<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_______
FORM 10-Q
QUARTERLY REPORT
_______
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_______
for quarter ended March 1, 1997
_______
REGISTRANT: CLARCOR Inc. (Delaware)
_______
<PAGE> 2
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 1, 1997 Commission File Number 1-11024
CLARCOR Inc.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0922490
- ----------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125
- -------------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 815-962-8867
----------------
No Change
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
15,995,798 common shares outstanding
----------------------------------------------
Page 1 of 12
<PAGE> 3
Part I - Item 1
- ---------------
CLARCOR Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
________
<TABLE>
<CAPTION>
Restated
March 1, November 30,
ASSETS 1997 1996
------------- --------------
(unaudited) (See Note 2)
<S> <C> <C>
Current assets:
Cash and short-term cash investments $ 14,958 $ 18,827
Accounts receivable, less allowance for losses
of $2,092 for 1997 and $2,007 for 1996 57,585 58,739
Inventories:
Raw materials 20,477 19,549
Work in process 10,627 11,663
Finished products 29,130 25,675
----------- ------------
Total inventories 60,234 56,887
----------- ------------
Prepaid expenses 1,301 2,391
Other current assets 4,142 3,882
----------- ------------
Total current assets 138,220 140,726
----------- ------------
Plant assets, at cost 177,759 175,950
less accumulated depreciation (93,182) (91,425)
----------- ------------
84,577 84,525
----------- ------------
Marketable equity securities, at fair value - 3,292
Excess of cost over fair value of assets acquired,
less accumulated amortization 15,470 15,503
Pension assets 12,932 12,453
Other noncurrent assets 11,644 10,520
----------- ------------
$ 262,843 $ 267,019
=========== ============
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 4,593 $ 7,625
Accounts payable 21,980 20,366
Income taxes 4,760 3,984
Accrued and other liabilities 16,951 19,322
----------- ------------
Total current liabilities 48,284 51,297
----------- ------------
Long-term debt, less current portion 43,530 43,449
Long-term pension liabilities 6,542 6,607
Other long-term liabilities 9,393 10,077
Minority Interest 927 908
Contingencies
SHAREHOLDERS' EQUITY
Capital stock 15,996 15,956
Retained earnings 138,825 138,210
Other shareholders' equity (654) 515
----------- ------------
154,167 154,681
----------- ------------
$ 262,843 $ 267,019
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements.
Page 2 of 12
<PAGE> 4
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
________
<TABLE>
<CAPTION>
Three Months Ended
Restated
March 1, March 2,
1997 1996
---------- -----------
<S> <C> <C>
Net sales $ 86,958 $ 81,014
Cost of sales 62,450 57,913
---------- -----------
Gross profit 24,508 23,101
Selling and administrative expenses 17,166 16,167
Merger related expenses 2,972 -
---------- -----------
Operating profit 4,370 6,934
---------- -----------
Other income (expense):
Interest expense (805) (962)
Interest income 288 233
Gain on sale of investment in marketable securities 1,706 -
Other, net 89 (305)
---------- -----------
1,278 (1,034)
---------- -----------
Earnings before income taxes and minority
interests in earnings of subsidiaries 5,648 5,900
Provision for income taxes 2,610 2,131
---------- -----------
Earnings before minority interests in earnings of
subsidiaries 3,038 3,769
Minority interests in earnings of subsidiaries (21) (17)
---------- -----------
Net earnings $ 3,017 $ 3,752
========== ===========
Net earnings per common share: $ 0.19 $ 0.24
========== ===========
Average number of common shares
outstanding 15,973,537 15,912,669
========== ===========
Dividends paid per share $ 0.1625 $ 0.1600
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
Page 3 of 12
<PAGE> 5
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
________
<TABLE>
<CAPTION>
Three Months Ended
Restated
March 1, March 2,
1997 1996
---------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,017 $ 3,752
Depreciation and amortization 2,885 2,488
Gain on sale of investment in marketable securities (1,706) -
Changes in assets and liabilities (3,427) (8,509)
Other, net (57) (31)
---------------------
Net cash provided by (used in) operating activities 712 (2,300)
---------------------
Cash flows from investing activities:
Proceeds from sale of investment 3,322 -
Business acquisitions, net of cash acquired - (1,318)
Investment in affiliate - (111)
Additions to plant assets (2,989) (4,890)
Disposition of plant assets 175 148
---------------------
Net cash provided by (used in) investing activities 508 (6,171)
---------------------
Cash flows from financing activities:
Proceeds from long-term debt 1,000 8,735
Reduction of long-term debt (3,951) (2,015)
Purchase of treasury stock - (192)
Cash dividends paid (2,407) (2,364)
Other, net 286 91
---------------------
Net cash provided by (used in) financing activities (5,072) 4,255
---------------------
Net effect of exchange rate changes on cash (17) 12
---------------------
Net change in cash and short-term cash investments (3,869) (4,204)
Cash and short-term cash investments, beginning of period 18,827 19,791
---------------------
Cash and short-term cash investments, end of period $ 14,958 $ 15,587
=====================
Cash paid during the period for:
Interest $ 1,404 $ 1,083
=====================
Income taxes $ 1,573 $ 1,244
=====================
</TABLE>
See Notes to Consolidated Financial Statements.
