CLARCOR Reports Record Fourth Quarter and Fiscal 2004 Results
Fourth Quarter 2004 Sales Up 7%; Net Earnings Up 22% Over 2003
FRANKLIN, Tenn., Jan. 12 /PRNewswire-FirstCall/ -- CLARCOR Inc.
(NYSE:CLC) reported today that fourth quarter 2004 sales and net
earnings increased by 7% and 22%, respectively, compared to the
same quarter in 2003. Fourth quarter operating profit increased by
10%, and operating margin improved to 15.0% in 2004 compared to
14.7% in 2003. For the full year 2004, sales increased by 6% and
net earnings and diluted earnings per share increased by 17% and
15%, respectively, compared to 2003. Operating profit increased by
13%, and operating margins improved to 12.5% from 11.7% in 2003.
Foreign currency fluctuations increased fiscal 2004 fourth quarter
sales by $1 million and full year sales by $4 million. There were
two non-recurring items in the fourth quarter and for the full year
of 2004 that affected net earnings: -- Costs to relocate the
company's headquarters to Franklin, TN were approximately $2.2
million for fiscal 2004 or approximately $0.05 per share.
Relocation costs incurred in the fourth quarter of 2004 were
approximately $0.3 million. -- Tax benefits arising from the
recently enacted American Jobs Creation Act of 2004 increased
after-tax earnings in the fourth quarter and for the full year of
2004 by approximately $1.2 million, or approximately $0.05 per
share. Norm Johnson, CLARCOR's Chairman and Chief Executive
Officer, said, "Fiscal 2004 marked CLARCOR's 12th consecutive year
of earnings growth. Fourth quarter earnings were significantly
stronger than we originally expected due primarily to higher
margins in our filtration and packaging businesses. Fourth quarter
Engine/Mobile segment margins improved to 22.1% from 21.9% last
year. Industrial/Environmental segment margins improved to 10.2%,
the highest level ever achieved by that segment, compared to 10.0%
in last year's fourth quarter. Margins also improved at our
Packaging segment to 12.0% in 2004 from 11.1% in 2003. The
improvement in margins was driven by cost reductions and improved
plant productivity, and increasing demand for our higher margin
filter products. Although like many companies, we faced
substantially higher raw material costs in 2004, particularly for
steel and filtration media, we passed through these costs to our
customers whenever possible. "Engine/Mobile Filtration sales
increased by 11% in the fourth quarter of 2004 compared to the same
quarter in 2003. Sales of heavy-duty filters through our
traditional aftermarket distribution, both in domestic and
international markets, were strong throughout the quarter. Our new
partnership with Caterpillar Inc. to sell Baldwin-branded filters
to Caterpillar dealers expanded with additional dealers added to
the program in the fourth quarter. We expect this program to
continue to grow through 2005 and 2006. We also saw growth at Clark
Filter, our railroad filter operation, driven by the increase in
freight shipped on North American railroads. Clark Filter is also
our primary manufacturing facility for dust collector cartridges
and this business grew solidly in the fourth quarter. Based on
current trends, we anticipate this continuing in 2005.
"Industrial/Environmental Filtration sales increased by 5% from
last year's fourth quarter. Most of the overall increase was due to
our acquisition of Purolator EFP in September. Filter demand in
industrial markets used in applications in oil and gas drilling,
aviation fuel, defense and fluid power continued to be very strong
in the fourth quarter, as they have been throughout 2004. Demand in
Europe for our sewage treatment systems continues to be solid.
After several years of declining demand, we began to see increased
orders in the fourth quarter for filtration systems sold into the
capital goods markets, such as dust collectors and electrostatic
precipitation equipment. Sales of HVAC filters, however, were below
those of last year. This decline was caused by strong price
competition in commercial, industrial and wholesale markets and
decreased demand for environmental filters sold to the major
automobile companies. "We continue to improve the cost structure
and manufacturing efficiencies in our Industrial/Environmental
companies and, as a result, operating margins improved by nearly
one full percentage point from 2003 to 2004 and reached 7.2%. We
expect further improvement in 2005 towards our goal of a 10% annual
operating margin for our Industrial/Environmental segment. The
integration of Purolator EFP has gone well and we expect the
acquisition, which we completed in September 2004, will be
accretive to earnings in 2005. Purolator EFP sells critical-use,
final filters for the plastics, fibers and polymers industry. "At
most of our companies located outside the U.S, we had a very good
year in 2004, continuing the strong performance we saw in 2003.
