CLARCOR Inc. (NYSE: CLC):
Unaudited First Quarter 2014
Highlights
(Amounts in millions, except per share
data and percentages)
Quarter Ended 3/1/14
3/2/13 Change Net sales $
312.7 $ 256.3 22 % Operating profit 31.3 33.8 -8 % Net earnings –
CLARCOR 24.3 23.5 3 % Diluted earnings per share $ 0.48 $ 0.47 2 %
Operating margin 10.0 % 13.2 % -3.2 pts
CLARCOR Inc. (NYSE: CLC) reported that first
quarter 2014 diluted earnings per share grew 2% from last year’s
first quarter. Net sales increased $56.4 million, or 22%, primarily
due to first quarter sales of $45.4 million from the December 2013
acquisition of GE Air Filtration. First quarter 2014 diluted
earnings per share were positively impacted by $0.06 due to a $2.8
million bargain purchase gain—included in other income—recognized
from the acquisition of Bekaert Advanced Filtration and negatively
impacted by $0.02 from a $1.3 million restructuring charge related
to the company’s HVAC air filtration business. Changes in average
foreign currency exchange rates negatively impacted net sales by
$1.4 million and operating profit by $0.3 million in the first
quarter of 2014 as compared with last year’s first quarter.
Chris Conway, CLARCOR’s Chairman, President and Chief Executive
Officer, commented, “Our first quarter results were influenced by
several items which make the comparison to our prior year results
somewhat challenging, including the impact of the two acquisitions
we completed in the first quarter of 2014, certain costs and
benefits associated with these acquisitions and restructuring
charges at our HVAC air filtration business. When the impact of the
two first quarter acquisitions and the HVAC restructuring charges
are removed from our financial results, net sales increased
approximately 3%, operating profit increased slightly and operating
margin declined slightly from the first quarter of 2013.1
“First quarter financial performance at our CLARCOR Industrial
Air business—formerly GE Air Filtration—was better than we
anticipated. When adjusted for expenses of $6.7 million related to
acquisition integration and the purchase accounting step-up in
inventory basis, first quarter operating margin with respect to
this business was in excess of 12%. This first quarter operating
margin was positively influenced by favorable material costs, fixed
overhead absorption and sales mix of higher margin industrial air
and gas turbine aftermarket filters versus gas turbine air inlet
systems. We do not expect this favorable first quarter sales mix
and operating margin level to be maintained during the balance of
fiscal 2014. Accordingly, we anticipate full year operating margin
for this business to be approximately 8% excluding the combined
impact of the projected acquisition integration costs and the
purchase accounting step-up in inventory basis—which we project
could negatively impact 2014 operating margin in this business by
approximately 4.0 percentage points. In addition, net sales at
CLARCOR Industrial Air for the eleven weeks under our ownership in
the first quarter increased approximately 20% from the same period
last year when this business was under its former ownership. These
higher sales were across all of our primary segments including gas
turbine aftermarket filters, gas turbine air inlet systems and
industrial air filters. We still have much to do to successfully
integrate CLARCOR Industrial Air, but we are even more excited
today about the long-term prospects of this business than we were
at the time of acquisition.
“Sales at our Engine/Mobile Filtration segment increased
approximately 4% in the first quarter with balanced geographic
growth including a 5% increase in domestic sales and a 3% increase
in foreign sales. Our U.S. sales growth was primarily driven by a
14% increase in locomotive filtration sales and a 7% increase in
heavy-duty independent aftermarket sales partially offset by
relatively flat automotive, heavy-duty OE and other filter company
sales. The 7% growth in domestic heavy-duty aftermarket sales was
higher than our expectations heading into the quarter, but some of
this growth could have been pulled forward from our second quarter
as evidenced by our particularly strong sales levels in February.
Despite higher than expected domestic heavy-duty aftermarket growth
in the first quarter, we anticipate full year sales growth to be 3%
to 5%, consistent with our expectations heading into the year. Our
full year expectations are lower than actual growth in the first
quarter primarily due to uncertainty in the broader domestic
trucking market where U.S. truck tonnage has declined approximately
5% since the end of our last fiscal year. The 3% increase in first
quarter sales outside the U.S. in this reporting segment was
primarily the result of a 21% increase in heavy-duty engine
filtration export sales to the Middle East while sales in Europe
and China were relatively flat.
