CLARCOR Inc. (NYSE: CLC): Unaudited Fiscal Second Quarter and Six
Months 2008 Highlights (Amounts in thousands, except per share data
and percentages) � Quarter Ended 5/31/08 6/2/07 � % Change � Six
Months Ended 5/31/08 6/2/07 � % Change Net Sales $ 267,137 � $
235,125 13.6 $ 517,318 � $ 444,655 16.3 Operating Profit $ 37,458 $
31,500 18.9 $ 65,197 $ 55,081 18.4 Net Earnings $ 24,634 $ 20,929
17.7 $ 40,783 $ 37,302 9.3 Diluted Earnings Per Share $ 0.48 $ 0.41
17.1 $ 0.80 $ 0.73 9.6 Second Quarter and Six Months 2008 Operating
Review CLARCOR Inc. (NYSE: CLC) reported today that second quarter
2008 net earnings increased by 18% and diluted earnings per share
increased by 17% compared to the same quarter in 2007. Sales for
the second quarter of 2008 increased by 14% and operating profit
increased by 19% compared to the same period in 2007. Operating
margins improved to 14.0% for the 2008 second quarter compared to
13.4% in last year�s second quarter. Norm Johnson, CLARCOR�s
Chairman and Chief Executive Officer, said, �Overall, our second
quarter 2008 results were very good, though certain product markets
and geographies were better than others. It is clear that
increasing commodity prices, particularly for energy related
products and certain metals, affected our manufacturing costs
during the quarter. Fortunately, our broad product and market
diversification helped to offset some of these cost pressures. In
most countries outside the U.S., sales growth was strong. In local
currencies excluding the Peco acquisition, sales outside the United
States grew by 8% and operating profit increased by 15%. Currency
fluctuations from last year�s second quarter to the 2008 second
quarter increased 2008 second quarter sales by $6 million and
operating profit by $1 million. �Second quarter 2008 sales and
operating profit included the sales and operating profit of Perry
Equipment Corporation (Peco) which CLARCOR acquired in December
2008. In the second quarter of 2008, Peco�s sales were nearly $30
million and operating profit nearly $4 million. �Engine/Mobile
Filtration segment sales and operating profit were unchanged in
this year�s second quarter compared to last year. Heavy-duty
aftermarket engine filter sales were affected by a continuing
decline in domestic over-the-road truck mileage. Offsetting a
slowdown in the U.S., heavy-duty engine filter sales grew in
Europe, Australia, Mexico, South Africa, China and Morocco. Sales
of filters for railroad locomotive applications in 2008 were
unchanged from the second quarter in 2007. �Operating margins in
the Engine/Mobile Filtration segment in the second quarter at 22.5%
were even with margins in 2007. We do not expect to see significant
growth in the United States for sales of engine aftermarket filters
during the rest of this year as we expect that heavy-duty truck
mileage in the U.S. for the rest of 2008 will continue to be weak.
