CLARCOR Inc. (NYSE: CLC):
Unaudited Third Quarter and First Nine
Months 2014 Highlights
(Amounts in millions, except per share
data and percentages)
GAAP Financial Results:
Three Months Ended Nine
Months Ended 8/30/14 8/31/13
Change 8/30/14 8/31/13
Change Net sales $ 400.2 $ 289.1 38 % $
1,099.5 $ 833.0 32 % Operating profit 62.2 42.0 48 % 144.6 125.2 16
% Net earnings - CLC 41.7 28.7 45 % 100.6 85.2 18 % Diluted EPS $
0.82 $ 0.57 44 % $ 1.98 $ 1.69 17 % Operating margin 15.6 %
14.5 % +1.1 pts 13.2 % 15.0 % -1.8 pts
Non-GAAP Adjusted Financial Results:
The third quarter and first nine months of 2014 contained
integration, purchase accounting and deal related costs associated
with three acquisitions in the current fiscal year. In addition,
the first nine months of 2014 contained a bargain purchase gain
related to the Bekaert Advanced Filtration acquisition. The third
quarter and first nine months of 2013 contained two pre-tax,
non-cash charges aggregating $7.7 million consisting of a $4.6
million loss on the disposal of equipment and a $3.1 million charge
to account for the settlement of a final pension obligation. The
following table reflects 2013 and 2014 third quarter and
year-to-date GAAP results adjusted for each of these items. A
reconciliation of non-GAAP financial measures, shown in the
following table, adjusting for these items in the third quarter and
first nine months of 2013 and 2014 to GAAP figures is provided on
pages 12 - 15 of this release.
Three Months Ended Nine
Months Ended 8/30/14 8/31/13
Change 8/30/14 8/31/13
Change Net sales $ 400.2 $ 289.1 38 % $
1,099.5 $ 833.0 32 % Adjusted operating profit 62.8 49.7 26 % 158.5
132.9 19 % Adjusted net earnings - CLC 42.1 33.7 25 % 107.5 90.2 19
% Adjusted diluted EPS $ 0.83 $ 0.67 24 % $ 2.12 $ 1.79 18 %
Adjusted operating margin 15.7 % 17.2 % -1.5 pts
14.4 % 16.0 % -1.6 pts
CLARCOR Inc. (NYSE: CLC) reported that its diluted
earnings per share for the third quarter of 2014 increased 44% from
the third quarter of 2013 to a record third quarter high of $0.82.
These 2014 third quarter results were negatively impacted by $0.6
million of integration, purchase accounting and deal related costs
associated with the GE Air Filtration acquisition while third
quarter 2013 results were negatively impacted by $7.7 million for
charges related to a loss on the disposal of equipment and the
settlement of a final pension obligation. When adjusted for these
costs and charges, the Company’s third quarter non-GAAP adjusted
diluted earnings per share of $0.83 increased 24% and non-GAAP
adjusted operating profit increased 26% compared to the Company’s
non-GAAP adjusted diluted earnings per share and non-GAAP adjusted
operating profit during the third quarter of 2013.1
Net sales in the third quarter of 2014 increased $111.1 million,
or 38%, from last year’s third quarter primarily driven by $90.7
million of additional sales from the three fiscal year 2014
acquisitions. Net sales of our base business increased $20.4
million, or 7%, from the third quarter of 2013, including 8%
organic sales growth in the Industrial/Environmental Filtration
segment and 7% 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 performance in the third quarter
maintained the strong momentum we established through the first six
months of 2014. The integration of our 2014 acquisitions remain on
track, and the top-line of our base business continues to grow—7%
in the third quarter and 6% year-to-date from comparable periods
last year—as our long-term sales growth initiatives gain traction.
As with prior quarters, we also continued our focus on strategic
initiatives including driving the development of value-added
technology, expanding profitably in international markets and
exploring new product and customer development activities.
“As of the end of the third quarter, we have completed the most
significant tasks required to carve-out our GE Air Filtration
acquisition from GE—approximately three months sooner than we
initially expected. We have benefited from cost savings as we have
transitioned from GE’s internal systems and processes to our
systems and processes, and we expect to fully realize the savings
associated with this transition beginning in fiscal year 2015.
