CLARCOR Inc. (NYSE: CLC): Unaudited Fiscal Second Quarter and Six
Months 2007 Highlights (Amounts in thousands, except per share data
and percentages) � Quarter Ended Six Months Ended � 6/2/07 �
6/3/06� %Change� 6/2/07 � 6/3/06� %Change� Net Sales $235,125�
$227,076� 3.5� $444,655� $440,259� 1.0� Operating Profit $31,500�
$26,221� 20.1� $55,081� $52,094� 5.7� Net Earnings $20,929�
$16,805� 24.5� $37,302� $33,006� 13.0� Diluted Earnings Per Share
$0.41� $0.32� 28.1� $0.73� $0.63� 15.9� Second Quarter and Six
Months 2007 Operating Review CLARCOR Inc. (NYSE: CLC) reported
today that second quarter 2007 net earnings increased by 25% and
diluted earnings per share increased by 28% compared to the same
quarter in 2006. Sales for the second quarter of 2007 increased by
4% and operating profit increased by 20% compared to the same
period in 2006. Overall, operating margins improved to 13.4% for
the 2007 second quarter compared to 11.5% in last year�s second
quarter. In the second quarter of 2006, CLARCOR recorded a $3
million bad debt expense charge to operating profit, or $0.04 per
diluted share, which did not recur in this year�s second quarter.
If that charge had not been recorded in 2006, the improvement in
second quarter operating profit and net earnings from 2006 to 2007
would have been 8% and 12%, respectively. Even excluding the $3
million charge, operating margins improved this quarter by over 50
basis points compared to last year�s second quarter. Norm Johnson,
CLARCOR�s Chairman and Chief Executive Officer, said, �We had a
very good second quarter and believe that the rest of this year
will show further improvement in both sales and operating profit
compared to last year�s results. Particularly strong results were
shown by our international Engine/Mobile segment operations. Sales
grew 30% during the 2007 second quarter including the Sinfa
acquisition made earlier this year and 19% excluding the
acquisition. Likewise, in our Industrial/Environmental segment
businesses, European sales grew by 26% from last year. Even though
we benefited from the weakness during the quarter of the U.S.
dollar, on a local currency basis our European sales grew by 13%
and our Asian sales by over 25%. �Engine/Mobile Filtration sales
rose by 7% from last year�s second quarter and 5% excluding the
Sinfa acquisition. Operating profit improved by 9%. Heavy-duty
engine filter sales grew at a faster rate in the second quarter
compared to earlier in 2007 as over-the-road truck traffic was
stronger in the second quarter of this year than it was in the
first quarter. Filter sales for railroad locomotive applications
fell slightly compared to last year. Operating margins in the
current quarter improved to 22.5% compared to 22.1% last year. We
expect sales growth in our Engine/Mobile Filtration segment to be
stronger in the second half of 2007. This is based on current order
patterns and an expectation that domestic freight tonnage movement
will gradually increase, both by truck and by rail, as the year
progresses. �Sales in our Industrial/Environmental Filtration
segment rose 2% in the second quarter of 2007 compared to the same
period in 2006. However, this small increase obscures significant
differences this quarter by end markets. Sales to industrial filter
end markets grew by 27% while sales to environmental end markets
declined by 10%. Sales to industrial end markets were strong in
most of our product lines, including oil and gas, aerospace,
aviation fuel and general industrial liquid filters. Operating
margins in our industrial end market grew to nearly 15% during the
quarter. �There were several reasons for the decline in sales to
environmental end markets from last year�s second quarter. First,
we terminated a $10 million contract with a customer in the second
quarter 2006, but still had some second quarter 2006 sales from
this customer that we did not have this year. Second, we are in the
first year of a three-year program to restructure our HVAC filter
operations. One of the steps in this program is to remove lower
margin customers, and that happened this quarter. Also, HVAC filter
sales to automotive manufacturers and lower-tier automotive parts
suppliers continue to slowly decline. Offsetting this, however, is
continual progress at selling our Total Filtration program to
non-automotive customers. Recent successes include new regional and
national programs with a number of non-automotive Fortune 500
companies. Sales for 2007 to environmental customers will be lower
than in 2006, but we do expect an improvement in operating margins
as our HVAC restructuring program accelerates. �The goal of our
HVAC restructuring program is to improve operating profit. By the
end of 2009 we expect an improvement in our operating profit run
rate of $14 million annually compared to 2006 operating profit for
this market. There are many initiatives in this program, but the
improvement in operating margins is anticipated to come primarily
from regionalizing our manufacturing facilities to substantially
reduce our freight costs and to better service our customers, and a
significant investment in automated manufacturing equipment to
increase manufacturing productivity. Over the three-year period we
plan to spend approximately $23 million in new equipment under this
program. This is in addition to our normal levels of capital
spending for the HVAC market. We expect a small improvement in
margins later this year and a much greater improvement in 2008 and
2009. �Our Packaging segment had a slow second quarter. Sales
declined by 6% this quarter compared to last year, and operating
profit decreased by approximately $600 thousand. Operating margins
decreased to 8% this quarter from 10% in the second quarter last
year, but we expect higher operating margins for the rest of 2007.