Therefore, we have adjusted and will continue to adjust our cost
structure in response. Outside the U.S. however, we expect stronger
growth, particularly in Asian markets. We are fortunate to sell our
products across many different markets and locales, and mostly in
the aftermarket which normally is more resistant, though certainly
not immune, to a weak economy. �Sales in our
Industrial/Environmental Filtration segment, which includes the
Peco acquisition, rose by over 30% in the second quarter of 2008
compared to the same period in 2007. Excluding Peco, segment sales
rose by 3%, but there were significant differences across product
end-markets. As we had expected, HVAC filter sales declined in the
quarter by 8%. Filter sales for oil exploration and sales of
filters for aerospace and specialty metal applications increased by
25%. Sales growth was also strong for aviation fuel and waste water
filter applications which grew by 10% in the 2008 quarter compared
to the second quarter in 2007. Dust collector systems and
replacement cartridges grew by 7% during this year�s second quarter
compared to 2007. �We are very pleased with Peco�s results since
the acquisition. Its integration with our Facet businesses is going
well, and certainly the continuing strength in the oil and gas
market is also helping Peco�s business. Second quarter 2008 sales
at Peco grew by over 13% compared to first quarter sales and the
run rate for sales in the second quarter was nearly $120 million
annually. Operating margins were also very strong in the second
quarter and, excluding purchase accounting adjustments, were higher
than in the same period in 2007. Based on our current forecast, we
expect the Peco acquisition, including the impact from purchase
accounting, to be accretive to diluted earnings per share this
year. �Overall, operating margins in the Industrial/Environmental
Filtration segment improved to 8.2% in the second quarter of 2008
compared to 5.2% in the same quarter in 2007 driven by the same
product markets where sales growth was strongest. �The CLC Air
restructuring program is showing steady progress with continuing
improvement in production efficiencies during the quarter. Though
we still recorded an operating loss at CLC Air for the second
quarter, the loss was progressively smaller during the quarter. We
expect an operating profit at CLC Air for the rest of 2008 with
each successive quarter improving both sequentially and compared to
the same quarter in 2007. Most of the delays in new equipment
installations at our manufacturing plants have been eliminated. We
will continue to receive additional manufacturing equipment for the
rest of this year and throughout 2009. We have closed two
manufacturing plants so far, one in Iowa and one in North Carolina,
and have opened one new manufacturing facility in Pennsylvania.
�Our goal for the CLC Air restructuring program, which has not
changed since we began the program 18 months ago, is to improve our
operating profit run rate by $14 million annually by the end of
2009. This will come from significantly improved manufacturing
productivity and a lower product cost structure driven by the new
equipment which will be installed at every one of our manufacturing
locations. In addition, we are introducing more new products to the
HVAC market this year at CLC Air than ever before. Our plan
includes relocating several of our facilities to more closely align
their shipments to our customer locations. We also expect to
significantly reduce our inter-plant freight costs by transforming
our plants into multi-product manufacturing facilities to improve
product availability and on-time shipments to our customers. So
far, even with the dramatic increase in freight costs this year,
our operating costs are less than for the same period last year. We
would certainly like the program to progress faster, and there have
been delays in reaching some of our interim objectives during the
three-year program. Still, we remain confident that we will achieve
the goals we set for ourselves nearly two years ago when the
restructuring program started. �Our Packaging segment had a
somewhat slower second quarter than we had expected. Sales declined
by 6% compared to last year�s second quarter though operating
profit was the same as in 2007. Operating margins increased to 8.2%
this quarter from 7.6% in the second quarter last year. 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 confectionary and tobacco markets where some
of our customers saw a slower sales buildup in their new product
introductions than they had anticipated. Based on current sales
orders, however, we expect to see stronger growth in the second
half of this fiscal year with correspondingly stronger operating
margins. We expect 2008 sales, operating profit and operating
margins for our Packaging segment to exceed last year�s results.
�We incurred $750,000 in costs this quarter due to two tornados and
one hail storm which damaged four of our facilities located in
three states. We expect that insurance coverage will pay for all of
the remaining costs to repair these locations. We lost several days
of sales in both the Engine/Mobile and Industrial/Environmental
segments in the second quarter, but we expect to recover all of the
delayed shipments in the third quarter. In addition, though we
cannot estimate the amount at this time, we may record a
non-recurring gain later this year based upon insurance recoveries
exceeding the carrying value of our damaged facilities. �There was
little change in other income compared to last year�s second
quarter. Our tax rate was approximately 34.3% for the quarter,
which was somewhat higher than it was in the first quarter of 2008.
