CLARCOR Inc. (NYSE: CLC):
Unaudited Third Quarter 2011
Highlights(Amounts in millions, except per share data and
percentages)
Quarter Ended Nine Months Ended 8/27/11
8/28/10 Change
8/27/11 8/28/10
Change Net sales $ 284.8 $ 262.8
8 % $ 819.1 $ 735.8 11 % Operating
profit 46.5 41.7 11 % 126.5 100.8 26 % Net earnings – CLARCOR 32.1
28.3 13 % 86.8 67.1 29 % Diluted earnings per share $ 0.63 $ 0.55
15 % $ 1.69 $ 1.31 29 % Operating margin 16.3 %
15.9 % 0.4 pts 15.4 %
13.7 % 1.7 pts
CLARCOR Inc. (NYSE: CLC) reported its financial
results for the third quarter of 2011. Diluted earnings per share
of $0.63 grew 15% from last year’s third quarter on the strength of
an 8% increase in net sales and a 0.4 percentage point improvement
in operating margin. Changes in average foreign currency exchange
rates positively influenced net sales by $6.5 million, or 2%, and
operating profit by $1.2 million, or 3%, in the third quarter of
2011 compared with the third quarter of 2010.
Diluted earnings per share of $1.69 for the first nine months of
2011 were 29% higher than the same prior year period driven by an
11% increase in net sales and 1.7 percentage point improvement in
operating margin. Changes in average foreign currency exchange
rates positively influenced net sales by $13.4 million, or 2%, and
operating profit by $2.7 million, or 3%, in the first nine months
of 2011 compared with the first nine months of 2010.
Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer,
commented, “The third quarter was another solid quarter for us. Our
diluted earnings per share of $0.63 were our second highest
quarterly earnings in the history of CLARCOR—second only to the
$0.64 last quarter. In addition, the third quarter marked the
seventh consecutive quarter where we exceeded the previous year’s
quarterly diluted earnings per share by at least 15%. This
consistent success is a result of the continued execution of our
long-term strategy including a commitment to sustainable growth,
cost containment and continuous improvement.
“All of our reporting segments contributed to our strong
financial performance with each improving operating margin by at
least 1.3 percentage points and growing operating profit by at
least 20% in the first nine months of 2011 compared with the same
period last year. Of particular note, our Industrial/Environmental
Filtration segment’s operating margin once again exceeded 10% in
the third quarter and is on pace to exceed this target for the full
year. As a result of the balanced segment performance, our overall
operating margin of 15.4% in the first nine months of 2011 exceeds
our full year 2010 operating margin of 14.3%—our highest full year
operating margin in almost twenty years.
“Our strong financial performance in 2011 is driven in part by
the 11% increase in net sales compared with the first nine months
of 2010. This growth would not be possible without the introduction
of new products and new markets and a focus on international
expansion. We anticipate our filter markets will continue to grow
going forward as evidenced by our $28 million commitment over the
next three years to expand our heavy-duty engine filter capacity in
the U.S. In addition, we remain focused on growth outside the U.S.,
where net sales have increased 13% in the first nine months of 2011
despite a reduction in our China heavy-duty engine filter sales in
the third quarter. The slowdown in China in the third quarter was
the result of softer demand from our OEM first-fit customers as
they adjusted their production schedules. We expect a return to
higher growth in China in the fourth quarter and still expect our
China heavy-duty engine filter sales to grow approximately 30% for
the full year—our original target for 2011.
“Our 33.7% gross margin percentage in the third quarter was our
third highest quarterly gross margin percentage in almost twenty
years but was lower than the 34.8% gross margin percentage in the
third quarter of 2010. This reduction in gross margin from the
prior year third quarter was primarily the result of additional
costs that we incurred to launch a new air filtration product and a
higher sales mix of capital vessels versus aftermarket filters in
our natural gas market. In general, we anticipate maintaining our
gross margin percentage between 33.5% and 34.5%, with some quarters
closer to the higher end of this range than others.
“Our continued focus on cost is evident from our 1.7 percentage
point reduction in selling and administrative expenses as a
percentage of sales for the third quarter primarily from our
efforts to control our administrative expenses while still
expanding our investment in sales and technology resources. As a
result, combined selling and administrative expenses were actually
lower in the third quarter of 2011 compared with last year’s third
quarter despite an 8% increase in sales. The reduction in
administrative expenses is indicative of our culture to continue to
manage costs prudently while still supporting growth.”