Page 4 of 12
<PAGE> 6
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
1. BUSINESS COMBINATION AND MERGER RELATED COSTS
---------------------------------------------
On February 28, 1997, the Company completed its acquisition of United Air
Specialists, Inc. (UAS), a manufacturer of air quality equipment based in
Cincinnati, Ohio. The Company issued 1,081,741 shares of its common stock in
exchange for all the shares of UAS stock. Additional shares of its common
stock (approximately 127,590 shares) will be issued upon exercise of UAS
options. The transaction has been structured as a statutory merger
accounted for as a pooling of interests. As a result of the acquisition,
UAS became a subsidiary of the Company.
Under the requirements of the pooling of interests accounting treatment, the
consolidated condensed financial statements for the periods presented have
been restated (except for cash dividends declared per share, which represent
the historical dividends declared by the Company) to include the results of
operations, cash flows, and financial positions of UAS. UAS' fiscal
year-end for all periods presented has been changed to the Saturday closest
to November 30. Therefore, the Company's restated consolidated financial
statements for fiscal 1996 include UAS for the period beginning December 1,
1995, and ending on November 30, 1996. Certain costs incurred by UAS in the
prior periods have been reclassified to conform with the presentation of
such data by the Company. UAS' net sales and net loss for the three months
ended March 2, 1996 were $8.9 million and $.2 million, respectively.
No intercompany transactions existed between the two companies during the
periods presented. A one-time pre-tax charge of $3 million ($2.4 million
net of tax) covering the costs of the merger includes legal and professional
fees, non-compete agreements, and costs to integrate the businesses of the
two companies.
2. CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
The November 30, 1996 restated consolidated balance sheet data was derived
from CLARCOR's year-end financial statements and UAS' unaudited November 30,
1996 balance sheet, but does not include all disclosures required by
generally accepted accounting principles. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted.
The consolidated balance sheet as of March 1, 1997, the consolidated
statements of earnings and the consolidated statements of cash flows for the
periods ended March 1, 1997, and March 2, 1996, have been prepared by the
Company without audit and include the results of UAS for the identical three
month period. The financial statements have been prepared on the same basis
as those in the Company's November 30, 1996 annual report to shareholders.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows have been made.
Page 5 of 12
<PAGE> 7
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited) Continued
- --------------------------------------------------------------------------------
2. CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
-----------------------------------------
The results of operations for the period ended March 1, 1997 are not
necessarily indicative of the operating results for the full year.
3. RECLASSIFICATION
----------------
Certain amounts within the financial statements have been reclassified to
conform to the current period presentation. The reclassification had no
effect on retained earnings or net income as previously reported.
Page 6 of 12
<PAGE> 8
Part II - Item 2
- ----------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
On February 28, 1997, the merger of United Air Specialists, Inc. (UAS) into
CLARCOR was completed. This transaction was accounted for as a pooling of
interests, and as a result, CLARCOR's financial statements were restated for
all periods presented to include the results of operations, cash flows and
financial positions of UAS. The Company's restated consolidated financial
statements for fiscal 1996 will include UAS for the period beginning December
1, 1995, and ending on November 30, 1996. The fiscal periods presented in this
report are for the three months ended March 1, 1997, and March 2, 1996, for
both CLARCOR and UAS.
RESULTS OF OPERATIONS: FIRST QUARTER OF 1997 COMPARED WITH FIRST QUARTER OF
1996.
CLARCOR's operations reported increased sales in the first quarter of 1997
compared to the 1996 quarter. Merger related costs of $2,972,000, pretax,
reduced operating profit and net earnings for the first quarter of 1997;
however, excluding the merger related costs, operating profit and net earnings
both increased over the 1996 quarter. A gain from the sale of marketable
securities of $1,706,000, before tax, was also recorded in the 1997 quarter.
Net sales of $86,958,000 increased 7.3% from $81,014,000 reported for the first
quarter of 1996. Filtration Products segment sales increased 8.0% to
$72,554,000 from $67,165,000 recorded in 1996. The strength of the segment's
engine/mobile filtration units contributed to this increase and included a
14.5% increase from Baldwin Filters and a 7.9% increase from Clark Filter. In
addition, sales of engine/mobile filtration products from the international
units increased almost 30% in the quarter. Lower sales of Hastings Filters'
light duty engine filters resulted primarily from eliminating low and negative
margin business. The segment's industrial/environmental products units also
recorded increases of 9.3% from Airguard Industries and 11.0% from UAS. The
Consumer Products segment reported a 4.0% increase in sales for the 1997
quarter due to increased sales of plastics products which offset a small sales
decline in the metals business.
