CLC Clarcor Inc. (delisted)

CLARCOR Inc. (NYSE:CLC): Unaudited Fiscal Third Quarter and Nine Months 2008 Highlights (Amounts in thousands, except per share data and percentages) � � � � � Quarter Ended 8/30/08 9/1/07 % Change � Nine Months Ended 8/30/08 9/1/07 % Change Net Sales $ 276,300 � $ 238,270 16.0 $ 793,618 � $ 682,925 16.2 Operating Profit $ 40,820 $ 34,622 17.9 $ 106,017 $ 89,703 18.2 Earnings before Income Taxes $ 39,389 $ 34,614 13.8 $ 101,016 $ 89,795 12.5 Net Earnings $ 25,811 $ 26,615 (3.0 ) $ 66,594 $ 63,917 4.2 Diluted Earnings Per Share $ 0.50 $ 0.53 (5.7 ) $ 1.30 $ 1.25 4.0 Third Quarter and Nine Months 2008 Operating Review CLARCOR Inc. (NYSE: CLC) reported today that third quarter 2008 net sales increased by 16% and operating profit increased by 18% compared to the same quarter in 2007. Earnings before income taxes were 14% higher than in the third quarter of 2007. Operating margins improved to 14.8% for the 2008 third quarter compared to 14.5% in last year�s third quarter. Third quarter 2008 and 2007 results were impacted by the following items: In the third quarter 2008, CLARCOR incurred a charge of approximately $1 million related to the closing of an HVAC filter manufacturing plant in North Carolina. In the third quarter 2007, CLARCOR recorded an after-tax benefit of $4 million, or $0.08 per diluted share, related to the completion of various income tax audits and the finalization of certain income tax liabilities. Norm Johnson, CLARCOR�s Chairman and Chief Executive Officer, said, �We are very pleased with our third quarter 2008 results. Each of our filtration segments reported higher sales and higher operating profit than in the third quarter of last year. Our gross margin of 31.9% and our operating margin of 14.8% for the quarter were the highest yet for 2008 and also exceeded last year�s third quarter gross and operating margins. �We have been able to raise our prices to offset rising commodity prices for various types and grades of steel, filter media, packaging materials, aluminum, specialty metals, gaskets and resins. We are optimistic that we will be able to continue to offset future cost increases. 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. �Internationally, sales in local currencies were stronger than in the prior year�s third quarter with most of our operations outside the United States reporting double-digit growth over the 2007 third quarter. International sales grew 38% in U.S. dollars during the quarter and were 32% of consolidated sales for the quarter. Currency fluctuations increased 2008 third quarter sales by $4 million and operating profit by $800 thousand. �We are very excited about the performance of Perry Equipment Corporation (Peco) which CLARCOR acquired in December 2007. Its integration into CLARCOR is continuing, and so far has gone exceptionally well. Its sales for the third quarter of 2008 were higher than either of the two prior quarters of fiscal 2008 and it is on track to exceed its last full year�s sales as a private company by over 15%. In the third quarter of 2008, Peco�s sales were just over $30 million and operating profit was nearly $4 million. We expect global demand for its filtration products and systems, which are used mostly in the oil and natural gas industries, to continue to grow. �Engine/Mobile Filtration segment sales increased 5% and operating profit rose 8% in this year�s third quarter compared to last year�s third quarter. We experienced stronger sales growth in the third quarter than in the previous two quarters of fiscal 2008 even as over-the-road truck mileage continued to be slow in the United States. Heavy-duty engine filter sales grew in Mexico, South Africa and China and were relatively unchanged in Europe. Sales of railroad filtration products were down slightly in the third quarter of 2008. We expect the commercial rail industry to remain soft as economic pressures continue in two sectors important to the railroad industry: housing and automotive. Engine/Mobile�s operating margin of 24.3% for the third quarter of 2008 increased