“When excluding the impact of our two first quarter
acquisitions, sales at our Industrial/Environmental Filtration
segment increased approximately 3% from last year’s first quarter.
This increase was primarily driven by higher dust collection system
sales to OE customers and higher global oil & gas filtration
product sales—which increased 3% from the first quarter of 2013,
consistent with our expectations heading into the quarter. The
first quarter increase in oil & gas filtration sales was lower
than our anticipated 10% full year sales growth primarily due to
the “lumpy” timing of several large element and vessel orders that
shipped in last year’s fourth quarter combined with several other
large orders that are currently scheduled to ship in this year’s
second quarter. Our current oil & gas filtration backlog is at
an all-time high as we continue to experience strong global order
activity, notably in Latin America and the Middle East. This strong
backlog supports our continued expectations for full year 10% sales
growth in our oil & gas filtration business.
“As mentioned in the opening paragraph, we recorded a $1.3
million restructuring charge in the first quarter of 2014 at our
HVAC air filtration business. This restructuring charge was
primarily related to the planned closure of our manufacturing
facility in Pittston, PA. It is never easy to execute decisions
which negatively impact our employees, but modifying the cost
structure of this business was a critical step for us to improve
its long-term profitability. We plan to move the Pittston
production equipment to other manufacturing locations, and we
estimate that this restructuring will reduce annual operating costs
from $1.5 to $2.0 million. Our long-term goal is to improve
operating margins at our HVAC air filtration business to 10% by
increasing our focus on higher margin air filtration products and
improving our cost structure. HVAC air filtration sales were 2%
lower than last year’s first quarter as lower swine filtration
sales were partially offset by higher commercial and industrial
sales—which increased 3% despite the harsh winter weather.”
First Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment increased 4%
compared with the first quarter of 2013 including relatively
proportionate increases domestically and outside the U.S. Higher
domestic sales were driven by a 7% increase in our heavy-duty
engine filtration aftermarket, and higher foreign sales were driven
by strong export activity from the U.S. primarily into the Middle
East. Heavy-duty engine filtration sales in China and Europe were
relatively flat compared with the first quarter of 2013.
Operating profit at our Engine/Mobile Filtration segment
declined approximately 3% from the first quarter of 2013, despite
the increase in sales, primarily due to a 1.2 percentage point
reduction in operating margin driven by lower absorption of fixed
costs and higher material costs. Much of the lower absorption was
related to additional capacity and infrastructure put in place in
fiscal 2013 while increased material costs were driven by higher
media and steel pricing. We executed a customer price increase at
the end of the first quarter which we expect will partially offset
these higher material costs. For the full year 2014, we anticipate
operating margin in this reporting segment to be between 21% and
22%—consistent with our expectations heading into the year.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment
increased $52.2 million, or 43%, from the first quarter of 2013
including $48.1 million, or 40%, from the two first quarter
acquisitions and $4.1 million, or 3%, from organic growth.
Geographically, organic domestic sales increased 1% while organic
foreign sales increased approximately 11%. Our growth in domestic
sales was primarily due to a 29% increase in dust collection system
sales, including to OE customers, in addition to significant
increases in commercial aerospace and offshore oil drilling
filtration sales, as our major offshore oil drilling customer
accelerated receipt of product in the first quarter after delays in
2013. Higher sales in these U.S. markets were offset by lower
aviation fuel filtration vessel sales for military applications and
lower HVAC air filtration sales primarily related to the timing of
swine filtration system shipments. The 11% increase in organic
sales outside the U.S. was driven by higher oil & gas
filtration sales into several geographies including Latin America
and Canada.
Operating profit at our Industrial/Environmental Filtration
segment declined $1.5 million, or 16%, from last year’s first
quarter primarily driven by a $1.3 million loss from the two first
quarter acquisitions and $1.3 million of restructuring charges
recognized at our HVAC air filtration business. Excluding the
impact of the two first quarter acquisitions and the restructuring
charges, operating profit increased approximately $1.1 million, or
11%, from the first quarter of 2013. Operating margin in the first
quarter of 2014 declined approximately 3.2 percentage points from
last year’s first quarter primarily due to a 3.8 percentage point
impact from the two acquisitions and the HVAC restructuring
charges. Operating margin in this reporting segment improved
approximately 0.6 percentage points excluding the impact of the two
first quarter acquisitions and the HVAC restructuring charges.
