CLARCOR Inc. (NYSE: CLC): � Unaudited Fiscal First Quarter 2007
Highlights (Amounts in thousands, except per share data and
percentages) � Quarter Ended � � 3/3/07� � 3/4/06� � % Change� Net
Sales $209,530� $213,183� (1.7) Operating Profit $23,581� $25,873�
(8.9) Net Earnings $16,373� $16,201� 1.1� Diluted Earnings Per
Share $0.32� $0.31� 3.2� Average Diluted Shares Outstanding
51,955,610� 52,498,939� (1.0) First Quarter 2007 Operating Review
CLARCOR Inc. (NYSE: CLC) today reported results for the first
quarter ended March 3, 2007. Sales in the first quarter of 2007
declined by $4 million, a 2% decrease compared to the first quarter
of 2006. Operating profit decreased by 9% compared to the same
quarter in 2006. Net earnings increased by 1% and diluted earnings
per share increased by 3%. Foreign currency fluctuations did not
materially impact sales or net earnings for the quarter. Norm
Johnson, CLARCOR�s Chairman and Chief Executive Officer, said, �Our
first quarter results were below our expectations and were unusual
for us. Although not every one of our businesses performs well each
quarter, it is not typical for us to have operating results below
our forecast in more than a few of our operations. We remain
confident, however, that subsequent quarters will be much stronger
and believe that we will meet our original earnings per share
forecast of $1.67 to $1.77 for fiscal 2007. Our operating results
were adversely impacted by manufacturing and shipping delays at
several of our HVAC facilities due primarily to our restructuring
program, customer requested shipping delays, a slowing in first
quarter truck and rail freight traffic in North America partially
due to weather and a snowstorm which closed one of our heavy-duty
manufacturing plants for several days. �I think it is important to
explain why we believe that subsequent quarters will show an
improvement from the first quarter and why we expect increased
sales and operating profits in the remaining three quarters of
fiscal 2007 compared to the same quarters in 2006. First, our
international business is very strong, and we believe this will
continue through the rest of 2007. Second, shipment and
installation of several of our larger filtration systems were
unexpectedly delayed until the second quarter. Third, it is not
unusual for certain industries that we serve to have irregular
order patterns. This was certainly true during the first quarter
with respect to aerospace filter orders, packaging products for
confectionary companies, filter sales to the fiber and resin
markets and HVAC filter sales to retail and wholesale outlets.
Based on current forecasts and order demand, we expect this trend
to reverse in the second quarter and for the rest of 2007. Fourth,
we expect our customers will need to replenish inventory levels due
to the sudden drop in orders at the end of February. Finally, we do
not expect the slowdown in rail and truck freight traffic that we
experienced in the first quarter will continue. �Engine/Mobile
segment sales increased by 6.2%, with growth across all major
market segments, both domestically and internationally. This sales
increase was actually less than we expected, and we believe was
due, as I noted above, to a slowdown in freight tonnage movements
in North America. Market demand for heavy-duty filter products from
traditional aftermarket and OEM dealer customers remains solid, as
does product demand from railroad filter and dust collector
cartridge customers. We expect product demand to increase for the
rest of 2007 and that the rate of growth to increase from what we
experienced in the first quarter. The segment�s operating margin of
21% was the same as in last year�s first quarter.
�Industrial/Environmental segment sales declined by 6%. Although
the decline covered many industrial sectors, there were several
which grew strongly during the quarter. Filter sales to the oil and
gas industry and sales of process liquid filter systems and
filters, primarily for the aviation fuel and defense sectors, both
domestically and internationally, had double-digit growth compared
to last year. Though sales of filters used by resin and fiber
manufacturers declined during the first quarter, order demand and
our sales backlog are very strong and we expect significant growth
for the rest of the year for this product line. �Our HVAC
restructuring program continues on schedule and is proceeding well
and as planned. Though we experienced manufacturing and shipping
delays in the first quarter as we reengineered certain of our
production facilities, this was not unexpected. Our new facility in
Pittston, Pennsylvania is on track to start production during the
second quarter. We have not changed our estimate for 2007 of $2.1
million in costs associated with the restructuring program
primarily incurred in the second and third quarters of 2007 which
are anticipated to be offset by an estimated $3.4 million in cost
reductions that we expect to realize in the last half of 2007. The
result should be a net operating profit benefit of $1.3 million in
2007. Partly as a result of decline in sales and the restructuring
costs incurred in the first quarter, operating margin declined for
this segment from 5.3% last year to 3.0% this year. For our
Industrial/Environmental segment overall, we expect margins for the
remaining three quarters of 2007 will be approximately 8%, compared
to 6.3% in the last three quarters of 2006. �Our Packaging segment
had an unexpectedly large decline in first quarter sales of 15%.