from 23.7% in the third quarter of 2007. We achieved the margin increase through a combination of price increases and cost reduction initiatives which offset higher raw material costs. �Sales in our Industrial/Environmental Filtration segment, which includes the Peco acquisition, rose by 32% in the third quarter of 2008 compared to the same period in 2007. Demand for our dust collector cartridges, which incorporate nanofiber technology, continued to grow by double-digits in the third quarter. Environmental filtration systems and filter cartridge sales for oil exploration, aerospace, polymer and fiber, aviation fuel and specialty applications also grew by double-digits during the third quarter of 2008 from the 2007 third quarter. As we had expected, HVAC filter sales, especially those used in the automotive manufacturing and residential home-building industries, continued to be slow during the third quarter. We do not expect to see any improvement in sales to these two sectors in the fourth quarter of 2008. Lower HVAC filter sales offset some of the growth in other product lines within this segment. Excluding Peco and HVAC filter sales, segment sales rose by over 13%. �Operating margin improved to 7.5% for the Industrial/Environmental Filtration segment from 5.8% in the comparable quarter of 2007. This was after a $1 million charge related to the closing of a CLC Air plant. Despite that charge, operating profit for this segment grew to $10.4 million or an increase of $4.3 million from 2007�s third quarter. �The CLC Air restructuring program is continuing with improved production efficiencies at each of its operating facilities. We expect continued progress as we receive and install new equipment, improve production processes and train our employees. We closed one plant in North Carolina during the quarter and announced the consolidation of four Louisville, Kentucky area facilities into one location in Southern Indiana in 2009. Most importantly, we have not changed our expectations about reaching our goal of an 8% operating margin for CLC Air by the end of 2009. �Our Packaging segment had a slower third quarter than we had expected. Sales and operating profit declined by 6% and 8%, respectively, compared to last year�s third quarter but operating margin was unchanged at 9%. The sales decline was caused by continued slow growth in our customers� sales of their products and delayed new product introductions, particularly in the confectionary market. Sales of decorated flat sheet metal, particularly for the film industry, were also lower in the 2008 third quarter than in the prior year�s third quarter. We expect a stronger fourth quarter of 2008 and believe that full year 2008 sales, operating profit and operating margins for our Packaging segment will exceed last year�s results. �Other expense for the third quarter of 2008 included $1.1 million of interest expense related to the debt incurred at the beginning of fiscal 2008 to acquire Peco and to repurchase Company stock. In addition, we recorded a charge of $84 thousand related to the fair value of an interest rate swap agreement. Through the first nine-months of fiscal 2008, we have recorded a cumulative $1.4 million charge, as part of interest expense, to mark-to-market a two-year interest rate swap. We will reduce interest expense over the next five quarters by this $1.4 million though the amount recognized in any one quarter will vary depending on interest rates. �Our effective tax rate of 34.4% for the quarter was higher than the 23.1% rate in the third quarter of 2007. The unusually low rate in the third quarter of 2007 was due to the completion of various tax audits in 2007 that resulted in a $4 million reduction of our tax liabilities and contributed $0.08 per diluted share to the third quarter of 2007. We expect the rate to be approximately 34.0% to 35.0% for the fourth quarter of 2008. �Capital expenditures were $25 million for the nine-month period just ended compared to $29 million in the nine-month period of 2007. We expect capital spending will be approximately $10 