Packaging Segment
Net sales at our Packaging segment declined 4% from the first
quarter of 2013 primarily due to lower packaging sales in the
battery, spice and smokeless tobacco markets partially offset by
higher sales of decorated flat sheet metal products. Operating
profit declined $0.4 million from the first quarter of 2013
primarily due to a 2.7 percentage point reduction in operating
margin driven by lower absorption of fixed costs from lower
sales.
Other Income
We recognized a $2.8 million bargain purchase gain in the first
quarter of 2014 related to our acquisition of Bekaert Advanced
Filtration (“BAF”). We paid approximately $7.3 million (net of cash
acquired) for BAF and acquired net assets valued at approximately
$10.1 million including intangible assets of $2.1 million. The
excess of net assets acquired over purchase price was recognized as
a bargain purchase gain in the first quarter. In addition, we
recognized a $1.0 million gain on foreign currency exchange in the
first quarter primarily related to the translation of intercompany
debt.
2014 Guidance
As a result of the $2.8 million bargain purchase gain recognized
pursuant to the Bekaert Advanced Filtration acquisition, we are
increasing our full year guidance for consolidated 2014 diluted
earnings per share to be in the range of $2.60 to $2.75. This
revised guidance is $0.05 higher than our prior guidance at both
the upper and lower ends. This guidance is inclusive of our
anticipated financial results from the GE Air Filtration and
Bekaert Advanced Filtration acquisitions. These expected results
are based upon projected consolidated net sales between $1,410 and
$1,470 million and consolidated operating margin between 13.25% and
14.5%.
Included in our consolidated 2014 guidance are estimated diluted
earnings per share of between $2.45 and $2.55 for our base business
and $0.15 to $0.20 from the GE Air Filtration and Bekaert Advanced
Filtration acquisitions—including the impact of the bargain
purchase gain. Sales and operating margin detail for our base
business—excluding the GE Air Filtration and Bekaert Advanced
Filtration acquisitions—is as follows:
2014 EstimatedSales
Growth
2014 EstimatedOperating
Margin
Engine/Mobile Filtration 1.0% to 3.0% 21.0% to 22.0%
Industrial/Environmental Filtration2
4.5% to 8.5% 12.0% to 13.0% Packaging
0.0% to 4.0%
8.0% to 9.0%
CLARCOR base business2
3.0% to 5.0% 15.7% to 16.5%
2 – Excludes the GE Air Filtration and
Bekaert Advanced Filtration acquisitions. These acquisitions do not
impact the Engine/Mobile Filtration and Packaging segments.
We also provide below 2014 guidance for the financial impact of
the GE Air Filtration and Bekaert Advanced Filtration acquisitions
included in our Industrial/Environmental Filtration segment. We
estimate that these two acquisitions will impact 2014 diluted
earnings per share between $0.15 and $0.20 and net sales between
$250 and $275 million. Projected 2014 sales and operating margin
for each acquisition is as follows:
2014
EstimatedSales($Millions)
2014
EstimatedOperatingMargin
GE Air Filtration $235 to $255 3.0% to 5.0% Bekaert Advanced
Filtration $15 to $20 -1.0% to 1.0%
Full year operating margin expectations for the GE Air
Filtration acquisition include $4.3 million of expense for the
step-up in inventory basis pursuant to purchase accounting, of
which $3.6 million was recognized in the first quarter. In
addition, these expectations include approximately $5.0 million of
integration costs related to the GE Air Filtration acquisition, of
which $3.1 million was recognized in the first quarter. The step-up
in inventory basis and acquisition integration costs are projected
to negatively impact 2014 operating margin in the GE Air Filtration
business by approximately 4.0 percentage points and consolidated
2014 diluted earnings per share by approximately $0.12. We
anticipate recognizing approximately $8.0 million of intangible
asset amortization expense and $2.7 million of depreciation expense
in fiscal 2014 pursuant to the GE Air Filtration acquisition.