Strategic integration into CLARCOR continues as we work to leverage
products, market channels and technologies across this business and
our complimentary filtration businesses. We believe we now offer
the industry’s broadest portfolio of pre-filters, final filters and
cartridge filters for gas turbine protection, and we are excited
about similar opportunities to leverage products and channels
across other CLARCOR companies going forward. The financial
performance of GE Air Filtration—renamed CLARCOR Industrial Air, or
CIA—continues to meet our expectations. In the third quarter CIA
had net sales of $59.8 million and a third quarter operating margin
of 8.4% despite $0.6 million of integration and purchase accounting
costs. Net sales at CIA for the first nine months of 2014 are
approximately 15% higher than the comparable period in 2013
including a 29% increase in sales of gas turbine air intake
filtration systems. We also continue to be excited about our more
recent acquisition of Stanadyne Filtration—renamed CLARCOR Engine
Mobile Solutions, or CEMS. We have made solid progress in
coordinating strategic market and product initiatives between CEMS
and our current Baldwin aftermarket operations, and the financial
performance of CEMS has been consistent with our expectations at
the time of acquisition.
“While investing significant time and resources to consummate
and integrate our current year acquisitions, we continue to
successfully drive strategic organic growth in our core filtration
markets. This organic growth has been driven by many of our diverse
filtration markets including the domestic heavy-duty engine
filtration aftermarket where net sales have increased 8% for both
the third quarter and first nine months of 2014. Our consolidated
organic growth on a year-to-date basis is strong despite just 6%
sales growth from our oil & gas filtration market—where we
anticipate sales growth in excess of 10% in the fourth quarter of
2014 based upon a record high backlog at the end of the third
quarter. Other filtration markets have also contributed to our
organic sales growth in the first nine months including a 37%
increase in dust collection system sales and a 9% increase in
locomotive filtration sales. In summary, despite the significant
business development activity this year, we have not taken our
focus off of our base business and long-term organic growth
initiatives. We believe our current year acquisitions only add to
the strategic position of an already strong core filtration
portfolio.”
Third Quarter Results:
Engine/Mobile Filtration
Segment
Net sales at our Engine/Mobile Filtration segment increased
$36.8 million, or 28%, from the third quarter of 2013 including
$28.0 million from CEMS. Organic sales increased $8.8 million, or
7%, from last year’s third quarter including 6% domestic sales
growth and 8% foreign sales growth. Higher third quarter domestic
sales were driven by an 8% increase in the heavy-duty engine
filtration aftermarket and a 10% increase in locomotive filtration
product sales primarily due to higher end-market demand driven by
higher rail activity. Higher foreign sales were primarily due to an
increase in export sales from the U.S. into Latin America.
Operating profit at our Engine/Mobile Filtration segment
increased $8.1 million, or 28%, and operating margin of 22.1%
decreased 0.1 percentage points from the last year’s third quarter.
The increase in third quarter operating profit in this reporting
segment was primarily due to incremental operating profit from the
Stanadyne Filtration acquisition, as well as the fact that
operating profit in last year’s third quarter included $1.4 million
of allocated charges pursuant to the settlement of a final pension
obligation. The slight decline in operating margin in the third
quarter was the result of lower operating margin at our base
business partially offset by the favorable mix impact on operating
margin from the Stanadyne Filtration acquisition. 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 including the
Engine/Mobile Filtration segment was also negatively impacted by
approximately 0.6 percentage points in the third quarter compared
to last year’s third quarter due to higher allocated corporate and
other growth-related costs.
Industrial/Environmental Filtration
Segment
Net sales at our Industrial/Environmental Filtration segment
increased $74.1 million, or 53%, from the third quarter of 2013.
The third quarter of 2014 included combined sales of $62.7 million
from the two 2014 acquisitions included in this reporting segment.
Third quarter organic sales increased $11.4 million, or 8%, from
last year’s third quarter including 14% domestic sales growth and a
6% reduction in foreign sales. Higher sales in the U.S. were
primarily due to a 31% increase in oil & gas filtration sales
due to continued strong shale activity. The 6% reduction in foreign
sales from last year’s third quarter primarily resulted from lower
oil & gas filtration sales in Latin America and Europe due to
several large filtration vessel shipments in both regions in the
third quarter of 2013.
