CLARCOR Inc. (NYSE: CLC):
Unaudited Second Quarter and First Six
Months 2014 Highlights(Amounts in millions, except per share
data and percentages)
GAAP Financial Results:
Three Months Ended Six Months
Ended 5/31/14 6/1/13 Change
5/31/14 6/1/13 Change Net
sales $ 386.6 $ 287.6 34 % $ 699.3 $ 543.9
29 % Operating profit 51.1 49.4 3 % 82.4 83.2 -1 % Net
earnings - CLARCOR 34.6 33.1 5 % 58.9 56.5 4 % Diluted earnings per
share $ 0.68 $ 0.66 3 % $ 1.16 $ 1.12 4 % Operating margin
13.2 % 17.2 % -4.0 pts 11.8 %
15.3 % -3.5 pts
Adjusted Non-GAAP Financial Results:
The second quarter and first six months of 2014 contained
integration, purchase accounting and deal related costs associated
with three acquisitions in the current fiscal year. In addition,
the first six months of 2014 contained a bargain purchase gain
related to the Bekaert Advanced Filtration acquisition. The
following table reflects 2014 second quarter and year-to-date GAAP
results adjusted for these items. A reconciliation of non-GAAP
financial measures adjusting for these items in the second quarter
and first six months of 2014 to GAAP figures is available on pages
14 and 15 of this release.
Three Months Ended Six Months
Ended 5/31/14 6/1/13 Change
5/31/14 6/1/13 Change Net
sales $ 386.6 $ 287.6 34 % $ 699.3 $ 543.9
29 % Adjusted operating profit 57.5 49.4 16 % 95.7 83.2 15 %
Adjusted net earnings - CLARCOR 38.9 33.1 18 % 65.4 56.5 16 %
Adjusted diluted earnings per share $ 0.76 $ 0.66 15 % $ 1.28 $
1.12 14 % Adjusted operating margin 14.9 %
17.2 % -2.3 pts 13.7 % 15.3 %
-1.6 pts
CLARCOR Inc. (NYSE: CLC) reported that its diluted
earnings per share for the second quarter of 2014 increased 3% from
the second quarter of 2013 to a record second quarter high of
$0.68. These second quarter results were negatively impacted by
$6.3 million for integration, purchase accounting and deal related
costs associated with three acquisitions in the current fiscal
year. When adjusted for these costs, the Company’s second quarter
non-GAAP adjusted diluted earnings per share of $0.76 increased 15%
and non-GAAP adjusted operating profit increased 16% compared to
the Company’s diluted earnings per share and operating profit
during the second quarter of 2013.1 Net sales in the second quarter
of 2014 increased $99.0 million, or 34%, from last year’s second
quarter primarily driven by $79.5 million of additional sales from
the three fiscal year 2014 acquisitions. Net sales of our base
business increased $19.5 million, or 7%, from the second quarter of
2013, including 9% organic sales growth in the
Industrial/Environmental Filtration segment and 5% organic sales
growth in the Engine/Mobile Filtration segment.
All references in this earnings release to the financial results
of our “base business” or “organic” financial results, at the
consolidated or reporting segment level, refer to our consolidated
or segment results without giving effect to the three fiscal year
2014 acquisitions.
Chris Conway, CLARCOR’s Chairman, President and Chief Executive
Officer, commented, “Our second quarter was an exciting quarter for
us from many perspectives. Our financial performance was
highlighted by 34% top-line growth, and non-GAAP adjusted diluted
earnings per share increased 15% from the second quarter of 2013.
We continued to shape our filtration asset portfolio with the
acquisition of Stanadyne Filtration--whose operations were included
in the last month of our second quarter financial results. The
integration of GE Air Filtration continued on course with another
solid quarter, and our base business generated 7% organic sales
growth from last year’s second quarter as some of our long-term
growth initiatives gained traction. We also continued to focus on
long-term initiatives including driving the development of
value-added technology, expanding profitably in international
markets and exploring opportunities to further enhance our
filtration portfolio.