Strong growth and increasing profitability continued in our Facet
operations in Europe and our Baldwin operations in China, South
Africa, Mexico and Australia. Our engine filtration and industrial
filter systems business in England struggled throughout 2004 to
integrate a recent acquisition and did not perform well. We are
putting great emphasis on fixing problems in our manufacturing
operations there. As sales at this operation have remained steady
throughout 2004 despite manufacturing problems, we expect to see a
significant improvement in profitability there in 2005. Though
currency movements do not usually have a significant impact on our
international results, the weakening of the U.S. dollar in the
fourth quarter helped our reported sales and earnings. If the
dollar continues at current levels or weakens further, we expect
favorable currency results will add to what we believe will be
another strong year internationally. "Packaging segment sales
increased 2% in the fourth quarter of 2004 compared to the fourth
quarter of 2003 and operating profit improved by 10%. For the full
year, sales grew by 6% and operating profit by 12%. The improvement
in operating profit was due to significant emphasis on cost
reductions and particularly on improving plant productivity.
Product demand was stable for flat sheet coating and decorating,
but declined in plastics packaging. We expect that sales will
continue to grow in 2005 with improved operating margins as well.
"During the fourth quarter of 2004, cash from operations totaled
$30 million and for the year cash from operations was $74 million.
Capital expenditures for the quarter and the year were $7 million
and $22 million, respectively. We continue to generate strong
levels of cash flow and at year- end our debt to equity ratio was
5.4%. Our fourth quarter and year-end tax rate in 2004 declined
from last year as we reduced tax reserves due to the recently
enacted American Jobs Creation Act of 2004. In 2005, we expect our
effective tax rate to be approximately 36.5%. "We expect capital
expenditures in the range of $25 to $30 million in 2005, up from
$22 million in 2004. Capital spending will be focused on the
development of new products, including the development of new
filter media, investing to expand the capabilities of our
filtration research and technical centers and the completion of a
new aviation fuel test facility in Greensboro, North Carolina. We
are also planning to install a new manufacturing line at our
Baldwin facility in Kearney, Nebraska for the production of our
Channel Flow(R) engine air filters. "Costs to comply with the
requirements of Sarbanes-Oxley Section 404 were approximately $1.8
million, or $0.04 per share in 2004. These costs will continue in
2005. Our external auditors have not yet completed their audit of
our internal control system and so we are not able to comment on
the results. "Though it is still early in the new fiscal year,
product demand for heavy-duty, aerospace and specialty process
liquid filters remains strong. Dust collector cartridges and
systems are experiencing a rebound from declining sales over the
last three to four years, with an increasing backlog and strong
quote activity. We are also optimistic that we will see an upturn
in HVAC filter sales. "Our international operations are doing very
well, particularly in China and continental Europe. We expect
significant improvement in our UK engine filter operations in 2005.
We believe the market in Europe will expand for sales of our sewage
treatment systems, and are exploring opportunities to transfer this
technology and our manufacturing experience with small sewage
treatment systems to the United States, Latin America and Asia.
"Our Total Filtration Program continued to grow in 2004 and we
expect this will continue in 2005. The Total Filtration Program's
growth in the future is expected to come from increasing sales to
non-automotive customers and expansion of our filter service
business. We have completed the transition of all of our
company-owned branches and stores from selling primarily air
filtration HVAC products to selling our entire range of liquid and
air filter products. We expect 2005 to be a year where we focus
more intensely than ever on the development of new filter products,
enhanced filter media and expanding the technical and testing
facilities at our Industrial/Environmental filter companies. "We
are concerned, as are many other U.S. companies, at increasing
costs for certain raw materials, energy and health care. Each of
these costs grew by double-digit percentages in 2004, which may
continue in 2005. Although a significant increase in interest rates
will not be good for the economy, either in the U.S. or abroad, we
are fortunate to have low levels of debt and strong cash flow.