Operating profit at our Industrial/Environmental Filtration
segment increased $12.6 million, or 111%, and operating margin of
11.2% increased 3.1 percentage points from last year’s third
quarter. Operating profit in this year’s third quarter was
positively influenced by $4.9 million from our 2014 acquisitions,
and operating profit in last year’s third quarter was negatively
impacted by $6.1 million of costs related to a loss on the disposal
of equipment and allocated charges pursuant to the settlement of a
final pension obligation. Operating margin for our base business in
this reporting segment remained flat compared with the third
quarter of 2013, as the benefits of cost savings through our
continuous improvement activities, as well as higher sales prices,
offset the approximately 0.6 percentage point negative impact due
to higher allocated corporate costs as noted above.
Packaging Segment
Net sales at our Packaging segment increased $0.2 million, or
1%, from the third quarter of 2013. These relatively flat sales
were primarily the result of higher decorated flat sheet sales from
new business opportunities offset by lower spice, battery and film
packaging sales. Operating profit at our Packaging segment declined
$0.4 million, or 22%, and operating margin of 7.9% declined 2.2
percentage points from last year’s third quarter. This lower third
quarter operating margin was primarily driven by a higher mix of
lower margin products in addition to higher utility costs and
allocated corporate costs compared with the third quarter of
2013.
2014 Guidance
We project 2014 GAAP diluted earnings per share
to be in the range of $2.79 and $2.85, a $0.05 increase at the
mid-point from our prior 2014 diluted earnings per share guidance
of $2.72 to $2.82. In excess of $0.03 of this increase was driven
by lower expected 2014 interest expense compared with our prior
guidance—which included the previously disclosed assumption that we
would complete a debt refinancing in the third quarter of 2014.
Although we will continue to assess the possibility of refinancing
a portion of our debt, at this point, we do not anticipate
completing a debt refinancing in 2014. We anticipate 2014
consolidated operating margin to be in the range from 13.8% to
14.2% and 2014 consolidated net sales to be as follows:
$Millions
Lower
Upper Base business $ 1,190 - $ 1,210 GE Air
Filtration acquisition 230 - 234 Stanadyne Filtration acquisition
65 - 69 Bekaert Advanced Filtration acquisition 15 -
17 Net sales $ 1,500 - $ 1,530
We project 2014 non-GAAP adjusted diluted earnings per share to
be in the range of $2.92 to $2.98. 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 14.7% to 15.1%.
Projected 2014 Non-GAAP
Adjusted Diluted Earnings per Share Reconciliation:
Lower Upper
2014 GAAP Diluted Earnings per Share $ 2.79 - $ 2.85
GE Air Filtration acquisition costs 0.13 - 0.13 Stanadyne
Filtration acquisition costs 0.06 - 0.06 Bekaert Advanced
Filtration bargain purchase gain (0.06 ) - (0.06 )
2014 Non-GAAP Adjusted Diluted Earnings per Share $ 2.92 - $
2.98
Projected 2014 Non-GAAP
Adjusted Operating Margin Reconciliation:
Lower Upper
2014 GAAP Operating Margin 13.8 % - 14.2 % GE Air
Filtration acquisition costs 0.6 % - 0.6 % Stanadyne Filtration
acquisition costs 0.3 % - 0.3 % 2014 Non-GAAP
Adjusted Operating Margin 14.7 % - 15.1 %
Base Business
Included in our consolidated 2014 guidance are estimated diluted
earnings per share of between $2.44 and $2.50 for our base
business—excluding the GE Air Filtration, Bekaert Advanced
Filtration and Stanadyne Filtration acquisitions. The mid-point of
this revised guidance is consistent with our previous guidance as
the diluted earnings per share impact of an increase in expected
base business sales was offset by a reduction in expected operating
margin.
Sales growth and operating margin detail in
support of our 2014 guidance for our base business is as
follows:
2014 EstimatedSales
Growth
2014 EstimatedOperating
Margin
Engine/Mobile Filtration2 5.0% to 7.0% 20.5% to 21.1%
Industrial/Environmental Filtration2 6.0% to 8.0% 11.2% to 12.0%
Packaging
1.0% to 2.0% 6.5% to 7.1%
CLARCOR base business2
5.2% to 7.2% 15.0% to
15.8%
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 $0.14
to $0.16 including the negative impact of approximately $0.14 from
$9.0 million of integration, purchase accounting and deal related
costs pursuant to the GE Air Filtration acquisition expected to be
incurred for full year 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 $0.13 to $0.15 including the negative
impact of approximately $0.06 from $4.4 million of integration,
purchase accounting and deal related costs pursuant to the
Stanadyne Filtration acquisition expected to be incurred for full
year 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 $180 million, capital expenditures between $65 million and $75
million, an effective tax rate between 31.5% and 32.0% and diluted
shares outstanding of approximately 50.9 million.