Third Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment increased
$10.7 million, or 9%, compared with the third quarter of 2010. This
increase in net sales was primarily related to higher volume and
pricing of heavy-duty engine filter sales in the U.S. Overall, the
increase in net sales was the result of 8% growth domestically and
10% growth outside the U.S. (2% when adjusted for changes in
foreign currency exchange rates). The slower growth outside the
U.S. in the third quarter was influenced by a 13% reduction in net
sales in China as some of our OEM customers adjusted production
schedules and sold down existing inventory. We expect our China
heavy-duty engine filter sales to return to higher growth in the
fourth quarter and expect our full year growth to be approximately
30%. Heavy-duty truck tonnage in the U.S. was approximately 5%
higher in our first eight fiscal months of 2011 compared with the
same period last year.
Operating profit at our Engine/Mobile Filtration segment
increased $4.2 million, or 16%, from the third quarter of 2010.
This increase in operating profit was primarily the result of
higher year-over-year heavy-duty engine filter sales. Our operating
margin improved 1.5 percentage points from last year’s third
quarter to 23.3%—our highest quarterly operating margin in this
reporting segment since the third quarter of 2008. This operating
margin improvement was primarily the result of our ability to
leverage our fixed manufacturing and selling and administrative
costs.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment
increased $12.8 million, or 11%, from the third quarter of 2010.
Net sales in the U.S. increased 16% while net sales outside the
U.S. declined 2% (11% when adjusted for changes in foreign currency
exchange rates). The slower growth outside the U.S. was influenced
by lower sales in Europe in part due to the timing of larger system
sales in Germany and less favorable Euro zone economic conditions.
Our growth in domestic sales was the result of higher natural gas
vessel sales, increased sales of new air filtration products and
incremental sales from our acquisition of TransWeb.
Operating profit at our Industrial/Environmental Filtration
segment increased $0.8 million, or 6%, from the third quarter of
2010. Our 10.3% operating margin in the third quarter declined 0.5
percentage points from last year primarily due to additional costs
to launch a new air filtration product and a higher mix of capital
vessel versus aftermarket filter sales in our natural gas market.
With a 9.8% operating margin in the first nine months of 2011, we
expect to exceed an operating margin of 10% in this reporting
segment for the full year.
Packaging Segment
Net sales in our Packaging segment declined $1.5 million, or 6%,
from the third quarter of 2010. This reduction in sales was
primarily the result of lower smokeless tobacco packaging sales as
our customers were building inventory in last year’s third quarter
to support product launch. As a result of these lower sales,
operating profit in our Packaging segment declined $0.2 million, or
8%, and operating margin decreased 0.2 percentage points from the
third quarter of 2010. However, for the first nine months of 2011,
operating profit increased $2.7 million, or 46%, and operating
margin increased 3.7 percentage points from the same prior year
period.
2011 Guidance
Norm Johnson commented: “Our third quarter extended a string of
successful quarters. We expect 2011 to be another record earnings
year for us as we continue to execute our long-term strategy.
However, we enter the fourth quarter with some caution. We
experienced some challenges with slower economic activity in Europe
and China in the third quarter, and uncertainty prevails in the
U.S. economy going forward. Accordingly, we are maintaining our
current 2011 diluted earnings per share guidance at $2.25 to $2.40.
We expect to be in the upper end of this range assuming there are
no major economic disruptions in the fourth quarter.”
Updated projected sales growth and operating margin by segment
and on a consolidated basis are as follows:
2011 EstimatedSales
Growth
2011 EstimatedOperating
Margin
Engine/Mobile Filtration 14.0% to 15.0% 21.5% to 22.5%
Industrial/Environmental Filtration 11.0% to 12.0% 10.0% to 11.0%
Packaging -5.0% to -2.0% 10.0% to 12.0% CLARCOR 11.0% to 12.0%
15.0% to 16.0%
We expect 2011 cash from operations will be between $115 million
and $120 million, capital expenditures will be between $30 million
and $35 million and our effective tax rate will range between 31.0%
and 32.0%. Our 2011 guidance includes the impact of the TransWeb
acquisition.