The sales decline was caused by slower growth in our customers�
sales of their products resulting in reduced shipments to them.
This was particularly true in the confectionary markets where some
of our customers saw a slower sales buildup in their new product
introductions than they had anticipated. We do not expect to
recover the entire sales shortfall from the first half of 2007
during the rest of this year, but we do expect improved margins
based on current cost reduction initiatives and greater plant
efficiencies. �There was little change in other income compared to
last year�s second quarter. Our tax rate was approximately 33.2%
for the quarter, which was somewhat higher than it was in the first
quarter of 2007. We expect the rate to be approximately 34.0% to
35.0% for the next two quarters. �Currency fluctuations had a
larger impact on sales and operating profit this quarter than we
normally experience. Currency fluctuations increased
dollar-denominated sales by $4 million and dollar-denominated
operating profit by $500 thousand. �Capital expenditures were $18
million for the six-month period just ended compared to $7 million
in the six-month period a year earlier. We expect capital spending
will increase during the second half of the year, partly due to our
HVAC restructuring program, and is expected to total $40 million to
$45 million for 2007 compared to $18 million in 2006. As always, we
are continuing to invest in new technologies, new media and new
product development. Later this year, we will begin manufacturing
nanofiber embedded media which we will initially use for dust
collector cartridges. We have also begun intensive research in
using nanofiber media in filtration applications that have never
before used this type of media as well as experimentation on new
approaches in applying nanofibers to different types of filtration
media. �Cash flow continues to be strong. Cash from operations
increased to $81 million in the 2007 six-month period from $19
million last year. We repurchased nearly $50 million of our common
stock this quarter and nearly $80 million during the last twelve
months. We expect to continue to repurchase our common stock
depending on the current stock price and interest rates. The
average stock repurchase price during the second quarter was $31.83
per share. �Based on our first half results and current backlog, we
expect our 2007 sales to grow by approximately 6% from 2006. We
also expect diluted earnings per share for 2007 to be from $1.72 to
$1.80, and the midpoint of this range would be an 11% increase over
2006. We expect that CLARCOR will have a record 2007 and post its
15th consecutive year of increased sales and earnings.� CLARCOR
will be holding a conference call to discuss its second quarter and
six-month results at 10:00 a.m. CST on June 20, 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 5975049. The replay will be available through June 27, 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
effects on results of operations or financial condition from recent
and expected developments or events; 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) � Second Quarter Six Months For
periods ended June 2, 2007 and June 3, 2006 2007� � 2006� � 2007� �
2006� � Net sales $235,125� $227,076� $444,655� $440,259� Cost of
sales 164,356� 159,959� 312,906� 309,368� Gross profit 70,769�
67,117� 131,749� 130,891� Selling and administrative expenses
39,269� 40,896� 76,668� 78,797� Operating profit 31,500� 26,221�
55,081� 52,094� Other income (expense) (33) 65� 228� 24� Earnings
before income taxes and minority interests 31,467� 26,286� 55,309�
52,118� Income taxes 10,461� 9,332� 17,879� 18,852� Earnings before
minority interests 21,006� 16,954� 37,430� 33,266� Minority