CLARCOR will be holding a conference call to discuss the third
quarter 2014 results at 10:00 a.m. CT on September 18, 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 3829357. The replay will be available
through October 2, 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 third quarter, first nine months of 2014 and/or forecasted
2014 full year consolidated adjusted operating profit, adjusted net
earnings, adjusted diluted earnings per share and adjusted
operating margin, excluding the impact of the Stanadyne Filtration
acquisition, the GE Air Filtration acquisition, the Bekaert
Advanced Filtration acquisition and the bargain purchase gain
related to the Bekaert Advanced Filtration acquisition. This
earnings release also presents information with respect to 2013
third quarter and first nine months of 2013 adjusted operating
profit, adjusted net earnings, adjusted diluted earnings per share
and adjusted operating margin, excluding the loss on the disposal
of equipment and a charge to account for a final pension
obligation. 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 12 - 15 of this 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 attributable to the acquired GE Air
Filtration and Stanadyne Filtration businesses, the anticipated
impact on 2014 GAAP diluted earnings per share of integration,
purchase accounting and deal related costs resulting from the GE
Air Filtration and Stanadyne Filtration acquisitions, the assumed
interest expense incurred to finance the GE Air Filtration and
Stanadyne Filtration acquisitions impacting the projected diluted
earnings per share attributable to these acquisitions, 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 expectation that
we will fully realize the cost savings associated with
transitioning from GE’s internal systems and processes to our
systems and processes in fiscal year 2015; statements regarding our
anticipated ability to leverage products and channels related to
the acquired GE Air Filtration business across other CLARCOR
companies going forward; statements regarding our anticipated sales
growth from our oil & gas filtration market in the fourth
quarter of 2014; statements that an anticipated increase in full
year sales for our base business is expected to be offset by an
anticipated reduction in full year base business operating margin;
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 THIRD
QUARTER RESULTS
CONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS
(Dollars in thousands, except share
data)
Three Months Ended Nine Months
Ended
August 30,2014
August 31,2013
August 30,2014
August 31,2013
Net sales $ 400,152 $ 289,126 $ 1,099,479 $ 832,980 Cost of sales
264,827 197,226 742,197 561,380
Gross profit 135,325 91,900 357,282 271,600 Selling and
administrative expenses 73,099 49,915 212,643
146,399 Operating profit 62,226 41,985
144,639 125,201 Other income (expense):
Interest expense (1,336 ) (139 ) (2,406 ) (451 ) Interest income
101 221 304 528 Other, net (279 ) 153 3,866 (70 )
(1,514 ) 235 1,764 7 Earnings before
income taxes 60,712 42,220 146,403 125,208 Provision for
income taxes 18,947 13,447 45,751 39,754
Net earnings 41,756 28,773 100,652 85,454
Net earnings attributable to
noncontrolling interests, net of tax
(62 ) (66 ) (76 ) (234 ) Net earnings attributable to
CLARCOR Inc. $ 41,703 $ 28,707 $ 100,576 $
85,220 Net earnings per share attributable to CLARCOR
Inc. - Basic $ 0.83 $ 0.57 $ 1.99 $ 1.71
Net earnings per share attributable to CLARCOR Inc. -
Diluted $ 0.82 $ 0.57 $ 1.98 $ 1.69
Weighted average number of shares outstanding - Basic
50,395,007 50,092,548 50,457,436 49,917,939
Weighted average number of shares outstanding - Diluted
50,881,594 50,604,809 50,917,020 50,481,049
Dividends paid per share $ 0.1700 $ 0.1350
$ 0.5100 $ 0.4050
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
CONSOLIDATED CONDENSED BALANCE
SHEETS
(Dollars in thousands)
August 30,2014
November 30,2013
ASSETS Current assets: Cash and cash equivalents $ 77,625 $
411,562 Restricted cash — 763 Accounts receivable, less allowance
for losses of $11,400 and $9,183, respectively 313,745 224,829
Inventories 280,961 218,786 Deferred income taxes 30,540 25,313
Income taxes receivable — 1,000 Prepaid expenses and other current