For full year 2014 on a consolidated basis (inclusive of the
acquisitions), we project cash from operations between $150 million
and $165 million, capital expenditures between $70 million and $85
million, an effective tax rate between 32.0% and 32.5% and diluted
shares outstanding of approximately 51.0 million.
CLARCOR will be holding a conference call to discuss the first
quarter 2014 results at 10:00 a.m., Central Time, on March 20,
2014. 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 1-877-870-5176 or 1-858-384-5517 by
providing confirmation code 8826911. The replay will be available
through April 3, 2014 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.
1 This earnings release presents information with respect to
2014 first quarter consolidated net sales, operating profit and
operating margin, and 2014 first quarter Industrial/Environmental
Filtration segment net sales, operating profit and operating
margin, in each case excluding the impact of the GE Air Filtration
acquisition, the Bekaert Advanced Filtration acquisition, the
bargain purchase gain related to the Bekaert Advanced Filtration
acquisition and the HVAC restructuring charges. These are non-GAAP
financial measures. For a reconciliation of these non-GAAP
financial measures to the most comparable GAAP measures, as well as
information regarding why the Company believes these non-GAAP
financial measures present useful information to investors, see
pages 13 and 14 of this earnings release.
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 2014
performance of the Company, each of its segments and the GE Air
Filtration and Bekaert Advanced Filtration businesses, our
projections with respect to 2014 estimated sales growth and 2014
estimated operating margins for the Company, each of its segments
and the GE Air Filtration and Bekaert Advanced Filtration
businesses, and our projections with respect to 2014 cash from
operations, 2014 capital expenditures and 2014 effective tax rates;
statements regarding our expectations regarding the anticipated
2014 expense for the step-up in inventory basis pursuant to
purchase accounting in connection with the GE Air Filtration
acquisition, anticipated 2014 acquisition integration costs, the
anticipated impact of the step-up in inventory basis and
acquisition integration costs on 2014 diluted earnings per share,
and the anticipated amortization expense in 2014 related to
intangible assets recognized pursuant to purchase accounting for
the GE Air Filtration acquisition; 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 which
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
expectation that the favorable mix of higher gas turbine air inlet
systems and the operating margin level at our CLARCOR Industrial
Air Filtration business will not be maintained during the balance
of fiscal 2014; statements regarding our expectation that our full
year operating margin for the CLARCOR Industrial Air business will
be approximately 8%, excluding the impact of acquisition
integration costs and the purchase accounting step-up in inventory
basis; statements regarding our intent to assess our long-term
operating margin goal with respect to our CLARCOR Industrial Air
Filtration business at the end of the year; statements regarding
the integration of our CLARCOR Industrial Air business and our
excitement about the long-term prospects of this business;
statements regarding our expectation of full year sales growth of
3% to 5% in our Engine/Mobile Filtration segment; statements that
our full year expectations with respect to sales in our
Engine/Mobile Filtration segment are lower than actual growth in
the first quarter due to uncertainty in the broader domestic
trucking market; statements regarding our continued expectation for
full year 10% sales growth in our oil & gas filtration
business; statements regarding our plans to move the Pittston
product equipment to other manufacturing locations, and our
estimate that this restructuring will reduce annual operating costs
from $1.5 million to $2.0 million; statements regarding our
