or 719-457-0820 and providing confirmation code 9047445. The replay
will be available through January 26, 2006 by telephone and for 30
days on the Internet. CLARCOR is based in Franklin, Tennessee, and
is a diversified marketer and manufacturer of mobile, industrial
and environmental filtration products and consumer and industrial
packaging products sold in domestic and international markets.
Common shares of the Company are traded on the New York Stock
Exchange under the symbol CLC. The statements in this release
concerning the Company's sales, earnings, business performance and
prospects are forward-looking statements that involve significant
risks and uncertainties, including the effect of changes in product
demand, availability of labor, price and product competition, raw
material costs, health care costs, energy prices, productivity
improvement and plant consolidation programs, distribution
channels, acquisitions and divestitures, general economic
conditions in both domestic and foreign markets, interest rates,
currency fluctuations, the success of our Total Filtration Program,
the success of sales and marketing programs, the cost of compliance
with recently enacted regulatory requirements, the effect of
changes in accounting rules, the economic impact from natural
disasters such as hurricanes, tornados and flooding and other
factors discussed in filings made with the Securities and Exchange
Commission. -0- *T CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in
thousands except per share data) Per Share Data Restated for
2-for-1 Stock Split Effective April 29, 2005 For periods ended
December 3, 2005 Fourth Quarter Twelve Months and November 27,
------------------------ ------------------------ 2004 2005 2004
2005 2004 ----------------- ------------ ------------ ------------
------------ Net sales $ 241,524 $ 207,493 $ 873,974 $ 787,686 Cost
of sales 166,297 142,682 608,242 547,058 ----------- -----------
----------- ----------- Gross profit 75,227 64,811 265,732 240,628
Selling and administrative expenses 36,420 33,740 147,240 142,451
----------- ----------- ----------- ----------- Operating profit
38,807 31,071 118,492 98,177 Other income (expense) (441) 793 (570)
883 ----------- ----------- ----------- ----------- Earnings before
income taxes and minority interests 38,366 31,864 117,922 99,060
Income taxes 13,167 10,190 40,968 34,717 ----------- -----------
----------- ----------- Earnings before minority interests 25,199
21,674 76,954 64,343 Minority interests in earnings of subsidiaries
(161) (127) (561) (346) ----------- ----------- -----------
----------- Net earnings $ 25,038 $ 21,547 $ 76,393 $ 63,997
=========== =========== =========== =========== Net earnings per
common share: Basic $ 0.48 $ 0.42 $ 1.48 $ 1.26 ===========
=========== =========== =========== Diluted $ 0.48 $ 0.42 $ 1.46 $
1.24 =========== =========== =========== =========== Average shares
outstanding: Basic 51,751,603 51,224,676 51,658,347 50,984,314
Diluted 52,353,021 51,917,884 52,215,689 51,506,738 *T -0- *T
CONSOLIDATED BALANCE SHEETS (Dollars in thousands) December 3,
November 27, 2005 2004 ----------- ----------- Assets Current
assets: Cash and cash investments $ 18,502 $ 17,420 Short-term
investments 10,400 5,100 Accounts receivable, net 152,755 143,719
Inventories 117,508 115,571 Other 25,768 22,180 ----------
--------- Total current assets 324,933 303,990 Plant assets, net
149,505 142,242 Acquired intangibles, net 168,176 147,789 Pension
assets 22,069 24,574 Other assets 10,589 9,202 ---------- ---------
$ 675,272 $ 627,797 ========== ========= Liabilities Current
liabilities: Current portion of long-term debt $ 233 $ 420 Accounts
payable and accrued liabilities 108,693 117,859 Income taxes 12,544
7,993 ---------- --------- Total current liabilities 121,470
126,272 Long-term debt 16,009 24,130 Long-term pension liabilities
16,287 11,256 Other liabilities 38,673 37,677 ---------- ---------
192,439 199,335 Shareholders' Equity 482,833 428,462 ----------
--------- $ 675,272 $ 627,797 ========== ========= *T -0- *T
SUMMARY CASH FLOWS (Dollars in thousands) Twelve Months
----------------------- 2005 2004 --------- ---------- From
Operating Activities Net earnings $ 76,393 $ 63,997 Depreciation
19,749 18,241 Amortization 1,338 910 Changes in assets and
liabilities (8,642) (11,166) Other, net 508 (176) ---------
--------- Total provided (used) by operating activities 89,346
71,806 --------- --------- From Investing Activities Plant asset