“We are very excited about our second quarter acquisition of
Stanadyne Filtration--renamed CLARCOR Engine Mobile Solution, or
CEMS--which nicely complements our existing heavy-duty engine
filtration business. CEMS focuses heavily on fuel filtration
solutions for original equipment (OE) customers primarily for
smaller, off-road heavy-duty engines and with aftermarket
distribution through OE dealers. Prior to this acquisition, we had
identified penetrating new distribution channels in our heavy-duty
engine filtration business as a key growth initiative. This
acquisition greatly accelerates our progress with this initiative
through the addition of over $110 million of annual sales, of which
over 70% is aftermarket business sold primarily through OE
dealers--a sales channel where we have not historically had a
strong presence. Going forward, we will explore expanding sales
through this distribution channel with our existing oil, air and
hydraulic heavy-duty engine filtration products. In addition, we
anticipate selling CEMS products into new global markets, as we
plan to leverage our existing global footprint to support existing
and new CEMS customers outside the U.S. and Europe. The first month
operating performance at CEMS was consistent with our expectations
with $9.0 million of sales and a non-GAAP adjusted operating
margin--excluding $4.4 million of integration, purchase accounting
and deal related costs slightly above our historical Engine/Mobile
Filtration segment operating margin range.
“The integration of GE Air Filtration--renamed CLARCOR
Industrial Air, or CIA--continues to meet our expectations. We
believe that most integration activities should be materially
completed in our third quarter. We are pleased with CIA’s second
quarter operating performance with net sales of $67.0 million, an
operating margin of 7% and a non-GAAP adjusted operating margin of
10%--excluding $1.8 million of integration, purchase accounting and
deal related costs. Second quarter sales increased 20% from last
year’s second quarter when under GE’s ownership. This sales growth
was primarily driven by a 10% increase in industrial air filtration
sales and a more than doubling of sales of gas turbine air intake
filtration systems compared to last year’s second quarter primarily
due to a significant sales increase in larger, heavy-duty air
intake filtration systems. The 10% non-GAAP adjusted operating
margin was higher than our expectations heading into the second
quarter primarily due to a lower than expected sales mix of
lower-margin gas turbine air intake filtration systems. We also
continued to develop strategies to improve the long-term operating
margin profile for this business including reducing costs as we
transition from GE internal processes and exploring incremental
top-line opportunities, notably with non-GE gas turbine customers,
and through leverage of our industry-leading product line of gas
turbine replacement filters.
“Despite the significant acquisition activity in the first six
months, we have not taken our focus off of our base business, where
net sales increased 7% from last year’s second quarter. This strong
organic sales growth was across many of our diverse filtration
markets. Organic sales in our Engine/Mobile Filtration segment
increased 5% from the second quarter of 2013 including 9% sales
growth in our domestic heavy-duty engine filtration aftermarket and
12% sales growth in our railroad filtration market. The 9% sales
growth in our domestic heavy-duty engine aftermarket was higher
than our expectations heading into the quarter, as we had assumed
that strong sales growth at the end of our first quarter was the
result of a “pull ahead” of sales from the second quarter in
response to an announced price increase. Instead, this growth rate
continued through the second quarter, which we believe was the
result of general strength in the U.S. trucking industry and our
success in attracting new customers. Organic sales in our
Industrial/Environmental Filtration segment increased 9% from the
second quarter of 2013 primarily due to 10% sales growth in our oil
& gas filtration market. Strong top-line organic growth in this
reporting segment compared with last year’s second quarter was not
limited to the oil & gas filtration market. For example, second
quarter sales of HVAC filtration products increased 7%; sales at
our TFS distribution business also increased 7%, and sales of our
UAS dust collection systems increased 20%. In summary, despite
investing significant time and energy to consummate and integrate
the current year acquisitions, we continue to successfully drive
strategic organic growth in our core filtration markets.”
Second Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment increased
$16.0 million, or 12%, from the second quarter of 2013 including
$9.0 million from the acquisition of Stanadyne Filtration (one
month of operations). Organic sales increased $7.0 million, or 5%,
from last year’s second quarter including 8% domestic sales growth
and flat sales at foreign locations. Higher second quarter domestic
sales were driven by a 9% increase in the heavy-duty engine
filtration aftermarket and a 13% increase in railroad filtration
product sales primarily due to higher end-market demand driven by
higher rail activity.
Operating profit at our Engine/Mobile Filtration segment
declined $2.1 million, or 7%, and operating margin of 18.2%
declined 3.8 percentage points from the last year’s second quarter.