million for the fourth quarter of 2008. Although we have delayed certain capacity expansion projects at some of our domestic manufacturing plants, we have not delayed planned investments for the CLC Air restructuring program, new product development, new media development, overseas manufacturing expansion or expansion of our technical and research facilities. �CLARCOR�s financial position is solid and our cash flow continues to be strong. Cash flow from operations, excluding changes in our short-term investments, increased to $78 million in the 2008 nine-month period from $76 million last year. We did not repurchase any of our common stock in the third quarter. However, we did pay down $20 million of borrowing under our line of credit. We expect free cash flow to remain strong for the remainder of 2008 and into 2009. We are currently evaluating several small acquisitions in the United States and abroad. We will also continue to evaluate common stock repurchases depending on our stock price, acquisition opportunities and interest rates. Approximately $187 million remains outstanding under our current share repurchase authorization. �Even with a strong third quarter, we are not expecting a pickup in the U.S. economy for the rest of 2008. Although our Asian business continues to be strong, Europe appears to be slowing from a good first half of 2008. Based on our nine-month results and current order backlog, we expect our 2008 sales to grow by approximately 17% from 2007. In light of a slow U.S. economy, we have revised our previous earnings per share forecast and now expect diluted earnings per share for 2008 to be $1.88 to $1.93. Even at the lower end of this range, CLARCOR will post our 16th consecutive year of increased sales and earnings. �Looking forward to 2009, despite some softness in certain sectors of the U.S. and world economies, we are confident that our growth will continue. Although we are not providing an earnings estimate for fiscal 2009 at this time, our initial review of our operating company budgets indicate sales growth in the mid to upper single digits and operating profit growth in the low double-digit range. This would make 2009 our 17th consecutive year of growth in sales and earnings.� CLARCOR will be holding a conference call to discuss its third quarter and nine-month results at 10:00 a.m. CDT on September 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 1986499. The replay will be available through September 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 are subject to finalization of our third quarter financial and accounting procedures and 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, the effect of rising commodity costs and the Company�s ability to pass these costs on to its customers, the impact of a slowing economy in the United States and in certain foreign countries where the Company operates and the ability to realize benefits of the CLC Air restructuring program. 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. CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands except per share data) � � � � � � � Third Quarter Nine Months For periods ended August 30, 2008 and September 1, 2007 2008 � � 2007 � � 2008 � 2007 � Net sales $ 276,300 $ 238,270 $ 793,618 $ 682,925 Cost of sales 188,152 � 165,412 � 543,304 � 478,318 � Gross profit 88,148 72,858 250,314 204,607 Selling and administrative expenses 47,328 � 38,236 � 144,297 � 114,904 � Operating profit 40,820 34,622 106,017 89,703 Other income (expense) (1,349 ) 53 � (4,675 ) 281 � Earnings before income taxes and minority interests 39,471 34,675 101,342 89,984 Income taxes 13,578 � 7,999 � 34,422 � 25,878 � Earnings before minority interests 25,893 26,676 66,920 64,106 Minority interests in earnings of subsidiaries (82 ) (61 ) (326 ) (189 ) � Net earnings $ 25,811 � $ 26,615 � $ 66,594 � $ 63,917 � � Net earnings per common share: Basic $ 0.51 � $ 0.53 � $ 1.31 � $ 1.26 � Diluted $ 0.50 � $ 0.53 � $ 1.30 � $ 1.25 � � Average shares outstanding: Basic 50,885,417 49,961,327 50,745,240 50,555,380 Diluted 51,455,710 50,560,937 