additions (24,032) (22,352) Business acquisitions (28,133) (41,893)
Other, net 653 2,036 --------- --------- Total provided (used) by
investing activities (51,512) (62,209) --------- --------- From
Financing Activities Net (payments) proceeds under line of credit
(7,500) 7,500 Payments on long-term debt (811) (519) Cash dividends
paid (13,385) (12,834) Purchase of treasury stock (10,461) - Other,
net (3,542) 6,916 --------- --------- Total provided (used) by
financing activities (35,699) 1,063 --------- --------- Effect of
exchange rate changes on cash (1,053) 912 --------- ---------
Change in Cash and Cash Investments $ 1,082 $ 11,572 =========
========= *T -0- *T QUARTERLY INCOME STATEMENT DATA BY SEGMENT
(Dollars in thousands) 2005
---------------------------------------- Quarter Quarter Quarter
Ended Ended Six Ended February 26 May 28 Months August 27
----------- -------- --------- --------- Net sales by segment:
Engine/Mobile Filtration $ 83,129 $ 93,722 $176,851 $ 90,686
Industrial/Environmental Filtration 97,198 106,668 203,866 105,153
Packaging 15,934 19,396 35,330 20,564 -------- -------- --------
-------- $196,261 $219,786 $416,047 $216,403 ======== ========
======== ======== Operating profit by segment: Engine/Mobile
Filtration $ 16,778 $ 19,629 $ 36,407 $ 20,500
Industrial/Environmental Filtration 3,969 6,234 10,203 8,544
Packaging 333 1,690 2,023 2,008 -------- -------- -------- --------
$ 21,080 $ 27,553 $ 48,633 $ 31,052 ======== ======== ========
======== Operating margin by segment: Engine/Mobile Filtration
20.2% 20.9% 20.6% 22.6% Industrial/Environmental Filtration 4.1%
5.8% 5.0% 8.1% Packaging 2.1% 8.7% 5.7% 9.8% -------- --------
-------- -------- 10.7% 12.5% 11.7% 14.3% ======== ========
======== ======== 2005 ------------------------------ Quarter Nine
Ended Twelve Months December 3 Months --------- ----------
--------- Net sales by segment: Engine/Mobile Filtration $267,537
$100,646 $368,183 Industrial/Environmental Filtration 309,019
118,429 427,448 Packaging 55,894 22,449 78,343 -------- --------
-------- $632,450 $241,524 $873,974 ======== ======== ========
Operating profit by segment: Engine/Mobile Filtration $ 56,907 $
23,507 $ 80,414 Industrial/Environmental Filtration 18,747 12,519
31,266 Packaging 4,031 2,781 6,812 -------- -------- -------- $
79,685 $ 38,807 $118,492 ======== ======== ======== Operating
margin by segment: Engine/Mobile Filtration 21.3% 23.4% 21.8%
Industrial/Environmental Filtration 6.1% 10.6% 7.3% Packaging 7.2%
12.4% 8.7% -------- -------- -------- 12.6% 16.1% 13.6% ========
======== ======== 2004 ----------------------------------------
Quarter Quarter Quarter Ended Ended Six Ended February 28 May 29
Months August 28 ----------- -------- -------- --------- Net sales
by segment: Engine/Mobile Filtration $ 70,800 $ 82,992 $153,792 $
83,771 Industrial/Environmental Filtration 88,962 98,249 187,211
102,646 Packaging 15,510 17,471 32,981 19,792 -------- --------
-------- -------- $175,272 $198,712 $373,984 $206,209 ========
======== ======== ======== Operating profit by segment:
Engine/Mobile Filtration $ 14,425 $ 16,989 $ 31,414 $ 16,892
Industrial/Environmental Filtration 3,252 6,076 9,328 8,457
Packaging 136 1,153 1,289 1,665 Relocation Costs - (425) (425)
(1,514) -------- -------- -------- -------- $ 17,813 $ 23,793 $
41,606 $ 25,500 ======== ======== ======== ======== Operating
margin by segment: Engine/Mobile Filtration 20.4% 20.5% 20.4% 20.2%
Industrial/Environmental Filtration 3.7% 6.2% 5.0% 8.2% Packaging
0.9% 6.6% 3.9% 8.4% -------- -------- -------- -------- 10.2% 12.0%
11.1% 12.4% ======== ======== ======== ======== 2004
------------------------------ Quarter Nine Ended Twelve Months
November 27 Months --------- ----------- -------- Net sales by
segment: Engine/Mobile Filtration $237,563 $ 82,479 $320,042
Industrial/Environmental Filtration 289,857 106,772 396,629
Packaging 52,773 18,242 71,015 -------- -------- -------- $580,193
$207,493 $787,686 ======== ======== ======== Operating profit by
segment: Engine/Mobile Filtration $ 48,306 $ 18,258 $ 66,564
Industrial/Environmental Filtration 17,785 10,886 28,671 Packaging
2,954 2,197 5,151 Relocation Costs (1,939) (270) (2,209) --------
-------- -------- $ 67,106 $ 31,071 $ 98,177 ======== ========
======== Operating margin by segment: Engine/Mobile Filtration
20.3% 22.1% 20.8% Industrial/Environmental Filtration 6.1% 10.2%
7.2% Packaging 5.6% 12.0% 7.3% -------- -------- -------- 11.6%
15.0% 12.5% ======== ======== ======== *T
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