long-term goal to improve operating margins at our HVAC air
filtration business to 10% by increasing our focus on higher margin
air filtration products and improving our cost structure;
statements regarding our expectation that the customer price
increase executed at the end of the first quarter of 2014 will
partially offset higher material costs we have experienced in our
Engine/Mobile Filtration segment; statements regarding our
expectation that operating margin in our Engine/Mobile Filtration
segment will be between 21% and 22% for the full year 2014,
consistent with our expectations heading into the year; 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
2013 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 2014 for the Company, each of its
business segments and the GE Air Filtration and Bekaert Advanced
Filtration businesses, 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. 2014 UNAUDITED FIRST QUARTER RESULTS
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands, except per share
data)
Three Months Ended
March 1,2014
March 2,2013
Net sales $ 312,685 $ 256,271 Cost of sales 216,098 174,785
Gross profit 96,587 81,486 Selling and
administrative expenses 65,321 47,671
Operating profit 31,266 33,815 Other income
(expense): Interest expense (400 ) (150 ) Interest income 107 139
Other, net 3,971 — 3,678 (11 ) Earnings
before income taxes 34,944 33,804 Provision for income taxes
10,603 10,276 Net earnings 24,341 23,528
Net earnings attributable to
noncontrolling interests
(20 ) (66 ) Net earnings attributable to CLARCOR Inc. $
24,321 $ 23,462 Net earnings per share
attributable to CLARCOR Inc. - Basic $ 0.48 $ 0.47
Net earnings per share attributable to CLARCOR Inc. - Diluted $
0.48 $ 0.47 Weighted average number of shares
outstanding - Basic 50,463,714 49,834,701 Weighted average
number of shares outstanding - Diluted 50,924,445 50,409,464
Dividends paid per share $ 0.1700 $ 0.1350
CLARCOR INC. 2014 UNAUDITED FIRST QUARTER
RESULTS, continued CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
March 1,2014
November 30,2013
ASSETS
Current assets: Cash and cash equivalents $ 76,430 $ 411,562
Restricted cash 750 763 Accounts receivable, less allowance for
losses of $10,556 and $9,183, respectively 259,186 224,829
Inventories 272,543 218,786 Deferred income taxes 26,480 25,313
Income taxes receivable — 1,000 Prepaid expenses and other current
assets 14,358 9,868 Total current assets 649,747
892,121 Plant assets, at cost, less
accumulated depreciation of $344,760 and $332,787, respectively
245,223 208,953 Goodwill 316,294 241,299 Acquired intangible
assets, less accumulated amortization 223,457 89,881 Other
noncurrent assets 15,293 16,589 Total assets $
1,450,014 $ 1,448,843
LIABILITIES Current
liabilities: Current portion of long-term debt $ 231 $ 50,223
Accounts payable and accrued liabilities 197,766 157,538 Income
taxes payable 5,749 — Total current liabilities
203,746 207,761 Long-term debt, less current
portion 96,385 116,413 Long-term pension and postretirement
healthcare benefits liabilities 19,775 19,792 Deferred income taxes
64,574 64,415 Other long-term liabilities 7,345 5,753
Total liabilities 391,825 414,134
Contingencies Redeemable noncontrolling interests 1,813 1,836
SHAREHOLDERS' EQUITY Capital stock 50,417 50,371 Capital in
excess of par value 25,393 22,278 Accumulated other comprehensive
loss (25,100 ) (29,814 ) Retained earnings 1,004,756 989,013
Total CLARCOR Inc. equity 1,055,466 1,031,848
Noncontrolling interests 910 1,025 Total
shareholders' equity 1,056,376 1,032,873
Total liabilities and shareholders' equity $ 1,450,014 $
1,448,843
CLARCOR INC. 2014 UNAUDITED FIRST QUARTER RESULTS,
continued CONSOLIDATED CONDENSED CASH FLOWS
(Dollars in thousands)
Three Months Ended
March 1,2014
March 2,2013
Cash flows from operating activities: Net earnings $ 24,341
$ 23,528 Depreciation 7,292 6,581 Amortization 3,282 1,500 Other
noncash items 917 24 Net gain on disposition of plant assets (36 )
(276 ) Bargain purchase gain (2,815 ) — Stock-based compensation
expense 1,515 1,146 Excess tax benefit from stock-based
