CLARCOR Inc. (NYSE: CLC):
Unaudited First Quarter 2011 Highlights
(Amounts in millions, except per share
data and percentages)
Quarter Ended 02/26/11
02/27/10 Change Net sales $ 245.7 $
215.1 14 % Operating profit 31.3 22.9 37 % Net earnings –
CLARCOR 21.9 14.9 47 % Diluted earnings per share $ 0.43 $ 0.29 48
% Operating margin 12.7 % 10.6 % 2.1
pts
CLARCOR Inc. (NYSE: CLC) reported its financial
results for the first quarter of 2011. Diluted earnings per share
of $0.43 grew 48% from last year’s first quarter on the strength of
a 14% increase in net sales. The Company successively leveraged
this sales growth into a 37% increase in operating profit and a 2.1
percentage point improvement in operating margin. Changes in
average foreign currency exchange rates did not significantly
influence net sales or operating profit in the first quarter of
2011 compared with the first quarter of 2010.
Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer,
said, “We picked up in the first quarter where we left off fiscal
year 2010—with another strong quarter. Our diluted earnings of
$0.43 per share were an all-time high for a CLARCOR first quarter,
besting our previous high of $0.32 from the first quarter of 2008.
All of our segments contributed to our success as each segment
posted double-digit sales growth from last year’s first quarter.
Certainly, the improving economic environment compared with the
first quarter last year facilitated this growth. However, we were
also able to drive incremental growth through the introduction of
new products and further penetration of non-U.S. markets.
“Once again, all of our segments experienced improved operating
performance as each segment increased both operating profit and
margin from last year’s first quarter. Overall, the 2.1 percentage
point improvement in operating margin was driven by a 1.6 point
reduction in our selling and administrative expense percentage and
a 0.5 point improvement in our gross margin percentage as we
leveraged our higher sales.”
First Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment for the first
quarter of 2011 increased $14.9 million, or 15%, compared with the
first quarter of 2010. This increase was related primarily to
higher volume of heavy-duty engine filter sales, which have been
positively influenced by the continued strength in the U.S.
trucking industry. For the first two months of fiscal year 2011,
heavy-duty truck tonnage in the U.S. was approximately 6% higher
compared with the same period in fiscal year 2010 and is at its
highest level since February 2008. International sales of
heavy-duty engine filters continue to be strong across most
international markets increasing 18% compared with the same period
in 2010.
Operating profit at our Engine/Mobile Filtration segment for the
first quarter of 2011 increased $3.3 million, or 19%, from the
first quarter of 2010. This increase was primarily the result of
the higher year-over-year heavy-duty engine filter sales. Our
operating margin increased 0.5 points to 19.0% from 18.5% in last
year’s first quarter. This improvement in operating margin was
primarily the result of our ability to leverage our fixed
manufacturing costs with the higher sales although we experienced
an increase in selling and administrative expenses to support our
growth.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment for
the first quarter of 2011 increased $10.1 million, or 10%, from the
first quarter of 2010 primarily due to an approximate $8.0 million
increase in sales domestically across many of our markets including
air filtration, aerospace, aviation and sales through Total
Filtration Services—our distribution business. This sales increase
was the result of improved economic conditions in the U.S. along
with new product offerings in air filtration. Sales outside the
U.S. increased approximately $2.0 million in the first quarter of
2011 primarily as a result of higher off-shore oil drilling sales
off the coast of Singapore. In addition, in the first quarter of
2011 we were able to successfully enter the Brazilian oil and gas
market after opening a local sales office there at the end of 2010.
These positive sales trends were partially offset by a decline in
European sales as some periphery markets—notably Spain—continue to
be negatively impacted by economic and financial issues.
Operating profit at our Industrial/Environmental Filtration
segment for the first quarter of 2011 increased $3.0 million, or
69%, from the first quarter of 2010 as we were able to leverage the
10% increase in sales. This operating profit increase was spread
through our diverse markets, but a significant portion was derived
from our aerospace, oil drilling and other industrial markets. Our
oil drilling filtration business continues to perform well despite
the lack of drilling activity in the Gulf of Mexico as we have been
able to sell into markets outside the U.S. including Asia. Our
operating profit from wire mesh filtration products for the fibers
and plastics industries—where we have a leading market
position—were strong in the first quarter and are expected to
increase throughout 2011 in conjunction with our planned launch of
a new manufacturing facility in China in the second quarter.
Packaging Segment
Net sales in our Packaging segment increased $5.6 million, or
33%, to $22.3 million in the first quarter of 2011 compared with
the same period in the prior year. Included in these 2011 first
quarter sales was $0.5 million received from a customer for the
sale of one of our product patents. The remaining sales increase
was driven by a combination of additional sales volume in the
smokeless tobacco, confection and spice markets as well as
additional sales of decorated flat sheet metal.