These second quarter results included $4.4 million of integration,
purchase accounting and deal related costs pursuant to the
Stanadyne acquisition. Excluding these costs, non-GAAP adjusted
operating profit increased $2.3 million, or 8%, and non-GAAP
adjusted operating margin of 21.1% declined 0.9 percentage points
from the second quarter of 2013. The Stanadyne acquisition
contributed an estimated $2.5 million of non-GAAP adjusted
operating profit--excluding the acquisition costs noted above--for
the month of May while the Engine/Mobile Filtration segment base
business operating profit was relatively flat, and base business
operating margin declined despite higher sales. Consistent with
recent prior quarters, lower year-over-year base business operating
margin was partially driven by higher fixed costs to support future
growth. Operating margin at each reporting segment was also
negatively impacted by approximately 0.6 percentage points in the
second quarter compared to last year’s second quarter due to higher
allocated corporate costs including incentive compensation and
other growth-related costs.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment
increased $82.9 million, or 61%, from the second quarter of 2013,
which included sales of $67.0 million from the GE Air Filtration
acquisition and sales of $3.5 million from the Bekaert Advanced
Filtration acquisition. Second quarter organic sales increased
$12.4 million, or 9%, from last year’s second quarter including 8%
domestic sales growth and 11% foreign sales growth. Sales of oil
& gas filtration products increased 10% from last year’s second
quarter driven by strong end-market demand in several geographic
markets including the U.S. and the Middle East. Second quarter
sales growth in our non-oil & gas filtration markets in this
reporting segment was also strong as our dust collection business
benefited from higher sales to OE customers, our HVAC filtration
business benefited from higher sales to wholesale customers and our
TFS distribution business continues its growth across many end
markets.
Operating profit at our Industrial/Environmental Filtration
segment increased $4.6 million, or 25%, and operating margin of
10.5% declined 3.0 percentage points from last year’s second
quarter. These second quarter results included $1.9 million of
integration, purchase accounting and deal related costs pursuant to
the GE Air Filtration and Bekaert Advanced Filtration acquisitions.
Excluding these costs, non-GAAP adjusted operating profit increased
$6.5 million, or 36%, and non-GAAP adjusted operating margin of
11.4% declined 2.1 percentage points, from the second quarter of
2013. This lower Industrial/Environmental Filtration segment
non-GAAP adjusted operating margin was partially driven by the two
acquisitions, unfavorable year-over-year sales mix at our dust
collection business and lower absorption at our aerospace and
industrial filtration business. Operating margin at each reporting
segment was also negatively impacted by approximately 0.6
percentage points in the second quarter compared to last year’s
second quarter due to higher allocated corporate costs including
incentive compensation and other growth-related costs.
Packaging Segment
Net sales at our Packaging segment increased $0.1 million, or
1%, from the second quarter of 2013. These relatively flat sales
were primarily the result of higher tobacco packaging and decorated
flat sheet sales from new business opportunities offset by lower
spice, battery and film packaging sales. Operating profit at our
Packaging segment declined $0.7 million, or 38%, and operating
margin of 6.3% declined 3.9 percentage points from last year’s
second quarter. This lower second quarter operating margin was
primarily driven by a higher mix of lower margin products in
addition to higher utility costs--notably natural gas--compared
with the second quarter of 2013.
2014 Guidance
In our first quarter earnings release, we disclosed our range of
expectations for 2014 diluted earnings per share on a GAAP basis.
In this second quarter earnings release, we also provide our 2014
diluted earnings per share guidance based upon expected non-GAAP
adjusted financial results with reconciliation to GAAP financial
results.
We project 2014 GAAP diluted earnings per share to be in the
range of $2.72 and $2.82 compared with our previous 2014 diluted
earnings per share guidance of $2.60 to $2.75. The increase in this
guidance range at the mid-point was primarily driven by the
Stanadyne acquisition which we expect to be accretive for the full
year 2014. We anticipate 2014 consolidated operating margin to be
in the range from 13.6% to 14.2% and 2014 consolidated net sales to
be as follows:
$ Millions
Lower Upper Base business $
1,175 - $ 1,195 GE Air Filtration acquisition 235 - 255 Stanadyne
Filtration acquisition 60 - 65 Bekaert Advanced Filtration
acquisition 15 - 20 Net sales $ 1,485 - $ 1,535
We project 2014 non-GAAP adjusted diluted earnings per share to
be in the range of $2.85 to $2.95. This non-GAAP adjusted diluted
earnings per share guidance includes anticipated operating results
from the GE Air Filtration, Bekaert Advanced Filtration and
Stanadyne Filtration acquisitions but excludes integration,
purchase accounting and deal related costs pursuant to these
acquisitions, as well as a bargain purchase gain related to the
Bekaert Advanced Filtration acquisition. We anticipate 2014
non-GAAP adjusted consolidated operating margin to be in the range
from 14.5% to 15.1%.