We expect the rate to be approximately 34.0% to 35.0% for the next
two quarters. �Capital expenditures were $17 million for the
six-month period just ended compared to $19 million in the
six-month period for the first six months of 2007. We expect
capital spending will be approximately $20 million during the
second half of 2008. Until the direction of the economy becomes
clearer, we are delaying capacity expansion at certain of our
domestic manufacturing plants. We are not delaying investments
planned for the CLC Air restructuring program, new product
development, new media development, overseas manufacturing and
expansion of our technical and research facilities. �Cash flow
continues to be strong. Cash flow from operations, excluding
changes in our short-term investments, increased to $56 million in
the 2008 six-month period from $49 million last year. We did not
repurchase any of our common stock in the second quarter. However,
we expect free cash flow to remain strong for the remainder of
2008, and we will continue to evaluate common stock repurchases
throughout 2008 depending on our stock price, acquisition
opportunities and interest rates. Approximately $187 million
remains outstanding under our current share repurchase
authorization. �In the first quarter of 2008, we recorded a $2.4
million charge, as part of interest expense, to mark-to-market a
two-year interest rate swap. In this quarter, we recorded a $1.1
million gain due to the increase in interest rates from earlier in
the year. The remaining $1.3 million will be recorded as a
reduction of interest expense over the next 18 months. �There is no
doubt that costs are increasing for both raw materials and
operating expenses. Our principal raw materials include various
types and grades of steel, filter media, packaging materials,
aluminum, specialty metals, gaskets and resins. The major increases
we see in our operating costs, excluding employee compensation,
include freight and shipping charges, health care and energy costs.
In most cases, we have been successful at being able to pass
through the large majority of cost increases we face by increasing
our product prices. To the extent we have not be able to do this,
we expect to offset any remaining cost increases with productivity
improvements driven by technology investments and changes in our
production processes. This is an unrelenting focus for us given
current inflationary pressures, which we do not see abating in the
near future. We are fortunate to have a very strong balance sheet,
strong and consistent cash flows, and to operate in the filtration
aftermarket where the effect of inflationary and economic cycles is
usually muted. �Based on our first half results and current
backlog, we expect our 2008 sales to grow by approximately 19% from
2007. We have revised our previous earnings per share forecast and
now expect diluted earnings per share for 2008 to be $1.90 to
$2.00. The midpoint of this range would be a 10% increase in
earnings per share over 2007 and will mean that CLARCOR will have
another record year in 2008 and post our 16th 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. CDT on June 18, 2008. 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 access code 7945694. The replay will be
available through June 25, 2008 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, financial performance
measures related to Peco and the Company, the estimated financial
impact of the Peco transaction on the Company�s earnings, 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. These risks include the failure
to realize the economic and strategic benefits of the Peco
transaction. 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 2007 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 CLARCOR
2008 UNAUDITED SECOND QUARTER RESULTS cont'd. � CONSOLIDATED
STATEMENTS OF EARNINGS (Dollars in thousands except per share data)
� Second Quarter � � Six Months For periods ended May 31, 2008 and
