CLARCOR Inc. (NYSE: CLC):
Unaudited First Quarter 2012
Highlights
(Amounts in millions, except per share
data and percentages)
Quarter Ended 3/03/12
2/26/11 Change Net sales $ 257.3
$ 245.7 5% Operating profit 34.3 31.3 10% Net
earnings – CLARCOR 23.5 21.9 7% Diluted earnings per share $ 0.46 $
0.43 7% Operating margin 13.3% 12.7% 0.6 pts
CLARCOR Inc. (NYSE: CLC) reported its financial
results for the first quarter of 2012. Diluted earnings per share
grew 7% from the first quarter of 2011 to a record first quarter
high of $0.46. Higher diluted earnings per share were driven by a
5% increase in net sales, a 10% increase in operating profit and a
0.6 percentage point improvement in operating margin. Operating
profit at the company’s Engine/Mobile and Industrial/Environmental
Filtration segments increased 20% on a combined basis reflecting an
8% increase in net sales and a 1.4 percentage point improvement in
operating margin. Higher first quarter earnings were achieved
despite lower operating results at the company’s Packaging segment
where net sales declined 29% and operating profit declined 89% from
the first quarter of 2011. These Packaging segment results
negatively impacted consolidated diluted earnings per share by
approximately $0.04 compared with last year’s first quarter. The
company expects its Packaging segment results to improve over the
remainder of the year.
Changes in average foreign currency exchange rates reduced net
sales by $0.8 million and did not significantly impact operating
profit in the first quarter of 2012 compared with last year’s first
quarter.
Chris Conway, CLARCOR’s Chief Executive Officer, commented, “The
growth and profitability of our filtration segments remained strong
in the first quarter of 2012. We are particularly pleased with the
continued operating improvement in our Industrial/Environmental
Filtration segment, where operating profit increased 48% from the
first quarter of 2011. Our 8.8% operating margin in this reporting
segment in the first quarter improved 2.3 percentage points from
last year’s first quarter. To appreciate the significance of the
continuing improvement in financial results at our
Industrial/Environmental Filtration segment, recall that the
operating margin in this reporting segment in the first quarter of
2009 was 0.6%. With our continued focus on profitable growth in the
Industrial/Environmental Filtration segment from the introduction
of higher margin air filtration products into new markets and the
continued growth of our process liquid filtration markets including
oil and gas, we believe we are well-positioned to achieve our
long-term operating margin goal of 15% in this reporting segment in
the next three or four years.
“Combined operating margin at our filtration segments improved
to 14.1% in the first quarter of 2012 from 12.7% in last year’s
first quarter. This operating margin improvement was comprised of a
combined 0.8 percentage point improvement in gross margin
percentage and a combined 0.6 percentage point reduction in selling
and administration expenses as a percentage of net sales. Our
Engine/Mobile Filtration segment, which remains the solid base of
our business, increased its first quarter operating margin 0.4
percentage points to 19.4% from last year’s first quarter. The
combined reduction in selling and administrative expenses as a
percentage of net sales in our filtration segments was indicative
of our continuing culture of managing administrative costs
prudently while supporting profitable growth.
“Both of our filtration segments in the first quarter of 2012
experienced solid U.S. growth and lower foreign growth. Net sales
in our filtration segments in the U.S. increased a combined 12%,
but foreign sales were flat. U.S. growth in our Engine/Mobile
Filtration segment, with approximately 90% recurring revenue or
aftermarket sales, was driven by strong trucking activity in
conjunction with the continued expansion of our heavy-duty engine
filter product offerings. U.S. growth in our
Industrial/Environmental Filtration segment was across many of the
markets we serve in this reporting segment including an approximate
20% increase in our U.S. oil and gas filtration sales which have
benefited from new extraction activity at shale gas formations. Our
foreign sales were negatively impacted in the first quarter by
uncertain economic conditions in the Euro zone and lower sales in
China. We continue to monitor the uncertainty in Europe, and
although we now expect flat sales in China for full year 2012, we
believe we continue to be strongly positioned to capitalize on
China’s projected long-term filtration growth.”
First Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment increased 8%
compared with the first quarter of 2011. Overall, these higher net
sales were the result of 12% growth domestically and 3% growth
outside the U.S. Domestic growth was driven by higher trucking
activity in conjunction with our introduction of aftermarket
products into new markets. Foreign sales grew 3%—despite a 15%
reduction in China—due to the execution of our growth strategies in
other developing filtration markets. The first quarter reduction in
China sales, which was influenced by a significant reduction in
diesel engine manufacturing in the first quarter, was more than
offset by higher heavy-duty engine filtration sales into other
foreign markets including South America, Mexico, the Middle East,
South Africa, and Australia.