compensation (262 ) (1,731 ) Deferred income taxes 1,348 8,424
Changes in assets and liabilities (17,134 ) (32,748 ) Net cash
provided by operating activities 18,448 6,448
Cash flows from investing activities: Restricted cash 277 76
Business acquisitions, net of cash acquired (262,741 ) — Additions
to plant assets (14,352 ) (8,644 ) Proceeds from disposition of
plant assets 94 25 Investment in affiliates (473 ) (223 ) Net cash
used in investing activities (277,195 ) (8,766 )
Cash
flows from financing activities: Net payments on multicurrency
revolving credit facility (50,000 ) — Payments on term loan
facility (20,000 ) — Payments on long-term debt, including business
acquisition-related seller financing (56 ) (2,336 ) Sale of capital
stock under stock option and employee purchase plans 1,525 3,628
Payments for repurchase of common stock — (5,964 ) Excess tax
benefit from stock-based compensation 262 1,731 Dividend paid to
noncontrolling interests (166 ) — Cash dividends paid (8,577 )
(6,725 ) Net cash used in financing activities (77,012 ) (9,666 )
Net effect of exchange rate changes on cash 627 (248 ) Net
change in cash and cash equivalents (335,132 ) (12,232 ) Cash and
cash equivalents, beginning of period 411,562 185,496
Cash and cash equivalents, end of period $ 76,430 $ 173,264
Cash paid during the period for: Interest $
324 $ 78 Income taxes, net of refunds $ 4,233
$ 5,742
CLARCOR INC. 2014 UNAUDITED
FIRST QUARTER RESULTS, continued QUARTERLY INCOME STATEMENT
DATA BY SEGMENT
(Dollars in thousands)
March 1,2014
March 2,2013
Net sales by segment: Engine/Mobile Filtration $ 122,497 $
117,675 Industrial/Environmental Filtration 174,863 122,626
Packaging 15,325 15,970 $ 312,685 $ 256,271
Operating profit by segment: Engine/Mobile
Filtration $ 22,874 $ 23,449 Industrial/Environmental Filtration
8,146 9,678 Packaging 246 688 $ 31,266 $
33,815
Operating margin by segment:
Engine/Mobile Filtration 18.7 % 19.9 % Industrial/Environmental
Filtration 4.7 % 7.9 % Packaging 1.6 % 4.3 % 10.0 % 13.2 %
CLARCOR INC. 2014 UNAUDITED FIRST QUARTER RESULTS,
continuedRECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(Dollars in thousands, except per share
data)
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP net sales, non-GAAP cost of
sales, non-GAAP gross profit, non-GAAP selling and administrative
expenses, non-GAAP operating profit, non-GAAP other income
(expense), non-GAAP net earnings and non-GAAP diluted earnings per
share for the quarter ended March 1, 2014. These non-GAAP financial
measures are not in accordance with, or an alternative for,
generally accepted accounting principles in the United States. The
GAAP measures most directly comparable to non-GAAP measures are net
sales, cost of sales, gross profit, selling and administrative
expenses, operating profit, other income (expense), net earnings
and diluted earnings per share, respectively.
The quarter ended March 1, 2014 non-GAAP financial measures
provided in this release exclude the impact of the GE Air
Filtration acquisition, the Bekaert Advanced Filtration
acquisition, and the HVAC restructuring charges. Although the
comparison of data excluding these selected items in our quarter
ended March 1, 2014 is not a measure of financial performance under
GAAP, the Company believes that providing these non-GAAP financial
measures better enables investors to understand and evaluate the
Company's historical and prospective operating performance.
Management believes that removing the impact of these selected
items provides a more comparable measure of the changes in net
sales, cost of sales, gross profit, selling and administrative
expenses, operating profit, other income (expense), net earnings
and diluted earnings per share for the quarter ended March 1, 2014
compared to the quarter ended March 2, 2013.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
Reconciling Items
First Quarter2014U.S.
GAAP
GE
AirFiltrationAcquisition1
Inventory Step-up
andIntegrationCosts2
BekaertAdvancedFiltrationAcquisition
HVACRestructuringCharge
First Quarter2014
Adjusted
First Quarter2013U.S.