2014 Non-GAAP Adjusted Diluted Earnings
per Share Reconciliation
Lower Upper 2014 GAAP
Diluted Earnings per Share $ 2.72 - $ 2.82 GE Air Filtration
acquisition 0.13 - 0.13 Stanadyne Filtration acquisition 0.06 -
0.06 Bekaert Advanced Filtration acquisition (0.06 ) - (0.06 )
2014 Non-GAAP Adjusted Diluted Earnings
per Share $ 2.85 - $ 2.95
2014 Non-GAAP Adjusted Operating Margin
Reconciliation
Lower Upper 2014 GAAP
Operating Margin 13.6 % - 14.2 % GE Air Filtration
acquisition 0.6 % - 0.6 % Stanadyne Filtration acquisition 0.3 % -
0.3 % 2014 Non-GAAP Adjusted Operating Margin 14.5 %
- 15.1 %
Base Business
Included in our consolidated 2014 guidance are estimated diluted
earnings per share of between $2.42 and $2.52 for our base
business--excluding the GE Air Filtration, Bekaert Advanced
Filtration and Stanadyne Filtration acquisitions. We reduced this
guidance from our first quarter earnings release by approximately
$0.03 at each the upper and lower ends of our previous base
business guidance primarily due to additional corporate costs
expected to be incurred in 2014 including incentive compensation,
audit and legal fees partially offset by operating profit on higher
sales and a reduction in the expected full year tax rate. These
additional corporate costs are allocated to the reporting segments,
and we anticipate that they will impact 2014 operating margin for
each reporting segment by approximately 0.3 percentage points. In
addition, we increased our expectations for sales growth for our
base business from a previous range of 3.0% to 5.0% to a current
range of 3.5% to 5.5%. This higher expected sales growth range was
driven by increases in expected sales in our Engine/Mobile
Filtration and Industrial/Environmental Filtration segments. Sales
growth and operating margin detail in support of our 2014 guidance
for our base business is as follows:
2014 Estimated
Sales Growth
2014 Estimated
Operating Margin
Engine/Mobile Filtration2 2.0% to 4.0% 20.5% to 21.5%
Industrial/Environmental Filtration2 6.0% to 8.0% 11.5% to 12.5%
Packaging 0.0% to 2.0% 7.0% to 8.0% CLARCOR base business2 3.5% to
5.5% 15.3% to 16.1%
2 - Excludes the GE Air Filtration,
Bekaert Advanced Filtration and Stanadyne Filtration acquisitions.
These acquisitions do not impact the Packaging segment.
GE Air Filtration Acquisition
We anticipate that the GE Air Filtration acquisition will
positively impact 2014 GAAP diluted earnings per share from $0.13
to $0.18. This guidance range includes interest expense on $80
million of debt incurred to finance the acquisition at an assumed
2.0% blended interest rate. Our expectations for this positive
impact on 2014 GAAP diluted earnings per share is approximately
$0.03 higher than our prior quarter expectations primarily due to a
1% increase in expected full year operating margin. We expect full
year GAAP operating margin to be in the range from 4% to 6%.
Projected 2014 financial results for the GE Air Filtration
acquisition include approximately $8.0 million of intangible asset
amortization expense.
We expect the positive impact from the GE Air Filtration
acquisition on 2014 non-GAAP adjusted diluted earnings per share to
be in the range from $0.25 to $0.30, and we expect 2014 non-GAAP
adjusted operating margin to be in the range from 8% to 10%. These
non-GAAP financial measures exclude expected integration, purchase
accounting and deal related costs pursuant to the GE Air Filtration
acquisition of $9.5 million--of which $8.5 million was incurred in
the first six months of 2014.
Stanadyne Filtration
Acquisition
We anticipate that seven months of operations from the Stanadyne
Filtration acquisition will positively impact 2014 GAAP diluted
earnings per share from $0.08 to $0.12. This guidance includes
interest expense on $325 million of debt incurred to finance the
acquisition at an assumed 2.0% blended interest rate. Projected
2014 financial results for the Stanadyne Filtration acquisition
include approximately $7.0 million of intangible asset amortization
expense over seven months.