Operating profit at our Engine/Mobile Filtration segment
increased 10% from the first quarter of 2011. This increase was
primarily the result of higher heavy-duty engine filter sales. Our
operating margin improved 0.4 percentage points from last year’s
first quarter to 19.4%—the highest first quarter operating margin
in our Engine/Mobile Filtration segment since 2007. The increase in
our operating margin from the first quarter of 2011 was primarily
due to our ability to leverage our manufacturing overhead and
selling and administrative costs with higher sales.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment
increased 8% from the first quarter of 2011. Overall, these higher
net sales were the result of 13% sales growth domestically and 4%
lower foreign sales. Our growth in domestic sales was heavily
influenced by higher natural gas vessel sales as we continue to
develop our capability to support the natural gas extraction and
transportation process from shale formations. Many other markets in
this reporting segment also experienced strong first quarter sales
growth including our Total Filtration Services (TFS) distribution
business which has steadily increased sales and operating profit
over the last several years. Our United Air Specialists (UAS) dust
collector business increased U.S. sales almost 40% in the first
quarter from the growth of its OEM business, and our sales of
general industrial filtration products in this reporting segment
increased over 10%. The reduction in sales outside the U.S. was
influenced by an 11% reduction in sales in Europe due to continuing
issues with the Euro zone economies. Our lower European sales were
partially offset by higher natural gas vessel and aftermarket
filter sales in Asia and Brazil—where sales more than doubled from
the first quarter of 2011 through our continued focus on the
development of customer relationships in that geographic
market.
Operating profit at our Industrial/Environmental Filtration
segment grew $3.5 million, or 48%, from the first quarter of 2011.
Approximately 70% of this increase was from our domestic and
foreign natural gas business due to both higher sales and operating
margin. The 8.8% operating margin in our Industrial/Environmental
Filtration segment in the first quarter increased 2.3 percentage
points from last year including a 1.1 percentage point improvement
in gross margin percentage and a 1.2 percentage point reduction in
selling and administrative costs as a percentage of sales.
Packaging Segment
Net sales at our Packaging segment declined $6.4 million, or
29%, from the first quarter of 2011.
This reduction was primarily driven by lower confection
packaging sales, smokeless tobacco packaging sales and lower sales
in other markets due to inventory and production scheduling
adjustments. The reduction in confection sales was primarily due to
the loss of packaging business for a product from a large customer,
and lower smokeless tobacco packaging sales were primarily due to
one of our major customers qualifying a second source supplier
according to their corporate policy. The $2.5 million reduction in
operating profit and the 10.8 percentage point reduction in
operating margin were primarily the result of lower sales.
Impacting the year-over-year Packaging segment operating profit
comparison was a $0.5 million patent sale in the first quarter of
2011 which did not repeat in this year’s first quarter and a $0.2
million bad debt expense recognized in the first quarter of 2012
pursuant to the Kodak bankruptcy.
Sales and operating profit fell short of our internal
expectations in the first quarter. We believe some of these sales
issues are transitory, and we are aggressively pursuing several
significant sales opportunities in our pipeline for the remainder
of the year. Accordingly, we are not significantly reducing our
full year expectations for our Packaging segment for 2012.
Income Taxes and Other Income
The 3.3 percentage point increase in our effective tax rate to
32.8% in the first quarter of 2012 from 29.5% in the first quarter
of 2011 was primarily due to a significant benefit recognized in
the first quarter of 2011 related to the extension of the research
and experimentation tax credit in December 2010 in addition to the
non-renewal of this same credit for 2012. Other income (expense) in
the first quarter of 2012 included the receipt of a one-time $1.2
million dividend pursuant to our investment in BioProcess Algae LLC
and a $0.5 million foreign currency loss in the first quarter of
2012 primarily from the translation of cash accounts at certain
foreign subsidiaries denominated in currencies other than their
functional currencies.
2012 Guidance
Chris Conway commented on 2012 guidance: “The strength of our
filtration business was evident from our strong first quarter
growth and operating results. We expect these results to continue
as a result of the many growth opportunities we are pursuing in the
broad filtration markets we serve. We believe we are strongly
positioned to participate in the expected growth in the natural gas
market—a market we believe has as much long-term potential as any
other filtration market. We continue to develop innovative air
filtration products for non-traditional filtration markets
including animal confinement and outdoor electronic kiosks, and we
continue to drive international expansion as evidenced by our
significant growth in Brazil in the first quarter. We experienced
some headwinds in the first quarter from our Packaging segment and
from foreign markets in Europe and China. Although we now expect
flat sales in China for 2012, it remains a market with excellent
long-term growth potential. In addition, we expect recovery in our
Packaging segment and our European sales as the year progresses.
