CLARCOR Inc. (NYSE: CLC):
Unaudited Fiscal First Quarter
2010 Highlights
(Amounts in thousands, except
share and per share data and percentages)
Quarter Ended
2/27/10 2/28/09 %
Change Net sales $215,131 $213,690 0.7 Operating profit $22,896
$13,687 67.3 Net earnings attributable to CLARCOR $14,866 $8,791
69.1 Diluted earnings per share $0.29 $0.17
70.6
CLARCOR Inc. (NYSE: CLC) reported its financial
results for the first quarter ended February 27, 2010. Operating
profit increased 67%, and net earnings increased 69% from the first
quarter of 2009. Diluted earnings per share increased 71% to $0.29
in the first quarter of 2010 from $0.17 in the first quarter of
2009. The impact of foreign currency exchange rates positively
influenced our net sales by $5.1 million and our operating profit
by $0.8 million compared to the first quarter of 2009.
Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer,
said, “We are pleased with our operating results in the first
quarter. Operating margin improved to 10.6% in the first quarter of
2010 from 6.4% in the first quarter of 2009 and is approaching the
11.1% operating margin from the first quarter of 2008 prior to the
recession. This improvement in operating performance was driven by
higher sales in our Engine/Mobile Filtration segment and the cost
benefits of the restructuring efforts at our HVAC operations.
“Operating results increased significantly despite slightly
higher year-over-year sales. Net sales in the first quarter were
negatively impacted by a $3.9 million reduction in HVAC filter
sales to the 3M Company (“3M”). For the full year 2010, we
anticipate sales growth of 6.0% to 8.0% despite a $13.0 million to
$14.0 million reduction in sales to 3M.
Engine/Mobile Filtration
Segment
“Net sales at our Engine/Mobile Filtration segment increased
$11.0 million or 13% to $96.4 million in the first quarter of 2010.
This increase was driven in large part by higher heavy-duty engine
filter sales outside North America. Sales in China increased $3.6
million, nearly doubling 2009 first quarter sales as a result of
additional sales to both new and existing customers and an
acquisition completed in the second quarter of 2009. Sales of
aftermarket heavy-duty engine filters in North America were up
slightly from the first quarter of 2009. For the full year, we
anticipate sales growth in our Engine/Mobile Filtration segment to
be between 7.5% and 10.0%.
“Operating profit at our Engine/Mobile Filtration segment
increased $4.6 million or 34% to $17.9 million in the first quarter
of 2010. Operating margin increased to 18.5% in the first quarter
of 2010 from 15.6% in the first quarter last year. The improvement
in operating profit and margin was attributed to higher
year-over-year heavy-duty engine filter sales. Sales and operating
profit at our railroad filtration business increased slightly in
the first quarter from the first quarter of 2009.
Industrial/Environmental
Filtration Segment
“Net sales at our Industrial/Environmental Filtration segment
declined $11.5 million or 10% to $102.0 million in the first
quarter of 2010. This reduction was due to lower sales of HVAC
filters to 3M, natural gas vessels and elements and filters sold to
the oil drilling and aerospace industries. Despite these lower
sales, operating profit increased $3.6 million to $4.3 million in
the first quarter. Operating margin increased to 4.2% in the first
quarter of 2010 from 0.6% in the first quarter of 2009.
“Our HVAC filter sales declined over $3.0 million in the first
quarter based largely upon the loss of 3M sales. Despite this
reduction, operating profit at our HVAC operations actually
increased approximately $4.0 million over the same prior year
period. This improvement in operating profit was the result of our
restructuring efforts, including the elimination of fixed costs
from the closure of several manufacturing facilities, and the
reduction of material costs from continued manufacturing
efficiencies and commodity pricing. We anticipate that operating
performance at our HVAC operations will continue to improve as we
benefit from the changes in our cost structure, and we leverage our
expected sales growth as the year progresses.