We expect the positive impact from the Stanadyne Filtration
acquisition on 2014 non-GAAP adjusted diluted earnings per share to
be in the range from $0.14 to $0.18. These non-GAAP financial
measures exclude expected integration, purchase accounting and deal
related costs pursuant to the Stanadyne Filtration acquisition of
$4.4 million--all of which were incurred in the second quarter of
2014.
Bekaert Advanced Filtration
Acquisition
We anticipate that the Bekaert Advanced Filtration acquisition
will positively impact 2014 GAAP diluted earnings per share by
$0.06--entirely from the $2.8 million (non-taxable) bargain
purchase gain recognized in the first quarter of 2014.
Cash Flow, Taxes and Shares
For full year 2014 on a consolidated basis (inclusive of
acquisitions), we project cash from operations between $170 million
and $190 million, capital expenditures between $70 million and $85
million, an effective tax rate between 31.75% and 32.25% and
diluted shares outstanding of approximately 51.0 million.
CLARCOR will be holding a conference call to discuss the second
quarter 2014 results at 10:00 a.m. CT on June 19, 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 877-870-5176 or 858-384-5517 by
providing confirmation code 2850091. The replay will be available
through July 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 second quarter, first six months of 2014 and forecasted 2014
full year Consolidated adjusted net sales, adjusted operating
profit, adjusted net earnings, adjusted diluted earnings per share
and adjusted operating margin, and Engine/Mobile Filtration segment
and Industrial/Environmental Filtration segment, adjusted operating
profit and adjusted operating margin, excluding the impact of the
Stanadyne Filtration acquisition, the GE Air Filtration
acquisition, the Bekaert Advanced Filtration acquisition, the
bargain purchase gain related to the Bekaert Advanced Filtration
acquisition. These are non-GAAP financial measures. In addition,
this earnings release presents information with respect to the
adjusted operating margin of CEMS during the last month of the 2014
second quarter and forecasted 2014 adjusted operating margin of
CEMS, in each such case excluding integration, purchase accounting
and deal related costs, and adjusted operating margin of CIA during
the first six months of 2014 and forecasted 2014 adjusted operating
margin of CIA, in each such case excluding integration, purchase
accounting and deal related costs. These are also 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 14 and 15 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, the acquired GE
Air Filtration, Stanadyne Filtration, and Bekaert Advanced
Filtration businesses and our base business, our projections with
respect to 2014 diluted earnings per share, 2014 consolidated
operating margin, 2014 non-GAAP adjusted diluted earnings per
share, and 2014 non-GAAP adjusted consolidated operating margin,
our projections with respect to 2014 sales growth and 2014
operating margin for each of the Company’s segments and its base
business, our projections with respect to 2014 diluted earnings per
share attributable to our base business, the anticipated 2014
diluted earnings per share and 2014 non-GAAP adjusted diluted
earnings per share attributable to, and the projected 2014
operating margin and 2014 non-GAAP adjusted operating margin of,
the acquired GE Air Filtration and Stanadyne Filtration businesses,
and our projections with respect to 2014 cash from operations, 2014
capital expenditures, 2014 effective tax rates and 2014 diluted
shares outstanding; 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 intent to
explore expanding sales through the distribution channel of CEMS
with our existing oil, air and hydraulic heavy-duty engine
filtration products; statements regarding our plan of selling CEMS
products into new global markets and leveraging our existing global
footprint to support existing and new CEMS customers outside the
U.S. and Europe; statements regarding our expectation that most
integration activities with respect to CIA should be materially
completed in the third quarter; 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 or other statements included
in this press release, whether as a result of new information,
future events, changed circumstances or any other reason.