GAAP
Net sales $ 312,685 $ (45,378 ) $ — $ (2,777 ) $ — $ 264,530 $
256,271 Cost of sales 216,098 (28,610 ) (3,552 ) (2,153 )
(1,186 ) 180,597 174,785 Gross profit 96,587 (16,768
) 3,552 (624 ) 1,186 83,933 81,486 Selling and administrative
expenses 65,321 (11,163 ) (3,102 ) (875 ) (128 ) 50,053
47,671 Operating profit 31,266 (5,605 ) 6,654
251 1,314 33,880 33,815 Other
income (expense): Interest expense (400 ) 328 — — — (72 ) (150 )
Interest income 107 — — — — 107 139 Other, net 3,971 —
— (2,816 ) — 1,155 — 3,678
328 — (2,816 ) — 1,190 (11 )
Earnings before income taxes 34,944 (5,277 ) 6,654 (2,565 ) 1,314
35,070 33,804 Provision for income taxes 10,603 (1,420 )
1,790 83 448 11,504 10,276 Net
earnings 24,341 (3,857 ) 4,864 (2,648 ) 866 23,566 23,528 Net
earnings attributable to noncontrolling interests, net of tax (20 )
— — — — (20 ) (66 ) Net earnings
attributable to CLARCOR Inc. $ 24,321 $ (3,857 ) $ 4,864
$ (2,648 ) $ 866 $ 23,546 $ 23,462 Net
earnings per share attributable to CLARCOR Inc. - Basic $ 0.48
$ (0.80 ) $ 0.10 $ (0.05 ) $ 0.02 $ 0.47
$ 0.47 Net earnings per share attributable to CLARCOR
Inc. - Diluted $ 0.48 $ (0.08 ) $ 0.10 $ (0.05 ) $
0.02 $ 0.46 $ 0.47
1 - Excluding the inventory step-up and
acquisition integration costs.
2 - Related to the GE Air Filtration
acquisition.
CLARCOR INC. 2014 UNAUDITED FIRST QUARTER RESULTS,
continuedRECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(Dollars in thousands, except per share
data)
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP net sales, non-GAAP operating
profit and non-GAAP operating margin, both at the consolidated
level and at the Industrial/Environmental Filtration segment level,
for the quarter ended March 1, 2014. These non-GAAP financial
measures are not in accordance with, or an alternative for,
generally accepted accounting principles in the United States. The
GAAP measures most directly comparable to non-GAAP net sales,
non-GAAP operating profit and non-GAAP operating margin are net
sales, operating profit and operating margin, respectively.
The quarter ended March 1, 2014 non-GAAP financial measures
provided in this release exclude the impact of the GE Air
Filtration acquisition, the Bekaert Advanced Filtration
acquisition, the HVAC restructuring charges. Although the
comparison of data excluding these selected items in our quarter
ended March 1, 2014 is not a measure of financial performance under
GAAP, the Company believes that providing these non-GAAP financial
measures better enables investors to understand and evaluate the
Company's historical and prospective operating performance.
Management believes that removing the impact of these selected
items provides a more comparable measure of the changes in net
sales, operating profit and operating margin in the quarter ended
March 1, 2014 compared to the quarter ended March 2, 2013.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
Reconciling Items
FirstQuarter2014U.S. GAAP
GE
AirFiltrationAcquisition1
InventoryStep-up
andIntegrationCosts2
BekaertAdvancedFiltrationAcquisition
HVACRestructuringCharge
FirstQuarter2014Adjusted
FirstQuarter2013U.S. GAAP
Net sales by segment: Engine/Mobile Filtration $ 122,497 $ —
$ — $ — $ — $ 122,497 $ 117,675 Industrial/Environmental Filtration
174,863 (45,378 ) — (2,777 ) — 126,708 122,626 Packaging 15,325
— — — — 15,325 15,970
$ 312,685 $ (45,378 ) $ — $ (2,777 ) $ —
$ 264,530 $ 256,271
Operating profit by
segment: Engine/Mobile Filtration $ 22,874 $ — $ — $ — $ — $
22,874 $ 23,449 Industrial/Environmental Filtration 8,146 (5,605 )
6,654 251 1,314 10,760 9,678 Packaging 246 — —
— — 246 688 $ 31,266 $ (5,605 )
$ 6,654 $ 251 $ 1,314 $ 33,880 $ 33,815
Operating margin by segment: Engine/Mobile Filtration
18.7 % 18.7 % 19.9 % Industrial/Environmental Filtration 4.7 % 8.5
% 7.9 % Packaging 1.6 % 1.6 % 4.3 % 10.0 % 12.8 % 13.2 %
1 - Excluding inventory basis step-up and
acquisition integration costs.
2 - Related to the GE Air Filtration
acquisition.
CLARCOR Inc.David J. Fallon, 615-771-3100Chief Financial
Officer
Clarcor (NYSE:CLC)
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