Costs to comply with increasing government regulations rose more
steeply in 2004 than we had seen previously and we do not see this
trend abating. Yet, even with these headwinds, we expect 2005 to be
our 13th straight record year in both sales and earnings for
CLARCOR, with continued strong cash flow and diluted earnings per
share in the range of $2.63 to $2.73 excluding the effect, which we
have not yet determined, of the recently enacted requirement to
expense stock options." CLARCOR will be holding a conference call
to discuss the fourth quarter and full year results at 10:00 am CST
on January 13, 2005. Interested parties can listen to the
conference call at http://www.clarcor.com/ or
http://www.viavid.net/ . A replay will be available on these
websites and also at 877-519-4471 or 973-341-3080 and providing
confirmation code 5479627. The replay will be available through
January 20, 2005 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 the
Company are traded on the New York Stock Exchange under the symbol
CLC. The statements in this release concerning the Company's sales,
earnings, business performance and prospects are forward-looking
statements that involve significant risks and uncertainties,
including the effect of changes in product demand, availability of
labor, price and product competition, raw material costs, health
care costs, energy prices, productivity improvement and plant
consolidation programs, distribution channels, acquisitions and
divestitures, general economic conditions in both domestic and
foreign markets, interest rates, currency fluctuations, the success
of our Total Filtration Program, the success of sales and marketing
programs, the cost of compliance with recently enacted regulatory
requirements, the effect of changes in accounting rules and other
factors discussed in filings made with the Securities and Exchange
Commission. CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in
thousands except per share data) For periods ended November 27,
2004 and November 29, Fourth Quarter Twelve Months 2003 2004 2003
2004 2003 Net sales $207,493 $193,442 $787,686 $741,358 Cost of
sales 142,682 132,853 547,058 519,667 Gross profit 64,811 60,589
240,628 221,691 Selling and administrative expenses 33,740 32,207
142,451 134,629 Operating profit 31,071 28,382 98,177 87,062 Other
income (expense) 793 (603) 883 (1,003) Earnings before income taxes
and minority earnings 31,864 27,779 99,060 86,059 Income taxes
10,190 10,117 34,717 31,371 Earnings before minority earnings
21,674 17,662 64,343 54,688 Minority interests in earnings of
subsidiaries (127) (57) (346) (136) Net earnings $21,547 $17,605
$63,997 $54,552 Net earnings per common share: Basic $0.84 $0.70
$2.51 $2.17 Diluted $0.83 $0.68 $2.48 $2.15 Average shares
outstanding: Basic 25,612,338 25,304,251 25,492,157 25,106,561
Diluted 25,958,942 25,741,481 25,753,369 25,372,806 CONSOLIDATED
BALANCE SHEETS (Dollars in thousands) November 27, November 29,
2004 2003 Assets Current assets: Cash and cash investments $22,520
$8,348 Accounts receivable, net 143,719 127,546 Inventories 115,571
99,673 Other 22,180 21,835 Total current assets 303,990 257,402
Plant assets, net 142,242 129,572 Acquired intangibles, net 147,789
122,351 Pension assets 24,574 20,153 Other assets 9,202 8,759
$627,797 $538,237 Liabilities Current liabilities: Current portion
of long-term debt $420 $674 Accounts payable and accrued
liabilities 117,859 102,322 Income taxes 7,993 8,377 Total current
liabilities 126,272 111,373 Long-term debt 24,130 16,913 Long-term
pension liabilities 11,256 7,813 Other liabilities 37,677 31,746
199,335 167,845 Shareholders' Equity 428,462 370,392 $627,797
$538,237 SUMMARY CASH FLOWS (Dollars in thousands) Twelve Months
2004 2003 From Operating Activities Net earnings $63,997 $54,552