Operating profit for first quarter 1997, before merger-related costs of
$2,972,000, increased to $7,342,000, a 5.9% increase, from the $6,934,000
operating profit recorded in 1996. Operating profit after the merger-related
costs in 1997 was $4,370,000. As a percent of net sales, operating profit
before the merger-related costs in 1997 was 8.4% compared to 8.6% in 1996.
Both the Filtration and Consumer segments reported a 5.9% increase in operating
profit before merger-related costs for 1997. The Filtration segment increase
resulted from higher sales volume and continuing productivity improvements at
each domestic and international operating unit offset by larger than expected
operating losses at Hastings Filters. These losses were primarily related to
start-up costs at the expanded Yankton, South Dakota plant and are expected to
be reduced through additional productivity improvements, increased sales
volume, and the reduction of costs in almost all areas. The increased
operating profit for the Consumer Products segment resulted from a higher sales
level of plastic packaging products which were produced in an expanded
manufacturing facility which was completed during the first quarter of 1996.
Page 7 of 12
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
-----------------------------------------------------------
Net other income for the quarter included a $1,706,000 gain from the sale of
most of the remaining shares held by the Company in G.U.D. Holdings Ltd. (GUD).
In the fourth quarter of 1996, the Company recorded a similar gain from the
sale of an approximately equal number of shares in GUD. The first quarter of
1997 also reflected reduced interest expense resulting from the lower level of
debt, increased interest income and reduced currency translation losses
compared to 1996.
Earnings before income taxes and minority interests in earnings of subsidiaries
in the first quarter totaled $5,648,000, down from $5,900,000 in the comparable
quarter last year. This decrease of $252,000 is the net of the increased
operating profit before merger-related costs of $408,000, the gain from sale of
GUD shares of $1,706,000, the reduced other expense of $606,000, offset by the
merger-related costs of $2,972,000.
The provision for income taxes in 1997 was $2,610,000. Certain of the
merger-related charges are not fully deductible for tax purposes which created
an unusually high effective tax rate of 46% of pretax earnings. The effective
rate for the first quarter of 1996 was 36%. The effective tax rate for the
remaining three quarters of 1997 is expected to be comparable to the rate of
approximately 37% for fiscal 1996.
Net earnings in the first quarter of the current year were $3,017,000 and
reflect the impact of the merger-related costs and the gain from sale of the
GUD shares. Without these two unusual items, net earnings would have been
approximately $4,300,000 or $.27 per share compared to the 1996 first quarter
net earnings of $3,752,000, or $.24 per share.
Average shares outstanding were 15,973,537 at the end of the first quarter of
1997 and include the additional shares issued in connection with the merger of
UAS.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities increased $3,012,000 primarily from
reduced investment in working capital compared to the first quarter of 1996.
Cash flows from investing activities increased in the first quarter of 1997 due
to the proceeds of $3,322,000 received from the sale of the GUD shares. Cash
used in investing activities was lower in first quarter 1997 as a result of a
lower level of expenditures for plant assets and investments in acquisitions.
Cash flows used by financing activities in 1997 included payments on long-term
debt of $3,951,000 compared to $2,015,000 in 1996. The additional borrowing of
$1,000,000 in first quarter 1997 relates to UAS' additional use of a line of
credit prior to the merger. Additional borrowings in 1996 included $8,410,000
of industrial revenue bonds used to finance the Hastings Filters plant
expansion.
CLARCOR's current operations continue to generate adequate cash to fund
operating needs, pay dividends, and provide for the repayment of the Company's
long-term debt. Sufficient lines of credit remain available to fund current
operating needs. The Company's level of capital expenditures is expected to
be lower in 1997 than in 1996. Subsequent to the end of the first quarter of
1997, the Company paid off the remaining principal balance on a 9.7% loan
originally borrowed in 1989 and also paid off the high cost debt assumed in the
UAS merger.
Page 8 of 12
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
-----------------------------------------------------------
The Company's financial position at the end of the first quarter was not
significantly different from fiscal year-end 1996. Cash and short-term
investments totaled $14,958,000 at the end of the quarter, a reduction of
$3,869,000 from year-end. Inventories increased $3,347,000 from year-end due
to expected customer shipment requirements for the second and third quarters.
The current ratio at the end of the first quarter was 2.9:1 compared to 2.7:1
at the end of fiscal 1996. The current year ratio of long-term debt to total
capitalization was 22.0% which approximated the level at year-end.
At March 1, 1997, CLARCOR had 15,995,798 shares of common stock outstanding
that included 1,081,741 shares issued related to the UAS merger.