51,252,593 51,001,420 CONSOLIDATED BALANCE SHEETS (Dollars in thousands) � � August 30, December 1, � � � 2008 � � 2007 Assets Current assets: Cash and cash investments $ 44,568 $ 36,059 Short-term investments 7,431 4,884 Accounts receivable, net 209,036 166,912 Inventories 164,627 135,846 Other 30,722 28,219 Total current assets 456,384 371,920 Plant assets, net 193,388 169,212 Acquired intangibles, net 320,228 177,927 Pension assets - 8,341 Other assets 15,727 11,735 $ 985,727 $ 739,135 � Liabilities Current liabilities: Current portion of long-term debt $ 131 $ 94 Accounts payable and accrued liabilities 162,337 109,619 Income taxes 6,689 4,458 Total current liabilities 169,157 114,171 Long-term debt 97,383 17,329 Long-term pension liabilities 18,625 15,104 Other liabilities 48,353 36,801 333,518 183,405 Shareholders' Equity 652,209 555,730 $ 985,727 $ 739,135 SUMMARY CASH FLOWS (Dollars in thousands) � � � � � Nine Months � � � � � � � 2008 � 2007 From Operating Activities Net earnings $ 66,594 $ 63,917 Depreciation 19,130 16,448 Amortization 3,975 1,999 Loss on interest rate agreement 1,421 - Stock compensation expense 4,162 3,217 Excess tax benefits from stock compensation (2,396 ) (2,622 ) Changes in short-term investments (2,547 ) 23,445 Changes in assets and liabilities, excluding short-term investments (15,521 ) (8,357 ) Other, net 396 � 933 � Total provided by operating activities 75,214 � 98,980 � � From Investing Activities Plant asset additions (24,851 ) (29,336 ) Business acquisitions (75,329 ) (12,378 ) Investment in affiliate (2,000 ) (47 ) Other, net 139 � 1,704 � Total used in investing activities (102,041 ) (40,057 ) � From Financing Activities Net proceeds under line of credit 80,000 - Payment of long-term debt (7,366 ) (4,638 ) Cash dividends paid (12,259 ) (11,017 ) Excess tax benefits from stock compensation 2,396 2,622 Purchase of treasury stock (37,260 ) (49,334 ) Other, net 8,467 � 4,966 � Total provided by (used in) financing activities 33,978 � (57,401 ) � Effect of exchange rate changes on cash 1,358 � 1,174 � � Change in Cash and Cash Investments $ 8,509 � $ 2,696 � QUARTERLY INCOME STATEMENT DATA BY SEGMENT (Dollars in thousands) � � � � 2008 Quarter Quarter Quarter Ended Ended Six Ended Nine Net sales by segment: � March 1 May 31 Months August 30 Months Engine/Mobile Filtration $ 105,109 $ 108,658 $ 213,767 $ 117,753 $ 331,520 Industrial/Environmental Filtration 126,422 139,326 265,748 138,708 404,456 Packaging � 18,650 � � 19,153 � � 37,803 � � 19,839 � � 57,642 � � $ 250,181 � $ 267,137 � $ 517,318 � $ 276,300 � $ 793,618 � � Operating profit by segment: Engine/Mobile Filtration $ 22,342 $ 24,450 $ 46,792 $ 28,669 $ 75,461 Industrial/Environmental Filtration 4,285 11,444 15,729 10,404 26,133 Packaging � � 1,112 � � 1,564 � � 2,676 � � 1,747 � � 4,423 � � $ 27,739 � $ 37,458 � $ 65,197 � $ 40,820 � $ 106,017 � � Operating margin by segment: Engine/Mobile Filtration 21.3 % 22.5 % 21.9 % 24.3 % 22.8 % Industrial/Environmental Filtration 3.4 % 8.2 % 5.9 % 7.5 % 6.5 % Packaging � � 6.0 % � 8.2 % � 7.1 % � 8.8 % � 7.7 % � � 11.1 % � 14.0 % � 12.6 % � 14.8 % � 13.4 % � � � 2007 Quarter Quarter Quarter Ended Ended Six Ended Nine � March 3 June 2 Months September 1 Months Net sales by segment: Engine/Mobile Filtration $ 96,696 $ 108,504 $ 205,200 $ 112,280 $ 317,480 Industrial/Environmental Filtration 96,239 106,185 202,424 104,980 307,404 Packaging � � 16,595 � � 20,436 � � 37,031 � � 21,010 � � 58,041 � � $ 209,530 � $ 235,125 � $ 444,655 � $ 238,270 � $ 682,925 � � Operating profit by segment: Engine/Mobile Filtration $ 20,277 $ 24,445 $ 44,722 $ 26,629 $ 71,351 Industrial/Environmental Filtration 2,874 5,498 8,372 6,100 14,472 Packaging � � 430 � � 1,557 � � 1,987 � � 1,893 � � 3,880 � � $ 23,581 � $ 31,500 � $ 55,081 � $ 34,622 � $ 89,703 � � Operating margin by segment: Engine/Mobile Filtration 21.0 % 22.5 % 21.8 % 23.7 % 22.5 % Industrial/Environmental Filtration 3.0 % 5.2 % 4.1 % 5.8 % 4.7 % Packaging � � 2.6 % � 7.6 % � 5.4 % � 9.0 % � 6.7 % � � 11.3 % � 13.4 % � 12.4 % � 14.5 % � 13.1 %