Accordingly, we confirm our guidance for 2012 diluted earnings per
share of $2.55 to $2.70.”
Anticipated sales growth from 2011 and operating margin by
segment and on a consolidated basis are as follows:
2012 EstimatedSales
Growth
2012 EstimatedOperating
Margin
Engine/Mobile Filtration 7.0% to 9.0% 22.0% to 23.0%
Industrial/Environmental Filtration 7.0% to 9.0% 11.0% to 12.0%
Packaging -10.0% to -8.0% 9.0% to 11.0% CLARCOR 5.5% to 7.5% 16.0%
to 17.0%
We project 2012 cash from operations to be between $125 million
and $135 million, capital expenditures to be between $45 million
and $55 million and our effective tax rate to be between 32.0% and
32.5%.
CLARCOR will be holding a conference call to discuss the first
quarter 2012 results at 10:00 a.m. CST on March 22, 2012.
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 3689402. The replay will be available
through April 5, 2012 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 may be identified from use of the words “may,”
“should,” “could,” “potential,” “continue,” “plan,” “forecast,”
“estimate,” “project,” “believe,” “intent,” “anticipate,” “expect,”
“target,” “is likely,” “will,” or the negative of these terms, and
similar expressions. 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 anticipated future
growth and results of operations, including the anticipated 2012
performance of the Company and each of its segments, our
projections with respect to 2012 estimated sales growth and 2012
estimated operating margins for the Company and each of its
segments, and our projections with respect to 2012 cash from
operations, 2012 capital expenditures and 2012 effective tax rates;
statements regarding 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 regarding our ability to achieve our long-term
operating margin goal of 15% in our Industrial/Environmental
Filtration segment in the next three or four years; statements
regarding our culture of managing administrative costs prudently
while supporting profitable growth; statements regarding our
expectations of growth in Europe for the remainder of 2012 as we
introduce new products and to continue to expand our geographic
presence from our European operations; statements regarding ongoing
uncertainty in China and our expectation of sales in China for full
year 2012; statements regarding our belief regarding the transitory
nature of some sales issues in our Packaging segment, and our
ability to procure several significant sales opportunities in our
pipeline in the Packaging segment for 2012; statements regarding
our ability to develop our capability to support the natural gas
extraction and transportation from shale formations; 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. The Company’s future
results may differ materially from the Company’s past results as a
result of various risks and uncertainties, including the risk
factors discussed in the “Risk Factors” section of the Company’s
2011 Form 10-K 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 estimated sales growth and estimated
operating margin levels for 2012 for the Company and its business
segments, 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. 2012 UNAUDITED FIRST QUARTER RESULTS
CONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS
(Dollars in thousands except per share data)
Three Months Ended
March 3, February 26, 2012 2011
Net sales $ 257,264 $ 245,720 Cost of sales 171,049
164,767 Gross profit 86,215 80,953
Selling and administrative expenses 51,903
49,662 Operating profit 34,312
31,291 Other income (expense): Interest expense (100
) (44 ) Interest income 134 37 Other, net 612
(200 ) 646 (207 ) Earnings
before income taxes 34,958 31,084 Provision for income taxes
11,466 9,163 Net earnings 23,492
21,921
Net earnings attributable to
noncontrolling interests
(13 ) (40 ) Net earnings attributable to CLARCOR Inc $
23,479 $ 21,881 Net earning per share
attributable to CLARCOR Inc. - Basic $ 0.47 $ 0.43
Net earning per share attributable to CLARCOR Inc. - Diluted $ 0.46
$ 0.43 Weighted average number of shares
outstanding - Basic 50,411,196 50,568,499
Weighted average number of shares outstanding - Diluted
51,094,385 51,287,238 Dividends
paid per share $ 0.1200 $ 0.1050 CLARCOR INC.