assets 18,221 9,868 Total current assets 721,092
892,121 Plant assets, at cost, less
accumulated depreciation of $354,735 and $332,787, respectively
276,924 208,953 Goodwill 511,212 241,299 Acquired intangible
assets, less accumulated amortization 357,955 89,881 Other
noncurrent assets 17,324 16,589 Total assets $
1,884,507 $ 1,448,843
LIABILITIES Current
liabilities: Current portion of long-term debt $ 233 $ 50,223
Accounts payable and accrued liabilities 224,898 157,538 Income
taxes payable 4,665 — Total current liabilities
229,796 207,761 Long-term debt, less current
portion 425,268 116,413 Long-term pension and postretirement
healthcare benefits liabilities 18,743 19,792 Deferred income taxes
105,424 64,415 Other long-term liabilities 9,262 5,753
Total liabilities 788,493 414,134
Contingencies Redeemable noncontrolling interests 1,686 1,836
SHAREHOLDERS’ EQUITY
Capital stock 50,143 50,371 Capital in excess of par value 9,560
22,278 Accumulated other comprehensive loss (30,244 ) (29,814 )
Retained earnings 1,063,838 989,013 Total CLARCOR
Inc. equity 1,093,297 1,031,848 Noncontrolling
interests 1,031 1,025
Total shareholders’ equity
1,094,328 1,032,873
Total liabilities and shareholders’
equity
$ 1,884,507 $ 1,448,843
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
CONSOLIDATED CONDENSED CASH
FLOWS
(Dollars in thousands)
Nine Months Ended
August 30,2014
August 31,2013
Cash flows from operating activities: Net earnings $ 100,652
$ 85,454 Depreciation 22,359 19,885 Amortization 14,126 4,454 Other
noncash items 972 1,800 Net loss on disposition of plant assets 67
3,824 Bargain purchase gain (2,815 ) — Stock-based compensation
expense 4,909 4,074 Excess tax benefit from stock-based
compensation (705 ) (7,313 ) Deferred income taxes (1,166 ) 6,610
Changes in assets and liabilities (39,550 ) (47,592 ) Net cash
provided by operating activities 98,849 71,196
Cash flows from investing activities: Restricted cash 1,364
(9,207 ) Business acquisitions, net of cash acquired (595,328 ) —
Additions to plant assets (52,524 ) (25,491 ) Proceeds from
disposition of plant assets 354 2,673 Investment in affiliates (473
) (615 ) Net cash used in investing activities (646,607 ) (32,640 )
Cash flows from financing activities: Net payments on
multicurrency revolving credit facility (36,000 ) — 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 (1,562 ) (3,979 ) Payment of
financing costs (723 ) — Sale of capital stock under stock option
and employee purchase plans 4,208 24,204 Payments for repurchase of
common stock (21,959 ) (24,149 ) Excess tax benefit from
stock-based compensation 705 7,313 Dividend paid to noncontrolling
interests (166 ) (206 ) Cash dividends paid (25,751 ) (20,219 ) Net
cash provided by (used in) financing activities 213,752
(17,036 ) Net effect of exchange rate changes on cash 69
(157 ) Net change in cash and cash equivalents (333,937 ) 21,363
Cash and cash equivalents, beginning of period 411,562
185,496 Cash and cash equivalents, end of period $ 77,625
$ 206,859
Cash paid during the period
for: Interest $ 1,831 $ 301 Income taxes, net of
refunds $ 44,226 $ 29,947
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
QUARTERLY INCOME STATEMENT DATA BY
SEGMENT
(Dollars in thousands)
Quarter Ended Nine
Months Ended
August 30,2014
August 31,2013
August 30,2014
August 31,2013
Net sales by segment: Engine/Mobile Filtration $ 165,910 $
129,148 $ 436,805 $ 379,195 Industrial/Environmental Filtration
213,752 139,659 608,207 398,945 Packaging 20,490 20,319
54,467 54,840 $ 400,152 $ 289,126
$ 1,099,479 $ 832,980
Operating
profit by segment: Engine/Mobile Filtration $ 36,741 $ 28,611 $
86,587 $ 81,156 Industrial/Environmental Filtration 23,873 11,315
55,024 39,404 Packaging 1,612 2,059 3,028
4,641 $ 62,226 $ 41,985 $ 144,639 $
125,201
Operating margin by segment:
Engine/Mobile Filtration 22.1 % 22.2 % 19.8 % 21.4 %
Industrial/Environmental Filtration 11.2 % 8.1 % 9.0 % 9.9 %
Packaging 7.9 % 10.1 % 5.6 % 8.5 % 15.6 % 14.5 % 13.2 % 15.0 %
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
Reconciliation of Third 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 basic and diluted earnings per share for the quarter
ended August 30, 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 basic and diluted earnings per
share, respectively.