TABLES FOLLOW
CLARCOR INC. 2014 UNAUDITED SECOND
QUARTER RESULTSCONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended May
31,2014 June 1,2013 May 31,2014 June 1,2013 Net sales
$ 386,642 $ 287,583 $ 699,327 $ 543,854 Cost of sales 261,272
189,369 477,370 364,154 Gross
profit 125,370 98,214 221,957 179,700 Selling and
administrative expenses 74,223 48,813 139,544
96,484 Operating profit 51,147 49,401
82,413 83,216 Other income (expense): Interest
expense (670 ) (162 ) (1,070 ) (312 ) Interest income 96 168 203
307 Other, net 174 (223 ) 4,145 (223 ) (400 ) (217 )
3,278 (228 ) Earnings before income taxes 50,747
49,184 85,691 82,988 Provision for income taxes 16,201
16,031 26,804 26,307 Net
earnings 34,546 33,153 58,887 56,681
Net loss (earnings) attributable to
noncontrolling interests, net of tax
6 (102 ) (14 ) (168 ) Net earnings attributable to
CLARCOR Inc. $ 34,552 $ 33,051 $ 58,873 $
56,513 Net earnings per share attributable to CLARCOR
Inc. - Basic $ 0.68 $ 0.66 $ 1.17 $ 1.13
Net earnings per share attributable to CLARCOR Inc. -
Diluted $ 0.68 $ 0.66 $ 1.16 $ 1.12
Weighted average number of shares outstanding - Basic
50,513,588 49,826,567 50,488,651 49,830,634
Weighted average number of shares outstanding - Diluted
50,945,090 50,428,875 50,934,768 50,419,170
Dividends paid per share $ 0.1700 $ 0.1350
$ 0.3400 $ 0.2700
CLARCOR INC. 2014 UNAUDITED SECOND
QUARTER RESULTS, continuedCONSOLIDATED CONDENSED BALANCE
SHEETS(Dollars in thousands)
May 31,
2014
November 30,
2013
ASSETS Current assets: Cash and cash equivalents $ 84,027 $
411,562 Restricted cash 1,616 763 Accounts receivable, less
allowance for losses of $11,266 and $9,183, respectively 311,971
224,829 Inventories 274,499 218,786 Deferred income taxes 30,519
25,313 Income taxes receivable — 1,000 Prepaid expenses and other
current assets 16,421 9,868 Total current assets
719,053 892,121 Plant assets, at cost, less
accumulated depreciation of $349,868 and $332,787, respectively
263,454 208,953 Goodwill 510,485 241,299 Acquired intangible
assets, less accumulated amortization 365,804 89,881 Other
noncurrent assets 16,951 16,589 Total assets $
1,875,747 $ 1,448,843
LIABILITIES Current
liabilities: Current portion of long-term debt $ 250 $ 50,223
Accounts payable and accrued liabilities 213,460 157,538 Income
taxes payable 3,120 — Total current liabilities
216,830 207,761 Long-term debt, less current
portion 439,326 116,413 Long-term pension and postretirement
healthcare benefits liabilities 19,263 19,792 Deferred income taxes
107,556 64,415 Other long-term liabilities 7,203 5,753
Total liabilities 790,178 414,134
Contingencies Redeemable noncontrolling interests 1,730 1,836
SHAREHOLDERS' EQUITY Capital stock 50,456 50,371 Capital in
excess of par value 28,161 22,278 Accumulated other comprehensive
loss (26,490 ) (29,814 ) Retained earnings 1,030,720 989,013
Total CLARCOR Inc. equity 1,082,847 1,031,848
Noncontrolling interests 992 1,025 Total
shareholders' equity 1,083,839 1,032,873 Total
liabilities and shareholders' equity $ 1,875,747 $ 1,448,843
CLARCOR INC. 2014 UNAUDITED SECOND
QUARTER RESULTS, continuedCONSOLIDATED CONDENSED CASH
FLOWS(Dollars in thousands)
Six Months Ended
May 31,
2014
June 1,
2013
Cash flows from operating activities: Net earnings $ 58,887
$ 56,681 Depreciation 14,870 13,542 Amortization 7,943 2,980 Other
noncash items 933 48 Net loss (gain) on disposition of plant assets
73 (849 ) Bargain purchase gain (2,815 ) — Stock-based compensation
expense 3,654 3,090 Excess tax benefit from stock-based
compensation (351 ) (4,267 ) Deferred income taxes (658 ) 7,265
Changes in assets and liabilities (39,786 ) (35,280 ) Net cash
provided by operating activities 42,750 43,210
Cash flows from investing activities: Restricted cash (642 )
368 Business acquisitions, net of cash acquired (595,621 ) —
Additions to plant assets (28,275 ) (17,165 ) Proceeds from
disposition of plant assets 148 2,952 Investment in affiliates (473
) (459 ) Net cash used in investing activities (624,863 ) (14,304 )
Cash flows from financing activities: Net payments on
multicurrency revolving credit facility (22,000 ) — Borrowings
under term loan facility 315,000 — Payments on term loan facility
(20,000 ) — Payments on long-term debt, including business
acquisition-related seller financing (1,487 ) (3,921 ) Payment of
financing costs (723 ) — Sale of capital stock under stock option