Operating profit in our Packaging segment increased $2.1 million
and operating margin increased 8.3 percentage points to 12.8% from
the first quarter last year primarily due to our ability to
leverage our fixed manufacturing and administrative costs with the
higher sales levels. The recognition of the $0.5 million benefit
for the sale of the patent increased operating margin by
approximately 2.2 percentage points.
Income Taxes
The 29.5% effective tax rate in the first quarter of 2011
included a $0.7 million benefit related to the extension of the
research and experimentation tax credit in December 2010.
Effectively, we recognized a majority of our 2010 research and
experimentation tax credit in the first quarter of 2011. Excluding
this benefit, our effective tax rate would have been approximately
32.0%.
Commodity Prices
Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer,
commented on commodity prices: “There has been much discussion in
the financial press about increases in commodity prices. Although
we have experienced higher material costs—notably in steel and
media—these cost increases did not have a significant impact on our
margins in the first quarter. Many of our business units
proactively purchased ahead in 2010 thus mitigating the impact of
the recent commodity price increases in the first quarter. In
addition, our business units which manufacture filtration vessels
or systems are typically able to time customer price quotations
with steel purchases and are able to base quotations on actual
material costs.
“Going forward in 2011, we anticipate that higher commodity
prices will increase our material costs. However, we expect that we
will be able to pass most of these higher material costs to our
customers. Since a large majority of our business is in the
after-market where we control our pricing sheets, we believe our
ability to pass material cost increases to our customers is greater
than companies which deal primarily with OEMs. In addition, due to
the nature of our after-market filtration products, we believe our
customer demand is relatively inelastic—meaning reasonable price
increases do not significantly impact customer demand. We enacted a
customer price increase at one of our larger business units at the
end of the first quarter and anticipate a customer price increase
at another larger business unit in the second quarter. Based upon
our anticipated ability to recover material cost through pricing
without significantly impacting demand, we do not expect that
higher material costs will have a significantly negative impact on
our operating margins in 2011.”
2011 Guidance
Norm Johnson, Chairman and Chief Executive Officer, commented:
“We are pleased with our financial results in the first quarter as
we continue our top line growth while expanding operating margins.
Our Industrial/Environmental Filtration segment continues its
improvement as operating margin increased 2.3 points from last
year’s first quarter, and we continue to expect our full year
operating margin in this segment to exceed 10%. Our Engine/Mobile
Filtration segment increased sales 15% with solid growth both
domestically and abroad, and our Packaging segment continues to be
a great story. We believe we have positioned ourselves to be
insulated from the negative effects of recent commodity price
increases and do not anticipate that material cost increases will
significantly impact our operating margins in 2011. Based upon our
operating results in the first quarter, we believe we are well
positioned to continue our growth and financial performance for the
remainder of 2011. Accordingly, we are raising our 2011 diluted
earnings per share guidance to be in the range of $2.20 to $2.35,
an increase of $0.10 from our previous guidance of $2.10 to
$2.25.”
Updated projected sales growth and operating margin by segment
and on a consolidated basis are as follows:
2011 Estimated
Sales Growth
2011 Estimated
Operating Margin
Engine/Mobile Filtration 12.0% to 14.0% 20.5% to 22.5%
Industrial/Environmental Filtration 13.0% to 15.0% 10.0% to 11.0%
Packaging -9.0% to -7.0% 8.0% to 9.0% CLARCOR 10.5% to 12.5% 14.5%
to 16.0%
We expect 2011 cash from operations will be between $115 and
$125 million, capital expenditures will be between $30 and $40
million and our effective tax rate will range between 31.5% and
32.5%. Our 2011 updated guidance includes the impact of the
TransWeb acquisition.
CLARCOR will be holding a conference call to discuss the first
quarter 2011 results at 10:00 a.m. CDT on March 17, 2011.
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 877-870-5176 or 858-384-5517 by
providing confirmation code 5350581. The replay will be available
through March 31, 2011 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
CLARCOR 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 and results of
operations, 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; statements related to potential increases in commodity
prices and our ability to respond to such increases; 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. 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 2010 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.