Depreciation 18,241 18,078 Amortization 910 907 Changes in assets
and liabilities (8,566) 14,118 Other, net (176) 241 Total provided
(used) by operating activities 74,406 87,896 From Investing
Activities Plant asset additions (22,352) (13,042) Business
acquisitions (41,893) - Other, net 2,036 56 Total provided (used)
by investing activities (62,209) (12,986) From Financing Activities
Proceeds from line of credit 30,713 108,386 Payments on line of
credit (19,000) (170,859) Payments on long-term debt (519) (11,044)
Cash dividends paid (12,834) (12,406) Other, net 2,703 5,254 Total
provided (used) by financing activities 1,063 (80,669) Effect of
exchange rate changes on cash 912 360 Change in Cash and Cash
Investments $14,172 $(5,399) QUARTERLY INCOME STATEMENT DATA BY
SEGMENT (Dollars in thousands) 2004 Quarter Quarter Ended Ended Six
February 28 May 29 Months Net sales by segment: Engine/Mobile
Filtration $70,800 $82,992 $153,792 Industrial/Environmental
Filtration 88,962 98,249 187,211 Packaging 15,510 17,471 32,981
$175,272 $198,712 $373,984 Operating profit by segment:
Engine/Mobile Filtration $14,425 $16,989 $31,414
Industrial/Environmental Filtration 3,252 6,076 9,328 Packaging 136
1,153 1,289 Relocation Costs - (425) (425) $17,813 $23,793 $41,606
Operating margin by segment: Engine/Mobile Filtration 20.4% 20.5%
20.4% Industrial/Environmental Filtration 3.7% 6.2% 5.0% Packaging
0.9% 6.6% 3.9% 10.2% 12.0% 11.1% 2003 Quarter Quarter Ended Ended
Six March 1 May 31 Months Net sales by segment: Engine/Mobile
Filtration $66,776 $73,066 $139,842 Industrial/Environmental
Filtration 90,369 95,852 186,221 Packaging 14,349 16,857 31,206
$171,494 $185,775 $357,269 Operating profit by segment:
Engine/Mobile Filtration $12,686 $14,253 $26,939
Industrial/Environmental Filtration 2,373 5,417 7,790 Packaging 428
868 1,296 $15,487 $20,538 $36,025 Operating margin by segment:
Engine/Mobile Filtration 19.0% 19.5% 19.3% Industrial/Environmental
Filtration 2.6% 5.7% 4.2% Packaging 3.0% 5.1% 4.2% 9.0% 11.1% 10.1%
QUARTERLY INCOME STATEMENT DATA BY SEGMENT (Dollars in thousands)
2004 Quarter Quarter Ended Nine Ended Twelve August 28 Months
November 27 Months Net sales by segment: Engine/Mobile Filtration
$83,771 $237,563 $82,479 $320,042 Industrial/Environmental
Filtration 102,646 289,857 106,772 396,629 Packaging 19,792 52,773
18,242 71,015 $206,209 $580,193 $207,493 $787,686 Operating profit
by segment: Engine/Mobile Filtration $16,892 $48,306 $18,258
$66,564 Industrial/Environmental Filtration 8,457 17,785 10,886
28,671 Packaging 1,665 2,954 2,197 5,151 Relocation Costs (1,514)
(1,939) (270) (2,209) $25,500 $67,106 $31,071 $98,177 Operating
margin by segment: Engine/Mobile Filtration 20.2% 20.3% 22.1% 20.8%
Industrial/Environmental Filtration 8.2% 6.1% 10.2% 7.2% Packaging
8.4% 5.6% 12.0% 7.3% 12.4% 11.6% 15.0% 12.5% 2003 Quarter Quarter
Ended Nine Ended Twelve August 30 Months November 29 Months Net
sales by segment: Engine/Mobile Filtration $73,815 $213,657 $74,140
$287,797 Industrial/Environmental Filtration 98,683 284,904 101,371
386,275 Packaging 18,149 49,355 17,931 67,286 $190,647 $547,916
$193,442 $741,358 Operating profit by segment: Engine/Mobile
Filtration $15,137 $42,076 $16,223 $58,299 Industrial/Environmental
Filtration 6,218 14,008 10,163 24,171 Packaging 1,300 2,596 1,996
4,592 $22,655 $58,680 $28,382 $87,062 Operating margin by segment:
Engine/Mobile Filtration 20.5% 19.7% 21.9% 20.3%
Industrial/Environmental Filtration 6.3% 4.9% 10.0% 6.3% Packaging
7.2% 5.3% 11.1% 6.8% 11.9% 10.7% 14.7% 11.7% DATASOURCE: CLARCOR
Inc. CONTACT: Bruce A. Klein, Vice President-Finance and Chief
Financial Officer, of CLARCOR, +1-615-771-3100 Web site:
http://www.clarcor.com/ x
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