and employee purchase plans 2,442 7,811 Payments for repurchase of
common stock — (17,364 ) Excess tax benefit from stock-based
compensation 351 4,267 Dividend paid to noncontrolling interests
(166 ) — Cash dividends paid (17,166 ) (13,461 ) Net cash provided
by (used in) financing activities 256,251 (22,668 ) Net
effect of exchange rate changes on cash (1,673 ) (1,195 ) Net
change in cash and cash equivalents (327,535 ) 5,043 Cash and cash
equivalents, beginning of period 411,562 185,496 Cash
and cash equivalents, end of period $ 84,027 $ 190,539
Cash paid during the period for: Interest $
598 $ 228 Income taxes, net of refunds $ 28,812
$ 15,032
CLARCOR INC. 2014 UNAUDITED SECOND
QUARTER RESULTS, continuedQUARTERLY INCOME STATEMENT DATA BY
SEGMENT(Dollars in thousands)
Quarter Ended Six Months Ended
May 31,
2014
June 1,
2013
May 31,
2014
June 1,
2013
Net sales by segment: Engine/Mobile Filtration $ 148,398 $
132,372 $ 270,895 $ 250,047 Industrial/Environmental Filtration
219,592 136,660 394,455 259,286 Packaging 18,652 18,551
33,977 34,521 $ 386,642 $
287,583 $ 699,327 $ 543,854
Operating profit by segment: Engine/Mobile Filtration $
26,972 $ 29,096 $ 49,846 $ 52,545 Industrial/Environmental
Filtration 23,005 18,411 31,151 28,089 Packaging 1,170 1,894
1,416 2,582 $ 51,147 $ 49,401
$ 82,413 $ 83,216
Operating
margin by segment: Engine/Mobile Filtration 18.2 % 22.0 % 18.4
% 21.0 % Industrial/Environmental Filtration 10.5 % 13.5 % 7.9 %
10.8 % Packaging 6.3 % 10.2 % 4.2 % 7.5 % 13.2 % 17.2 % 11.8
% 15.3 %
CLARCOR INC. 2014 UNAUDITED SECOND QUARTER RESULTS,
continuedReconciliation of Second Quarter 2014 GAAP
Financial Results to Non-GAAP Adjusted Results
In addition to GAAP results, this earnings release presents
information with respect to non-GAAP cost of sales, non-GAAP gross
profit, non-GAAP selling and administrative expenses, non-GAAP
operating profit, non-GAAP operating margin, non-GAAP net earnings
and non-GAAP diluted earnings per share for the quarter ended May
31, 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 cost of sales, gross profit,
selling and administrative expenses, operating profit, operating
margin, net earnings and diluted earnings per share,
respectively.
The quarter ended May 31, 2014 non-GAAP financial measures
provided in this release exclude integration, purchase accounting
and deal related costs associated with the GE Air Filtration
acquisition, the Bekaert Advanced Filtration acquisition and the
Stanadyne Filtration acquisition. Although the comparison of data
excluding these selected items in our second quarter ended May 31,
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 cost of sales, gross
profit, selling and administrative expenses, operating profit,
operating margin, net earnings and diluted earnings per share for
the quarter ended May 31, 2014 compared to the quarter ended June
1, 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.
Certain Acquisition Related Costs
(Dollars in thousands, except per share data)
Second
Quarter 2014
GAAP
GE Air
Filtration
Acquisition
Bekaert
Advanced
Filtration
Acquisition
Stanadyne
Filtration
Acquisition
Second
Quarter 2014 Non-
GAAP Adjusted
Net sales $ 386,642 $ — $ — $ — $ 386,642 Cost of sales
261,272 (664 ) 1 (120 ) 1 (1,368 ) 1 259,120 Gross
profit 125,370 664 120 1,368 127,522 Selling and administrative
expenses 74,223 (1,161 ) 2 — (3,035 ) 2 70,027
Operating profit 51,147 1,825 120 4,403
57,495 Other income (expense): Interest expense (670 ) — — —
(670 ) Interest income 96 — — — 96 Other, net 174 — —
— 174 (400 ) — — — (400 )
Earnings before income taxes 50,747 1,825 120 4,403 57,095
Provision for income taxes 16,201 491 40 1,501
18,233 Net earnings 34,546 1,334 80 2,902 38,862
Net earnings attributable to
noncontrolling interests, net of tax
6 — — — 6
Net earnings attributable to CLARCOR
Inc
$ 34,552 $ 1,334 $ 80 $ 2,902 $ 38,868
Net earnings per share attributable to CLARCOR Inc. - Basic
$ 0.68 $ 0.03 $ 0.00 $ 0.06 $ 0.77
Net earnings per share attributable to CLARCOR Inc. -
Diluted $ 0.68 $ 0.03 $ 0.00 $ 0.06 $
0.76 Operating margin 13.2 % 0.5 % 0.0 % 1.2 % 14.9 %
Engine/Mobile Filtration Operating profit $ 26,972 $ — $ — $ 4,403
$ 31,375 Operating margin 18.2 % — — 2.9 % 21.1 %
Industrial/Environmental Filtration Operating profit $ 23,005 $
1,825 $ 120 $ — $ 24,950 Operating margin 10.5 % 0.8 % 0.1 % — 11.4
%
1 - Purchase accounting step-up in
inventory basis.