CLARCOR 2011 UNAUDITED FIRST QUARTER RESULTS
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands except per share
data)
Three Months February 26, February
27, 2011 2010 Net sales $ 245,720 $
215,131 Cost of sales 164,767 145,326
Gross profit 80,953 69,805 Selling and administrative
expenses 49,662 46,909 Operating
profit 31,291 22,896 Other
income (expense): Interest expense (44 ) (123 ) Interest income 37
21 Other, net (200 ) (392 ) (207 )
(494 ) Earnings before income taxes 31,084 22,402
Provision for income taxes 9,163 7,595
Net earnings 21,921 14,807
Net earnings (losses) attributable to
noncontrolling interests
40 (59 )
Net earnings attributable to CLARCOR
Inc
$ 21,881 $ 14,866 Net earnings per share
attributable to CLARCOR Inc: Basic $ 0.43 $ 0.29
Diluted $ 0.43 $ 0.29 Average number of shares
outstanding: Basic 50,568,499 50,594,234
Diluted 51,287,238 50,934,913
Dividends paid per share $ 0.1050 $ 0.0975
CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars
in thousands)
February 26, November
27, 2011 2010 ASSETS Current assets: Cash
and cash equivalents $ 107,369 $ 117,022 Restricted cash 712 708
Accounts receivable, less allowance for
losses of $11,620 for 2011 and $11,428 for 2010
185,061 188,186 Inventories 196,136 182,384 Deferred income taxes
25,086 25,081 Income tax receivable 197 7,324 Prepaid expenses and
other current assets 6,500 5,568 Total
current assets 521,061 526,273
Plant assets at cost, 468,566 456,547 less accumulated depreciation
(281,907 ) (275,372 ) 186,659
181,175 Assets held for sale 2,000 2,000 Goodwill
236,811 228,105 Acquired intangibles, less accumulated amortization
102,873 91,174 Deferred income taxes - 1,000 Other noncurrent
assets 12,857 12,684 Total assets $
1,062,261 $ 1,042,411
LIABILITIES
Current liabilities: Current portion of long-term debt $ 136 $ 146
Accounts payable and accrued liabilities 138,545 160,206 Income
taxes 3,098 3,105 Total current
liabilities 141,779 163,457
Long-term debt, less current portion 17,351 17,331 Postretirement
healthcare benefits 543 540 Long-term pension liabilities 65,844
65,584 Deferred income taxes 30,763 31,266 Other long-term
liabilities 20,256 5,138 Total
liabilities 276,536 283,316
Contingencies Redeemable noncontrolling interest 1,556 1,568
SHAREHOLDERS' EQUITY Capital stock 50,414 50,335 Capital in
excess of par value 37,285 33,698 Accumulated other comprehensive
loss (28,690 ) (35,041 ) Retained earnings 724,051
707,478 Total CLARCOR Inc. equity 783,060
756,470 Noncontrolling interests 1,109
1,057 Total shareholders' equity
784,169 757,527 Total liabilities and
shareholders' equity $ 1,062,261 $ 1,042,411
CONSOLIDATED CONDENSED CASH FLOWS (Dollars in
thousands)
Three Months Ended February
26, February 27, 2011 2010 Cash flows
from operating activities: Net earnings $ 21,921 $ 14,807
Depreciation 6,998 6,989 Amortization
1,331 1,164 Stock-based compensation expense
2,605 2,511 Excess tax benefit from stock-based compensation
(657 ) (127 ) Changes in short-term investments - 11,567
Changes in assets and liabilities,
excluding short-term investments
(23,271 ) (1,750 ) Other, net
(97 ) 1 Net cash provided by operating
activities
8,830 35,162
Cash flows from
investing activities: Additions to plant assets
(3,492 ) (5,996 ) Proceeds from disposition of plant assets
34 74 Business acquisitions, net of cash acquired
(10,455 ) - Proceeds from insurance claim
- 557 Restricted Cash
46 103 Net cash used in investing
activities
(13,867 ) (5,262 )
Cash flows from
financing activities: Net payments under line of credit -
(20,000 ) Payments on long-term debt (1,574 ) (29 )
Sale of capital stock under stock option
and employee purchase plans
2,508 525 Purchase of treasury stock (1,947 ) - Excess tax benefits
from stock-based compensation 657 127 Cash dividends paid
(5,308 ) (4,933 ) Net cash used in financing activities
(5,664 ) (24,310 ) Net effect of exchange rate
changes on cash 1,048 (3,760 ) Net
change in cash and cash equivalents (9,653 ) 1,830 Cash and
cash equivalents, beginning of period 117,022
59,277 Cash and cash equivalents, end of period $
107,369 $ 61,107 Cash paid during the period
for: Interest $ 36 $ 1,037 Income taxes $ 1,740
$ 6,328
QUARTERLY INCOME STATEMENT
DATA BY SEGMENT (Dollars in thousands)
Three
Months February 26, February 27, 2011
2010 Net sales by segment: Engine/Mobile Filtration $
111,328 $ 96,428 Industrial/Environmental Filtration 112,119
102,027 Packaging 22,273 16,676 $
245,720 $ 215,131
Operating profit by
segment: Engine/Mobile Filtration $ 21,202 $ 17,862
Industrial/Environmental Filtration 7,248 4,283 Packaging
2,841 751 $ 31,291 $ 22,896
Operating margin by segment: Engine/Mobile Filtration
19.0 % 18.5 % Industrial/Environmental Filtration 6.5 % 4.2 %
Packaging 12.8 % 4.5 % 12.7 % 10.6 %
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