The first quarter is normally this segment�s slowest. We believe
that first quarter sales growth and particularly operating margins
will not be indicative of performance during the next three
quarters. Several of our larger consumer product customers took
fewer products than we had anticipated during the quarter. These
customers have confirmed their forecast for the rest of 2007, and
therefore, we expect to increase shipments to them as the year
progresses. �Other income this quarter was primarily the result of
larger cash balances and short-term investments, driven by our
continuing strong cash flow and increased interest rates. During
the quarter, we did not repurchase any of our common stock under
our current $150 million share repurchase authorization, of which
approximately $110 million remains available. Repurchases in future
quarters will depend on cash availability, acquisition
opportunities and the market price of our common stock. �Our tax
rate in the first quarter at 31.1% was significantly lower than
will be the case for the rest of 2007. In the first quarter, we
recorded a $500,000 entry related to fiscal 2006 due to the passage
by Congress of the Research and Experimentation Tax Credit
extension in December 2006. Interest income from increased
tax-exempt investments and faster profit growth in international
operations with lower tax rates than in the U.S. also contributed
to a lower tax rate. For the rest of 2007, we expect our effective
tax rate to be approximately 35.0%. Capital expenditures this year
are expected to be approximately $40 million to $45 million
compared to $18 million in 2006. This increase is largely due to
the HVAC restructuring program and new products and production
lines, such as our new nanofiber media line which will become
operational later this year. �We still expect that 2007 earnings
per share will be in the $1.67 to $1.77 range. This estimate is
unchanged from our estimate in January despite our first quarter
results. We expect domestic growth to rebound beginning in the
second quarter and international sales growth, which was very
strong in the first quarter, to continue.� CLARCOR will be holding
a conference call to discuss the first quarter results at 9:00 a.m.
CDT on March 22, 2007. Interested parties can listen to the
conference call at www.clarcor.com or www.viavid.net. A replay will
be available on these websites and also at 888-203-1112 or
719-457-0820 and providing confirmation code 6194032. The replay
will be available through March 29, 2007 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. Forward-Looking Statements This
press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements made in this press release other than statements of
historical fact, are forward-looking statements. These statements
are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements may include, among other things: statements and
assumptions relating to future growth, earnings, earnings per share
and other financial performance measures, as well as management's
short-term and long-term performance goals; statements regarding
anticipated order patterns from our customers or the anticipated
economic conditions of the industries and markets that we serve;
statements relating to the anticipated affects on results of
operations or financial condition from recent and expected
developments or event; statements relating to the Company's
business and growth strategies; and any other statements or
assumptions that are not historical facts. The Company believes
that its expectations are based on reasonable assumptions. However,
these forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the
Company's actual results, performance or achievements, or industry
results, to differ materially from the Company's expectations of
future results, performance or achievements expressed or implied by
these forward-looking statements. In addition, the Company's past
results of operations do not necessarily indicate its future
results. These and other uncertainties are discussed in the "Risk