The quarter ended August 30, 2014 non-GAAP financial measures
provided in this release exclude integration, purchase accounting
and deal related costs associated with the GE Air Filtration
acquisition. Although the comparison of data excluding these costs
in our third quarter ended August 30, 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 costs 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 basic and diluted earnings per share for the quarter
ended August 30, 2014 compared to the quarter ended August 31,
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)
ThirdQuarter
2014GAAP
GE
AirFiltrationAcquisition
BekaertAdvancedFiltrationAcquisition
StanadyneFiltrationAcquisition
ThirdQuarter 2014
Non-GAAP Adjusted
Net sales $ 400,152 $ — $ — $ — $ 400,152 Cost of sales
264,827 (126 ) 1 — — 264,701 Gross
profit 135,325 126 — — 135,451 Selling and administrative expenses
73,099 (452 ) 2 — — 72,647 Operating
profit 62,226 578 — — 62,804
Other income (expense): Interest expense (1,336 ) — — — (1,336 )
Interest income 101 — — — 101 Other, net (279 ) — — —
(279 ) (1,514 ) — — — (1,514 ) Earnings
before income taxes 60,712 578 — — 61,290 Provision for income
taxes 18,947 155 — — 19,102 Net
earnings 41,765 423 — — 42,188
Net earnings attributable to
noncontrolling interests, net of tax
(62 ) — — — (62 )
Net earnings attributable to CLARCOR
Inc.
$ 41,703 $ 423 $ — $ — $ 42,126
Net earnings per share attributable to CLARCOR Inc. - Basic $ 0.83
$ 0.01 $ — $ — $ 0.84 Net
earnings per share attributable to CLARCOR Inc. - Diluted $ 0.82
$ 0.01 $ — $ — $ 0.83 Operating
margin 15.6 % 0.1 % — — 15.7 % 1 - Purchase
accounting step-up in inventory basis. 2 - Integration costs and
accelerated amortization of backlog pursuant to purchase
accounting.
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
Reconciliation of Third Quarter 2013
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 basic and diluted earnings per share for the quarter
ended August 31, 2013. 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 basic and diluted earnings per
share, respectively.
The quarter ended August 31, 2013 non-GAAP financial measures
provided in this release exclude a loss on disposal of equipment
and a charge to account for a final pension obligation. Although
the comparison of data excluding these costs in our third quarter
ended August 31, 2013 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
costs 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 basic and diluted
earnings per share for the quarter ended August 31, 2013 compared
to the quarter ended August 30, 2014.
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.
(Dollars in thousands, except
per share data)
ThirdQuarter
2013GAAP
Loss onDisposal
ofEquipment
Settlement ofFinal
PensionObligation
ThirdQuarter 2013
Non-GAAP Adjusted
Net sales $ 289,126 $ — $ — $ 289,126 Cost of sales 197,226
(4,631 ) — 192,595 Gross profit 91,900 4,631 —
96,531 Selling and administrative expenses 49,915 —
(3,111 ) 46,804 Operating profit 41,985 4,631
3,111 49,727 Other income (expense): Interest expense
(139 ) — — (139 ) Interest income 221 — — 221 Other, net 153
— — 153 235 — — 235
Earnings before income taxes 42,220 4,631 3,111 49,962
Provision for income taxes 13,447 1,667 1,120
16,234 Net earnings 28,773 2,964 1,991 33,728
Net earnings attributable to
noncontrolling interests, net of tax
(66 ) — — (66 )
Net earnings attributable to CLARCOR
Inc.
$ 28,707 $ 2,964 $ 1,991 $ 33,662 Net
earnings per share attributable to CLARCOR Inc. - Basic $ 0.57
$ 0.06 $ 0.04 $ 0.67 Net earnings per
share attributable to CLARCOR Inc. - Diluted $ 0.57 $ 0.06
$ 0.04 $ 0.67 Operating margin 14.5 % 1.6 %
1.1 % 17.2 %
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
Reconciliation of First Nine 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 basic and diluted
earnings per share for the first nine months ended August 30, 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 these
non-GAAP measures are cost of sales, gross profit, selling and
administrative expenses, operating profit, operating margin, other
income (expense), net earnings and basic and diluted earnings per
share, respectively.