CLARCOR will be holding a conference call to discuss the third
quarter 2011 results at 10:00 a.m. CDT on September 15, 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 5751948. The replay will be available
through September 27, 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, growth and
cost reduction 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.
TABLES FOLLOW
CLARCOR INC. 2011 UNAUDITED THIRD QUARTER RESULTS
CONSOLIDATED CONDENSED
STATEMENTS OF EARNINGS (Dollars in thousands except per share
data)
Quarter Ended Nine Months Ended
August 27, August 28, August 27, August
28, 2011 2010 2011 2010 Net
sales $ 284,819 $ 262,770 $ 819,072 $ 735,770 Cost of sales
188,945 171,209 542,783
489,561 Gross profit 95,874 91,561 276,289 246,209
Selling and administrative expenses 49,413
49,869 149,757 145,409
Operating profit 46,461 41,692
126,532 100,800 Other income
(expense): Interest expense (87 ) (103 ) (352 ) (340 ) Interest
income 170 70 446 186 Other, net 16 15
(412 ) (582 ) 99 (18 )
(318 ) (736 ) Earnings before income taxes
46,560 41,674 126,214 100,064 Provision for income taxes
14,401 13,103 39,253
32,751 Net earnings 32,159 28,571 86,961
67,313
Net (earnings) loss attributable to
noncontrolling interests
(89 ) (245 ) (202 ) (236 ) Net
earnings attributable to CLARCOR Inc $ 32,070 $ 28,326
$ 86,759 $ 67,077 Net earning per share
attributable to CLARCOR Inc. - Basic $ 0.63 $ 0.56 $
1.72 $ 1.32 Net earning per share attributable to
CLARCOR Inc. - Diluted $ 0.63 $ 0.55 $ 1.69 $
1.31 Weighted average number of shares outstanding -
Basic 50,527,206 50,796,393
50,563,556 50,700,066 Weighted average number
of shares outstanding - Diluted 51,200,241
51,248,957 51,256,621 51,145,071
Dividends paid per share $ 0.1050 $ 0.0975 $
0.3150 $ 0.2925 CLARCOR INC. 2011 UNAUDITED
THIRD QUARTER RESULTS, continued
CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands)
August 27, November 27, 2011 2010
ASSETS Current assets: Cash and cash equivalents $ 127,065 $
117,022 Restricted cash 994 708
Accounts receivable, less allowance for
losses of $10,647 and $11,428, respectively
208,200 188,186 Inventories 209,701 182,384 Deferred income taxes
25,588 25,081 Income tax receivable 1,982 7,324 Prepaid expenses
and other current assets 6,994 5,568
Total current assets 580,524 526,273
Plant assets, at cost, less accumulated
depreciation of $292,382 and $275,372, respectively
185,170 181,175 Assets held for sale 2,000 2,000 Goodwill 237,138
228,105 Acquired intangible assets, less accumulated amortization
100,119 91,174 Deferred income taxes - 1,000 Other noncurrent
assets 13,008 12,684 Total assets $
1,117,959 $ 1,042,411
LIABILITIES
Current liabilities: Current portion of long-term debt $ 1,347 $
146 Accounts payable and accrued liabilities 153,327 160,206 Income
taxes 4,500 3,105 Total current
liabilities 159,174 163,457
Long-term debt, less current portion 16,005 17,331 Long-term
pension and postretirement healthcare benefits liabilities 56,679
66,124 Deferred income taxes 36,066 31,266 Other long-term
liabilities 14,090 5,138 Total
liabilities 282,014 283,316
Contingencies Redeemable noncontrolling interests 1,650 1,568
SHAREHOLDERS' EQUITY Capital stock 50,231 50,335
Capital in excess of par value 28,394 33,698 Accumulated other
comprehensive loss (23,376 ) (35,041 ) Retained earnings
778,310 707,478 Total CLARCOR Inc. equity
833,559 756,470 Noncontrolling
interests 736 1,057 Total shareholders'
equity 834,295 757,527 Total
liabilities and shareholders' equity $ 1,117,959 $ 1,042,411