“We expect that our natural gas vessel and element sales in 2010
will grow between 10.0% and 15.0% from 2009, though sales to this
market were down in the first quarter of 2010 compared with 2009.
Natural gas vessel sales in the first quarter of 2009 continued to
benefit from the historically high natural gas drilling activity
experienced in 2008. Despite lower sales, operating profit from the
natural gas market was consistent with 2009 due to lower steel
prices, a higher mix of element sales, which command a higher
margin, and a reduction in selling and administrative expenses. We
anticipate the sale of natural gas vessels will continue to improve
throughout 2010. We have experienced a steady increase in our
vessel sale backlog since September 2009, a trend which we believe
should continue through the fourth quarter due to major natural gas
finds during 2009, both in the U.S. and overseas. In addition, our
emphasis on building our natural gas filtration aftermarket
business is gaining momentum and should grow faster than our
natural gas vessel business.
“We also anticipate improvement in our filter sales to the oil
drilling and aerospace markets throughout the remainder of the
year. Both of these markets were significantly impacted by the
downturn in the economy. However, based upon a recent increase in
order activity, we expect the combined growth in these markets to
be between 10.0% and 15.0% in 2010 compared with 2009.
Packaging Segment
“Net sales at our Packaging segment increased $1.9 million or
13% to $16.7 million in the first quarter of 2010. This increase
was driven by higher sales from smokeless tobacco packaging and
decorated flat sheet metal. As a result of higher sales, operating
profit in the first quarter of 2010 increased $1.0 million to $0.7
million in the first quarter of 2010 from a loss of $0.3 million in
the first quarter of 2009. Operating margin improved to 4.5% in the
first quarter. We anticipate that both sales and operating margin
in this segment will continue to improve throughout the remaining
quarters of 2010.
Other Expense, Income Taxes and
Cash Flow
“Other expense of $0.5 million in the first quarter of 2010 was
$0.3 million lower than the first quarter of 2009. This reduction
was due to lower net interest expense of $0.7 million due to a $0.6
million mark-to-market loss on an interest rate swap agreement in
the first quarter of 2009. This net interest expense reduction was
offset in part by higher foreign currency transaction losses.
“Our effective tax rate in the first quarter of 2010 was 33.9%
versus 31.8% in the first quarter of 2009. For the full year 2010,
we anticipate an effective tax rate between 33.0% and 34.0%.
“Our financial position is solid, and our cash flow continues to
be strong. Cash flow from operating activities, excluding changes
in our short-term investments, was $23.7 million in the first
quarter of 2010 down slightly from $25.2 million last year. In the
first quarter we paid down our line of credit by $20.0 million to a
balance of $15.0 million at the end of the quarter. We expect to
pay the remaining amount outstanding on our line of credit by the
end of the year.
Outlook
“We are pleased with our operating results in the first quarter
which were significantly improved from the first quarter of last
year. Based upon the cost reduction programs we initiated last
year, including completing the restructuring of our HVAC
operations, we are well positioned to capitalize on our anticipated
incremental growth in 2010. While we remain cautious, we believe we
have seen a positive turning point in sales in most of our product
markets. We continue to anticipate overall sales growth for the
full year to be between 6.0% and 8.0% despite the previously
mentioned reduction in sales to 3M. Our projected sales growth is
spread through our many diverse end markets, but we expect
significant growth in our natural gas, aerospace and oil drilling
markets throughout the year. We reaffirm our previous 2010 guidance
for diluted earnings per share in the range of $1.55 and
$1.70.”