2012 UNAUDITED FIRST QUARTER RESULTS, continued
CONSOLIDATED CONDENSED BALANCE
SHEETS
(Dollars in thousands)
March 3, December 3,
2012 2011 ASSETS Current assets: Cash and cash
equivalents $ 142,063 $ 155,999 Restricted cash 1,007 1,105
Accounts receivable, less allowance for
losses of $10,489 and $9,795, respectively
201,758 206,664 Inventories 208,578 200,274 Deferred income taxes
25,580 25,974
Income taxes receivable
704 3,373 Prepaid expenses and other current assets 7,596
7,510 Total current assets 587,286
600,899
Plant assets, at cost, less accumulated
depreciation of $299,454 and $293,111, respectively
188,134 184,992 Assets held for sale 2,000 2,000 Goodwill 235,941
235,530 Acquired intangible assets, less accumulated amortization
97,636 98,674 Deferred income taxes 621 749 Other noncurrent assets
14,120 12,089 Total assets $ 1,125,738
$ 1,134,933
LIABILITIES Current
liabilities: Current portion of long-term debt $ 1,176 $ 1,289
Accounts payable and accrued liabilities 133,342 155,585 Income
taxes payable 2,846 3,176 Total current
liabilities 137,364 160,050
Long-term debt, less current portion 16,026 15,981 Long-term
pension and postretirement healthcare benefits liabilities 61,317
74,524 Deferred income taxes 40,264 36,194 Other long-term
liabilities 10,340 11,069 Total
liabilities 265,311 297,818
Contingencies Redeemable noncontrolling interests 1,585 1,557
SHAREHOLDERS' EQUITY Capital stock 50,262 50,145
Capital in excess of par value 21,981 19,453 Accumulated other
comprehensive loss (41,331 ) (44,391 ) Retained earnings
827,083 809,520 Total CLARCOR Inc. equity
857,995 834,727 Noncontrolling
interests 847 831 Total shareholders'
equity 858,842 835,558 Total
liabilities and shareholders' equity $ 1,125,738 $ 1,134,933
CLARCOR INC. 2012 UNAUDITED FIRST QUARTER RESULTS,
continued
CONSOLIDATED CONDENSED CASH
FLOWS
(Dollars in thousands)
Three Months Ended March
3, February 26, 2012 2011 Cash flows
from operating activities: Net earnings $ 23,492 $ 21,921
Depreciation 6,568 6,998 Amortization 1,426 1,331 Other noncash
items (102 ) (94 )
Net loss (gain) on disposition of plant
assets
16 (3 ) Stock-based compensation expense 2,906 2,605 Excess tax
benefit from stock-based compensation (2,302 ) (657 ) Deferred
income taxes 9,522 (367 ) Changes in assets and liabilities,
excluding short-term investments (40,301 ) (22,904 )
Net cash provided by operating activities 1,225
8,830
Cash flows from investing
activities: Restricted cash 51 46 Business acquisitions, net of
cash acquired (2,144 ) (10,455 ) Additions to plant assets (9,797 )
(3,492 ) Proceeds from disposition of plant assets 59 34 Investment
in affiliates (132 ) - Net cash used in
investing activities (11,963 ) (13,867 )
Cash flows from financing activities: Payments on long-term
debt (26 ) (1,574 ) Sale of capital stock under stock option and
employee purchase plans 2,958 2,508 Purchase of treasury stock
(3,635 ) (1,947 ) Excess tax benefits from stock-based compensation
2,302 657 Cash dividends paid (6,046 ) (5,308 ) Net
cash used in financing activities (4,447 ) (5,664 )
Net effect of exchange rate changes on cash 1,249
1,048 Net change in cash and cash
equivalents (13,936 ) (9,653 ) Cash and cash equivalents,
beginning of period 155,999 117,022
Cash and cash equivalents, end of period $ 142,063 $
107,369
Cash paid during the period for:
Interest $ 68 $ 36 Income taxes, net of refunds $
2,879 $ 1,740 CLARCOR INC. 2012 UNAUDITED
FIRST QUARTER RESULTS, continued
QUARTERLY INCOME STATEMENT DATA BY SEGMENT (Dollars in
thousands)
Three Months March 3 February
26 2012 2011 Net sales by segment:
Engine/Mobile Filtration $ 120,283 $ 111,328
Industrial/Environmental Filtration 121,114 112,119 Packaging
15,867 22,273 $ 257,264 $
245,720
Operating profit by segment:
Engine/Mobile Filtration $ 23,297 $ 21,202 Industrial/Environmental
Filtration 10,705 7,248 Packaging 310 2,841
$ 34,312 $ 31,291
Operating
margin by segment: Engine/Mobile Filtration 19.4 % 19.0 %
Industrial/Environmental Filtration 8.8 % 6.5 % Packaging
2.0 % 12.8 % 13.3 % 12.7 %
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