CLARCOR INC. 2011 UNAUDITED THIRD QUARTER RESULTS,
continued
CONSOLIDATED CONDENSED
CASH FLOWS (Dollars in thousands)
Nine Months
Ended August 27, August 28, 2011
2010 Cash flows from operating activities: Net
earnings $ 86,961 $ 67,313 Depreciation 20,679 20,357 Amortization
4,160 3,563 Other noncash items 180 (25 ) Net loss on disposition
of plant assets 168 252 Stock-based compensation expense
4,786 4,004 Excess tax benefit from stock-based compensation
(2,338 ) (1,893 ) Changes in short-term investments - 32,171
Changes in assets and liabilities, excluding short-term investments
(45,387 ) (24,634 ) Net cash provided by operating
activities
69,209 101,108
Cash flows
from investing activities: Restricted cash
(317 ) (166 ) Business acquisitions, net of cash acquired
(14,160 ) - Additions to plant assets
(16,789 ) (17,305 ) Proceeds from disposition of plant assets
244 88 Proceeds from insurance claim
- 557 Investment in affiliates
- (100 ) Net cash used in investing activities
(31,022 ) (16,926 )
Cash flows from
financing activities: Net payments under multicurrency
revolving credit agreement - (35,000 ) Payments on long-term debt
(1,825 ) (115 ) Sale of capital stock under stock option and
employee purchase plans 6,900 4,979 Acquisition of noncontrolling
interests - (732 ) Purchase of treasury stock (18,204 ) (10,009 )
Excess tax benefits from stock-based compensation 2,338 1,893
Dividend paid to noncontrolling interests (321 ) - Cash dividends
paid (15,927 ) (14,828 ) Net cash used in financing
activities (27,039 ) (53,812 ) Net effect of
exchange rate changes on cash (1,105 ) (2,423 )
Net change in cash and cash equivalents 10,043 27,947
Cash and cash equivalents, beginning of period 117,022
59,277 Cash and cash equivalents, end
of period $ 127,065 $ 87,224
Cash paid
during the period for: Interest $ 95 $ 1,126
Income taxes, net of refunds $ 26,505 $ 37,058
CLARCOR INC. 2011 UNAUDITED THIRD QUARTER RESULTS, continued
QUARTERLY
INCOME STATEMENT DATA BY SEGMENT (Dollars in thousands)
2011 Quarter Quarter Quarter
Ended Ended Ended Nine February
26 May 28 August 27 Months Net sales by
segment: Engine/Mobile Filtration $ 111,328 $ 131,276 $ 129,467
$ 372,071 Industrial/Environmental Filtration 112,119 133,499
132,380 377,998 Packaging 22,273 23,758
22,972 69,003 $ 245,720 $
288,533 $ 284,819 $ 819,072
Operating profit by segment: Engine/Mobile Filtration $
21,202 $ 29,592 $ 30,175 $ 80,969 Industrial/Environmental
Filtration 7,248 16,179 13,650 37,077 Packaging 2,841
3,009 2,636 8,486 $
31,291 $ 48,780 $ 46,461 $ 126,532
Operating margin by segment: Engine/Mobile Filtration
19.0 % 22.5 % 23.3 % 21.8 % Industrial/Environmental Filtration 6.5
% 12.1 % 10.3 % 9.8 % Packaging 12.8 % 12.7 %
11.5 % 12.3 % 12.7 % 16.9 % 16.3 %
15.4 %
2010 Quarter
Quarter Quarter Ended Ended
Ended Nine February 27 May 29 August
28 Months Net sales by segment: Engine/Mobile
Filtration $ 96,428 $ 113,434 $ 118,753 $ 328,615
Industrial/Environmental Filtration 102,027 117,566 119,589 339,182
Packaging 16,676 26,869 24,428
67,973 $ 215,131 $ 257,869 $
262,770 $ 735,770
Operating profit by
segment: Engine/Mobile Filtration $ 17,862 $ 23,643 $ 25,937 $
67,442 Industrial/Environmental Filtration 4,283 10,371 12,887
27,541 Packaging 751 2,198 2,868
5,817 $ 22,896 $ 36,212 $ 41,692
$ 100,800
Operating margin by segment:
Engine/Mobile Filtration 18.5 % 20.8 % 21.8 % 20.5 %
Industrial/Environmental Filtration 4.2 % 8.8 % 10.8 % 8.1 %
Packaging 4.5 % 8.2 % 11.7 % 8.6 %
10.6 % 14.0 % 15.9 % 13.7 %
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