The first nine months ended August 30, 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 costs
in our first nine months ended August 30, 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 costs 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 basic and diluted earnings per
share for the nine months ended August 30, 2014 compared to the
first nine months ended August 31, 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)
YTD 2014GAAP
GE
AirFiltrationAcquisition
BekaertAdvancedFiltrationAcquisition
StanadyneFiltrationAcquisition
YTD 2014 Non-GAAP
Adjusted
Net sales $ 1,099,479 $ — $ — $ — $ 1,099,479 Cost of sales
742,197 (4,342 ) 1 (240 ) 1 (1,368 ) 1 736,247 Gross
profit 357,282 4,342 240 1,368 363,232 Selling and administrative
expenses 212,643 (4,715 ) 2 (130 ) 2 (3,035 ) 2 204,763
Operating profit 144,639 9,057 370
4,403 158,469 Other income (expense): Interest
expense (2,406 ) — — — (2,406 ) Interest income 304 — — — 304
Other, net 3,866 — (2,814 ) 3 — 1,052
1,764 — (2,814 ) — (1,050 ) Earnings before
income taxes 146,403 9,057 (2,444 ) 4,403 157,419 Provision for
income taxes 45,751 2,436 123 1,501
49,811 Net earnings 100,652 6,621 (2,567 ) 2,902 107,608
Net earnings attributable to
noncontrolling interests, net of tax
(76 ) — — — (76 )
Net earnings attributable to CLARCOR
Inc.
$ 100,576 $ 6,621 $ (2,567 ) $ 2,902 $ 107,532
Net earnings per share attributable to CLARCOR Inc. - Basic
$ 1.99 $ 0.13 $ (0.05 ) $ 0.06 $ 2.13
Net earnings per share attributable to CLARCOR Inc. - Diluted $
1.98 $ 0.13 $ (0.05 ) $ 0.06 $ 2.12
Operating margin 13.2 % 0.8 % 0.0 % 0.4 % 14.4 % 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. 3 - Bargain purchase gain (non-taxable).
CLARCOR INC. 2014 UNAUDITED THIRD
QUARTER RESULTS, continued
Reconciliation of First Nine Months
2013 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 basic and diluted earnings per share for the quarter
ended August 31, 2013. 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 basic and diluted earnings per
share, respectively.
The first nine months ended August 31, 2013 non-GAAP financial
measures provided in this release exclude a loss on disposal of
equipment and a charge to account for a final pension obligation.
Although the comparison of data excluding these costs in our first
nine months ended August 31, 2013 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
costs 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 basic and diluted
earnings per share for the first nine months ended August 31, 2013
compared to the first nine months ended August 30, 2014.
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.
(Dollars in thousands,
except per share data)
YTD 2013GAAP
Loss onDisposal
ofEquipment
Settlement ofFinal
PensionObligation
YTD 2013 Non-GAAP
Adjusted
Net sales $ 832,980 $ — $ — $ 832,980 Cost of sales 561,380
(4,631 ) — 556,749 Gross profit 271,600 4,631
— 276,231 Selling and administrative expenses 146,399 —
(3,111 ) 143,288 Operating profit 125,201
4,631 3,111 132,943 Other income (expense):
Interest expense (451 ) — — (451 ) Interest income 528 — — 528
Other, net (70 ) — — (70 ) 7 — —
7 Earnings before income taxes 125,208 4,631 3,111 132,950
Provision for income taxes 39,754 1,667 1,120
42,541 Net earnings 85,454 2,964 1,991 90,409
Net earnings attributable to
noncontrolling interests, net of tax
(234 ) — — (234 )
Net earnings attributable to CLARCOR
Inc.
$ 85,220 $ 2,964 $ 1,991 $ 90,175 Net
earnings per share attributable to CLARCOR Inc. - Basic $ 1.71
$ 0.06 $ 0.04 $ 1.81 Net earnings per
share attributable to CLARCOR Inc. - Diluted $ 1.69 $ 0.06
$ 0.04 $ 1.79 Operating margin 15.0 % 0.6 %
0.4 % 16.0 %
CLARCOR Inc.David J. Fallon, 615-771-3100Chief Financial
Officer
Clarcor (NYSE:CLC)
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