interests in earnings of subsidiaries (77) (149) (128) (260) � Net
earnings $20,929� $16,805� $37,302� $33,006� � Net earnings per
common share: Basic $0.41� $0.32� $0.73� $0.64� Diluted $0.41�
$0.32� $0.73� $0.63� � Average shares outstanding: Basic
50,459,481� 52,006,685� 50,801,230� 51,902,894� Diluted 50,950,931�
52,817,895� 51,355,724� 52,629,923� CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) � June 2, December 2, � 2007� � 2006� Assets
Current assets: Cash and cash investments $24,076� $29,051�
Short-term investments -� 32,195� Accounts receivable, net 162,211�
158,157� Inventories 141,937� 129,673� Other 30,638� 31,264� Total
current assets 358,862� 380,340� Plant assets, net 164,695�
146,529� Acquired intangibles, net 171,019� 169,033� Pension assets
20,429� 19,851� Other assets 12,069� 11,763� $727,074� $727,516� �
Liabilities Current liabilities: Current portion of long-term debt
$58� $58� Accounts payable and accrued liabilities 113,725�
107,129� Income taxes 11,753� 11,241� Total current liabilities
125,536� 118,428� Long-term debt 17,112� 15,946� Long-term pension
liabilities 19,256� 17,476� Other liabilities 39,867� 38,157�
201,771� 190,007� Shareholders' Equity 525,303� 537,509� $727,074�
$727,516� SUMMARY CASH FLOWS (Dollars in thousands) � Six Months �
� � � � 2007� � 2006� From Operating Activities Net earnings
$37,302� $33,006� Depreciation 10,965� 10,846� Amortization 1,380�
1,079� Stock compensation expense 2,053� 1,422� Excess tax benefits
from stock compensation (2,047) (2,992) Changes in short-term
investments 32,195� (17,450) Changes in assets and liabilities,
excluding short-term investments (1,215) (7,543) Other, net 743�
159� Total provided by operating activities 81,376� 18,527� � From
Investing Activities Plant asset additions (18,557) (7,358)
Business acquisitions (12,254) (5,241) Other, net 163� 471� Total
used in investing activities (30,648) (12,128) � From Financing
Activities Payments on long-term debt (4,779) (372) Cash dividends
paid (7,389) (7,016) Excess tax benefits from stock compensation
2,047� 2,992� Purchase of treasury stock (49,334) -� Other, net
3,282� 4,483� Total (used) provided by financing activities
(56,173) 87� � Effect of exchange rate changes on cash 470� 948� �
Change in Cash and Cash Investments $(4,975) $7,434� QUARTERLY
INCOME STATEMENT DATA BY SEGMENT (Dollars in thousands) � 2007�
Quarter Quarter Ended Ended Six March 3 June 2 Months Net sales by
segment: Engine/Mobile Filtration $ 96,696� $ 108,504� $ 205,200�
Industrial/Environmental Filtration 96,239� 106,185� 202,424�
Packaging 16,595� 20,436� 37,031� $ 209,530� $ 235,125� $ 444,655�
� Operating profit by segment: Engine/Mobile Filtration $ 20,277� $
24,445� $ 44,722� Industrial/Environmental Filtration 2,874� 5,498�
8,372� Packaging 430� 1,557� 1,987� $ 23,581� $ 31,500� $ 55,081� �
Operating margin by segment: Engine/Mobile Filtration 21.0% 22.5%
21.8% Industrial/Environmental Filtration 3.0% 5.2% 4.1% Packaging
2.6% 7.6% 5.4% 11.3% 13.4% 12.4% � � 2006� Quarter Quarter Ended
Ended Six March 4 June 3 Months Net sales by segment: Engine/Mobile
Filtration $ 91,032� $ 101,429� $ 192,461� Industrial/Environmental
Filtration 102,656� 103,866� 206,522� Packaging 19,495� 21,781�
41,276� $ 213,183� $ 227,076� $ 440,259� � Operating profit by
segment: Engine/Mobile Filtration $ 19,073� $ 22,446� $ 41,519�
Industrial/Environmental Filtration 5,485� 1,594� 7,079� Packaging
1,315� 2,181� 3,496� $ 25,873� $ 26,221� $ 52,094� � Operating
margin by segment: Engine/Mobile Filtration 21.0% 22.1% 21.6%
Industrial/Environmental Filtration 5.3% 1.5% 3.4% Packaging 6.7%
10.0% 8.5% 12.1% 11.5% 11.8%
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