OUTLOOK
The operating results for the first quarter of 1997 included improved results
from each operating unit except for Hastings Filters. Excluding Hastings, the
Filtration Products segment recorded double-digit percentage increases in sales
and operating profit in the first quarter of 1997. The Company expects that
the Filtration segment, except for Hastings, will continue to have a superior
year. Throughout the remainder of 1997, the results from Hastings are expected
to improve, and by year-end 1997 the Hastings operation is expected to be
profitable. The Consumer Products segment's order backlog is good and this
segment is expected to show a strong single-digit increase in sales and
operating profit in 1997. Excluding the first quarter's unusual items, the
Company believes that 1997 will be another record year of sales and net
earnings for CLARCOR.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements quoted in the body of this report, and statements in the
"Outlook" section of this report are forward-looking. These statements involve
risk and uncertainty. Actual future results and trends may differ materially
depending on a variety of factors, including the volume and timing of orders
received during the quarter, the mix of changes in distribution channels
through which the Company's products are sold, the timing and acceptance of new
products and product enhancements by the Company or its competitors, changes in
pricing, product life cycles, purchasing patterns of distributors and
customers, competitive conditions in the industry, business cycles affecting
the markets in which the Company's products are sold, extraordinary events,
such as litigation or acquisitions, including related charges, and economic
conditions generally or in various geographic areas. All of the foregoing
matters are difficult to forecast. The future results of the Company may
fluctuate as a result of these and the other risk factors detailed from time to
time in the Company's Securities and Exchange Commission reports.
Due to the foregoing items, it is possible that, in some future quarters, the
Company's operating results will be below the expectation of some stock market
analysts and investors. In such event, the price of the CLARCOR common stock
could be materially adversely affected.
Page 9 of 12
<PAGE> 11
Part II - Other Information
- ---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the annual meeting of shareholders of CLARCOR Inc. held on March
25, 1997, all of management's nominees for directors, as listed in the
proxy statement dated February 18, 1997, were elected. The Company
had 14,914,057 shares of common stock outstanding as of the close of
business on the February 11, 1997 record date. The holders of
13,007,771 shares of common stock were present at the meeting, in
person or by proxy.
The two nominees elected received votes as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
J. Marc Adam 12,904,839 102,932
Stanton K. Smith, Jr. 12,904,609 103,162
</TABLE>
Item 6a - Exhibit (11), Computations of Per Share Earnings are presented on page
11.
Item 6b - On January 6, 1997, the Company filed a Form 8-K to report the fourth
quarter press release. On February 28, 1997, the Company filed a Form
8-K to report the consummation of the acquisition of United Air
Specialists and to update the pro forma financial information for
the year ended November 30, 1996.
Page 10 of 12
<PAGE> 12
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARCOR INC.
(Registrant)
April 11, 1997 By /s/ Bruce A. Klein
------------------------ ---------------------------------------------
(Date) Bruce A. Klein, Vice President - Finance
and Chief Financial Officer
Page 12 of 12
<PAGE> 1
CLARCOR Inc.
EXHIBIT (11) - COMPUTATIONS OF PER SHARE EARNINGS
________
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
Restated
March 1, March 2,
1997 1996
-----------------------------
AVERAGE SHARES OUTSTANDING
- --------------------------
<S> <C> <C>
1. Average number of shares outstanding 15,973,537 15,912,669
2. Net additional shares resulting from
assumed exercise of stock options* 431,656 439,461
-----------------------------
3. Adjusted average shares outstanding
for fully diluted computation (1 plus 2) 16,405,193 16,352,130
=============================
Earnings per share of common stock:
Primary $0.19 $0.24
===== =====
Assuming full dilution $0.18 $0.23
===== =====
</TABLE>
* Assumes proceeds from exercise of stock options used to purchase treasury
shares at the greater of the quarter-end or the average market price
during the period.
Page 11 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-29-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAR-01-1997
<EXCHANGE-RATE> 1
<CASH> 14,958
<SECURITIES> 0
<RECEIVABLES> 59,677
<ALLOWANCES> 2,092
<INVENTORY> 60,234
<CURRENT-ASSETS> 138,220
<PP&E> 177,759
<DEPRECIATION> 93,182
<TOTAL-ASSETS> 262,843
<CURRENT-LIABILITIES> 48,284
<BONDS> 43,530
0
0
<COMMON> 15,996
<OTHER-SE> 138,171
<TOTAL-LIABILITY-AND-EQUITY> 262,843
<SALES> 86,958
<TOTAL-REVENUES> 86,958
<CGS> 62,450
<TOTAL-COSTS> 62,450
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 805
<INCOME-PRETAX> 5,648
<INCOME-TAX> 2,610
<INCOME-CONTINUING> 3,017
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,017
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