CLARCOR will be holding a conference call to discuss the first
quarter results at 10:00 a.m. CDT on March 18, 2010. 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 3245630. The replay will be available through April 1, 2010 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, 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 related to the performance of the U.S. and
other economies generally; 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 2009 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,
including projected sales and profit levels for any business
segment in any given quarter, 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 February 27, 2010 and February 28, 2009
2010 2009 Net sales $ 215,131 $
213,690 Cost of sales 145,326 152,707 Gross profit 69,805 60,983
Selling and administrative expenses 46,909 47,296 Operating
profit 22,896 13,687 Other expense 494 806 Earnings before income
taxes 22,402 12,881 Income taxes 7,595 4,096 Net earnings 14,807
8,785 Less: Net losses attributable to noncontrolling interests 59
6 Net earnings attributable to CLARCOR Inc. $ 14,866 $ 8,791
Net earnings per common share attributable to CLARCOR Inc.: Basic $
0.29 $ 0.17 Diluted $ 0.29 $ 0.17 Average shares
outstanding: Basic 50,594,234 51,059,182 Diluted 50,934,913
51,541,458
CONSOLIDATED BALANCE SHEETS SUMMARY CASH FLOWS
(Dollars in thousands) (Dollars in thousands)
February 27, November 28, Three Months
2010 2009
2010 2009
Assets From Operating
Activities Current assets: Net earnings $ 14,807 $ 8,785 Cash
and cash equivalents $ 61,107 $ 59,277 Depreciation 6,989 6,921
Short-term investments 20,604 32,171 Amortization 1,164 1,215
Accounts receivable, net 162,168 164,545 Stock compensation expense
2,511 2,415 Inventories 164,773 157,416 Excess tax benefit from
stock compensation (127 ) (422 ) Other 37,419 35,119 Changes in
short-term investments 11,567 (6,229 ) Total current assets 446,071
448,528 Changes in assets and liabilities, excluding Plant assets,
net 186,475 188,091 short-term investments (1,647 ) 6,350 Goodwill
227,160 228,182 Other, net 1 (82 ) Other acquired
intangibles, net 94,777 95,990 Total provided by operating
activities 35,265 18,953 Other assets 12,875 13,099 $
967,358 $ 973,890
From Investing Activities Additions to
plant assets (5,996 ) (6,075 )
Liabilities Business
acquisitions, net of cash - (6,955 ) Current liabilities:
Investment in affiliate - (1,000 ) Current portion of long-term
debt $ 92 $ 99 Proceeds from insurance claim 557 -
Accounts payable and accrued
liabilities
130,727
126,424
Disposition of plant assets 74 224
Income taxes
7,738
5,419
Total used in investing activities (5,365 ) (13,806 ) Total current
liabilities 138,557 131,942
From Financing Activities
Long-term debt 31,993 52,096 Net payments under line of credit
(20,000 ) - Long-term pension liabilities 62,344 61,746 Payments on
long-term debt (29 ) (45 ) Other liabilities 38,494 38,219 Cash
dividends paid (4,933 ) (4,596 ) Total liabilities 271,388 284,003
Excess tax benefits from stock compensation 127 422 Redeemable
noncontrolling interest 1,361 1,412 Other, net 525 1,805
Shareholders' Equity 694,609 688,475 Total used in
financing activities (24,310 ) (2,414 ) $ 967,358 $ 973,890 Effect
of exchange rate changes on cash (3,760 ) (167 )
Change in Cash
and Cash Equivalents $ 1,830 $ 2,566
QUARTERLY INCOME STATEMENT DATA BY SEGMENT (Dollars in
thousands)
Three Months February
27, February 28, 2010 2009 Net sales by
segment: Engine/Mobile Filtration $ 96,428 $ 85,380
Industrial/Environmental Filtration 102,027 113,458 Packaging
16,676 14,852 $ 215,131 $ 213,690
Operating profit by segment: Engine/Mobile Filtration
$ 17,862 $ 13,301 Industrial/Environmental Filtration 4,283 663
Packaging 751 (277 ) $ 22,896 $ 13,687
Operating margin by segment: Engine/Mobile Filtration 18.5 %
15.6 % Industrial/Environmental Filtration 4.2 % 0.6 % Packaging
4.5 % -1.9 % 10.6 % 6.4 %
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