Factors'' section of the Company�s 2006 Form 10-K. The future
results of the Company may fluctuate as a result of these and other
risk factors detailed from time to time in the Company's filings
with the Securities and Exchange Commission. You should not place
undue reliance on any forward-looking statements. These statements
speak only as of the date of this press release. Except as
otherwise required by applicable laws, the Company undertakes no
obligation to publicly update or revise any forward-looking
statements or the risk factors described in this press release,
whether as a result of new information, future events, changed
circumstances or any other reason after the date of this press
release. TABLES FOLLOW � CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data) � Three Months For
periods ended March 3, 2007 and March 4, 2006 � � 2007� � � 2006� �
Net sales $ 209,530� $ 213,183� Cost of sales 148,550� 149,409�
Gross profit 60,980� 63,774� Selling and administrative expenses
37,399� 37,901� Operating profit 23,581� 25,873� Other income
(expense) 261� (41) Earnings before income taxes and minority
interests 23,842� 25,832� Income taxes 7,418� 9,520� Earnings
before minority interests 16,424� 16,312� Minority interests in
earnings of subsidiaries (51) (111) � Net earnings $ 16,373� $
16,201� � Net earnings per common share: Basic $ 0.32� $ 0.31�
Diluted $ 0.32� $ 0.31� � Average shares outstanding: Basic
51,289,477� 51,792,245� Diluted 51,955,610� 52,498,939� �
CONSOLIDATED BALANCE SHEETS (Dollars in thousands) � March 3,
December 2, � � � 2007� � � 2006� Assets Current assets: Cash and
cash investments $ 39,038� $ 29,051� Short-term investments 31,450�
32,195� Accounts receivable, net 148,209� 158,157� Inventories
136,555� 129,673� Other � 30,222� 31,264� Total current assets
385,474� 380,340� Plant assets, net 151,008� 146,529� Acquired
intangibles, net 171,177� 169,033� Pension assets 20,140� 19,851�
Other assets � 11,613� 11,763� $ � 739,412� $ 727,516� �
Liabilities Current liabilities: Current portion of long-term debt
$ 57� $ 58� Accounts payable and accrued liabilities 99,787�
107,129� Income taxes � 12,595� 11,241� Total current liabilities
112,439� 118,428� Long-term debt 15,933� 15,946� Long-term pension
liabilities 18,318� 17,476� Other liabilities � 38,207� 38,157�
184,897� 190,007� Shareholders' Equity � 554,515� 537,509� $ �
739,412� $ 727,516� � SUMMARY CASH FLOWS (Dollars in thousands) �
Three Months � � � � � � � 2007� � � 2006� From Operating
Activities Net earnings $ 16,373� $ 16,201� Depreciation 5,503�
5,483� Amortization 784� 538� Stock compensation expense 910� 632�
Excess tax benefits from stock compensation (1,823) (903) Changes
in short-term investments 745� (6,435) Changes in assets and
liabilities, excluding short-term investments 991� (9,912) Other,
net 470� � 116� Total provided by operating activities 23,953� �
5,720� � From Investing Activities Plant asset additions (7,832)
(2,906) Business acquisitions (6,577) (206) Other, net (79) � 8�
Total used in investing activities (14,488) � (3,104) � From
Financing Activities Payments on long-term debt (17) (18) Cash
dividends paid (3,718) (3,499) Excess tax benefits from stock
compensation 1,823� 903� Other, net 2,416� � 2,649� Total provided
by financing activities 504� � 35� � Effect of exchange rate
changes on cash 18� � 267� � Change in Cash and Cash Investments $
9,987� $ � 2,918� � QUARTERLY INCOME STATEMENT DATA BY SEGMENT
(Dollars in thousands) � Quarter Ended March 3, March 4, 2007�
2006� Net sales by segment: Engine/Mobile Filtration $ 96,696� $
91,032� Industrial/Environmental Filtration 96,239� 102,656�
Packaging 16,595� 19,495� $ 209,530� $ 213,183� � Operating profit
by segment: Engine/Mobile Filtration $ 20,277� $ 19,073�
Industrial/Environmental Filtration 2,874� 5,485� Packaging 430�
1,315� $ 23,581� $ 25,873� � Operating margin by segment:
Engine/Mobile Filtration 21.0% 21.0% Industrial/Environmental
Filtration 3.0% 5.3% Packaging 2.6% 6.7% 11.3% 12.1%
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