June 2, 2007 � 2008 � � � 2007 � � � � 2008 � � 2007 � � � Net
sales $ 267,137 $ 235,125 $ 517,318 $ 444,655 Cost of sales 181,526
� 164,356 � 355,152 � 312,906 � Gross profit 85,611 70,769 162,166
131,749 Selling and administrative expenses 48,153 � 39,269 �
96,969 � 76,668 � Operating profit 37,458 31,500 65,197 55,081
Other income (expense) 183 � (33 ) (3,326 ) 228 � Earnings before
income taxes and minority interests 37,641 31,467 61,871 55,309
Income taxes 12,903 � 10,461 � 20,844 � 17,879 � Earnings before
minority interests 24,738 21,006 41,027 37,430 Minority interests
in earnings of subsidiaries (104 ) (77 ) (244 ) (128 ) � Net
earnings $ 24,634 � $ 20,929 � $ 40,783 � $ 37,302 � � Net earnings
per common share: Basic $ 0.49 � $ 0.41 � $ 0.80 � $ 0.73 � Diluted
$ 0.48 � $ 0.41 � $ 0.80 � $ 0.73 � � Average shares outstanding:
Basic 50,752,765 50,459,481 50,682,871 50,801,230 Diluted
51,272,388 50,950,931 51,125,712 51,355,724 CONSOLIDATED BALANCE
SHEETS � SUMMARY CASH FLOWS (Dollars in thousands) (Dollars in
thousands) � � � � � � May 31, December 1, Six Months � � 2008 �
2007 � � � � � � 2008 � � 2007 � Assets From Operating Activities
Current assets: Net earnings $ 40,783 $ 37,302 Cash and cash
investments $ 47,159 $ 36,059 Depreciation 13,259 10,965 Short-term
investments 13,864 4,884 Amortization 2,779 1,380 Accounts
receivable, net 194,008 166,912 Loss on interest rate agreement
1,337 - Inventories 162,528 135,846 Stock compensation expense
3,713 2,053 Other 31,160 28,219 Excess tax benefits from stock
compensation (2,289 ) (2,047 ) Total current assets 448,719 371,920
Changes in short-term investments (8,980 ) 32,195 Plant assets, net
194,508 169,212 Changes in assets and liabilities, excluding
short-term investments Acquired intangibles, net 320,934 177,927
(3,776 ) (1,215 ) Pension assets 8,799 8,341 Other, net 297 � 743 �
Other assets 16,056 11,735 Total provided by operating activities
47,123 � 81,376 � $ 989,016 $ 739,135 From Investing Activities
Liabilities Plant asset additions (17,412 ) (18,557 ) Current
liabilities: Business acquisitions (75,073 ) (12,254 ) Current
portion of long-term debt $ 131 $ 94 Investment in affiliate (2,000
) - Accounts payable and accrued liabilities 142,266 109,619 Other,
net 56 � 163 � Total used in investing activities (94,429 ) (30,648
) Income taxes 4,963 4,458 Total current liabilities 147,360
114,171 From Financing Activities Long-term debt 117,474 17,329 Net
proceeds under line of credit 100,000 - Long-term pension
liabilities 16,369 15,104 Payment of long-term debt (7,327 ) (4,779
) Other liabilities 67,848 36,801 Cash dividends paid (8,183 )
(7,389 ) 349,051 183,405 Excess tax benefits from stock
compensation 2,289 2,047 Shareholders' Equity 639,965 555,730
Purchase of treasury stock (37,260 ) (49,334 ) $ 989,016 $ 739,135
Other, net 7,825 � 3,282 � Total provided by (used in) financing
activities 57,344 � (56,173 ) � Effect of exchange rate changes on
cash 1,062 � 470 � � Change in Cash and Cash Investments $ 11,100 �
$ (4,975 ) CLARCOR 2008 UNAUDITED SECOND QUARTER RESULTS cont'd. �
QUARTERLY INCOME STATEMENT DATA BY SEGMENT � (Dollars in thousands)
� 2008 � Quarter Quarter Ended Ended Six Net sales by segment:
March 1 May 31 Months Engine/Mobile Filtration $ 105,109 $ 108,658
$ 213,767 Industrial/Environmental Filtration 126,422 139,326
265,748 Packaging � 18,650 � � 19,153 � � 37,803 � $ 250,181 � $
267,137 � $ 517,318 � � Operating profit by segment: Engine/Mobile
Filtration $ 22,342 $ 24,450 $ 46,792 Industrial/Environmental
Filtration 4,285 11,444 15,729 Packaging � 1,112 � � 1,564 � �
2,676 � $ 27,739 � $ 37,458 � $ 65,197 � � Operating margin by
segment: Engine/Mobile Filtration 21.3 % 22.5 % 21.9 %
Industrial/Environmental Filtration 3.4 % 8.2 % 5.9 % Packaging �
6.0 % � 8.2 % � 7.1 % � 11.1 % � 14.0 % � 12.6 % � � � � 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 %
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