2 - Integration costs, deal costs
including investment banking and legal expenses, and accelerated
amortization of backlog pursuant to purchase accounting.
CLARCOR INC. 2014 UNAUDITED SECOND QUARTER RESULTS,
continuedReconciliation of First Six Months 2014 GAAP
Financial Results to Non-GAAP Adjusted Results
In addition to GAAP results, this earnings release presents
information with respect to non-GAAP cost of sales, non-GAAP gross
profit, non-GAAP selling and administrative expenses, non-GAAP
operating profit, non-GAAP operating margin, non-GAAP other income
(expense), non-GAAP net earnings and non-GAAP diluted earnings per
share for the first six months ended May 31, 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
cost of sales, gross profit, selling and administrative expenses,
operating profit, operating margin, other income (expense), net
earnings and diluted earnings per share, respectively.
The first six months ended May 31, 2014 non-GAAP financial
measures provided in this release exclude integration, purchase
accounting and deal related costs associated with the GE Air
Filtration acquisition, the Bekaert Advanced Filtration acquisition
and the Stanadyne Filtration acquisition and a bargain purchase
gain recognized pursuant to the Bekaert Advanced Filtration
acquisition. Although the comparison of data excluding these
selected items in our first six months ended May 31, 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 cost of sales, gross profit,
selling and administrative expenses, operating profit, operating
margin, other income (expense), net earnings and diluted earnings
per share for the six months ended May 31, 2014 compared to the six
months ended June 1, 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.
Certain Acquisition Related Costs
(Dollars in thousands, except per share data)
First Six
Months 2014
GAAP
GE Air
Filtration
Acquisition
Bekaert
Advanced
Filtration
Acquisition
Stanadyne
Filtration
Acquisition
First Six
Months 2014 Non-
GAAP Adjusted
Net sales $ 699,327 $ — $ — $ — $ 699,327 Cost of sales
477,370 (4,216 ) 1 (240 ) 1 (1,368 ) 1 471,546 Gross
profit 221,957 4,216 240 1,368 227,781 Selling and administrative
expenses 139,544 (4,263 ) 2 (130 ) 2 (3,035 ) 2 132,116
Operating profit 82,413 8,479 370 4,403
95,665 Other income (expense): Interest expense
(1,070 ) — — — (1,070 ) Interest income 203 — — — 203 Other, net
4,145 — (2,814 ) 3 — 1,331 3,278
— (2,814 ) — 464 Earnings before income taxes
85,691 8,479 (2,444 ) 4,403 96,129 Provision for income taxes
26,804 2,281 123 1,501 30,709
Net earnings 58,887 6,198 (2,567 ) 2,902 65,420
Net earnings attributable to
noncontrolling interests, net of tax
(14 ) — — — (14 )
Net earnings attributable to CLARCOR
Inc
$ 58,873 $ 6,198 $ (2,567 ) $ 2,902 $ 65,406
Net earnings per share attributable to CLARCOR Inc. - Basic
$ 1.17 $ 0.12 $ (0.05 ) $ 0.06 $ 1.30
Net earnings per share attributable to CLARCOR Inc. - Diluted $
1.16 $ 0.12 $ (0.05 ) $ 0.06 $ 1.28
Operating margin 11.8 % 1.2 % 0.1 % 0.6 % 13.7 %
1 - Purchase accounting step-up in
inventory basis.
2 - Integration costs, deal costs
including investment banking and legal expenses, and accelerated
amortization of backlog pursuant to purchase accounting.
3 - Bargain purchase gain
(non-taxable).
CLARCOR Inc.David J. Fallon, 615-771-3100Chief Financial
Officer
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