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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
<TABLE>
<CAPTION>
(MARK ONE)
<S> <C>
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________________________
COMMISSION FILE NUMBER 1-11024
</TABLE>
CLARCOR Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0922490
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 815-962-8867
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $1.00 per share New York Stock Exchange
Preferred Stock Purchase Rights
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
----------------------------------------------------
(Title of Class)
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 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
The aggregate market value (based on the closing price of registrant's Common
Stock on February 11, 1997 as reported on the New York Stock Exchange Composite
Transactions) of the voting stock held by non-affiliates of the registrant as at
February 11, 1997 is $358,600,277.
The number of outstanding shares of Common Stock, as of February 11, 1997 is
14,914,057 shares.
Certain portions of the registrant's 1996 Annual Report to Shareholders are
incorporated by reference in Parts I, II and IV. Certain portions of the
registrant's Proxy Statement dated February 18, 1997 for the Annual Meeting of
Shareholders to be held on March 25, 1997 are incorporated by reference in Part
III.
<PAGE> 2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) General Development of Business
CLARCOR Inc. ("CLARCOR") was organized in 1904 as an Illinois corporation
and in 1969 was reincorporated in the State of Delaware. As used herein, the
"Company" refers to CLARCOR and its subsidiaries unless the context otherwise
requires.
The Company's fiscal year ends on the Saturday closest to November 30. For
fiscal year 1996, the year ended on November 30, 1996 and for fiscal year 1995,
the year ended on December 2, 1995. In this Form 10-K, all references to fiscal
years are shown to begin on December 1 and end on November 30 for clarity of
presentation.
(i) Certain Significant Developments.
Acquisition of United Air Specialists, Inc. On September 23, 1996 the
Company announced the signing of a definitive agreement to acquire United Air
Specialists, Inc. ("UAS") located in Cincinnati, Ohio. The transaction, when
completed, will be in the form of a merger of a wholly-owned subsidiary of
CLARCOR into UAS with UAS surviving the merger and becoming a wholly-owned
subsidiary of CLARCOR.
UAS is engaged in the design, manufacture and sale of commercial and
industrial air cleaners, electrostatic fluid contamination control equipment and
high precision spraying equipment. For the fiscal year ended June 30, 1996, UAS
had net sales of approximately $40.8 million and net earnings of approximately
$1.5 million. For the first six months of fiscal 1997, its net sales were
approximately $19.5 million and net earnings approximately $.4 million.
The shareholders of UAS voted in favor of the transaction on February 14,
1997 and the transaction is expected to be closed on February 28, 1997.
The transaction will be accounted for as a pooling of interests. No more
than a total of 1,209,302 shares of CLARCOR's common stock will be issued in
connection with such merger to the former holders of UAS common stock.
Other. In December 1995, CLARCOR announced that a joint venture agreement
had been signed with Weifang Power Machine Fittings Ltd. ("Weifang") located in
China. The joint venture, called Baldwin-Weifang Filters Ltd., is 60% owned by
CLARCOR and 40% owned by Weifang. The manufacture of heavy duty spin-on oil
filters for trucks, construction equipment and agricultural equipment began in
November 1996. Continued expansion of the joint venture is anticipated including
a second production line for heavy duty filters which is expected to be in
operation by the end of 1997.
In February 1996, the acquisition was completed of Unifil (Pty.) Ltd., a
South African manufacturer of air filtration products for heavy-duty
transportation, construction and agricultural equipment and automobiles. Unifil
was acquired by Baldwin-Unifil S.A., a South African partnership that is 70%
owned by the Company's Baldwin Filters, Inc. subsidiary, and 30% owned by a
three-member group from Unifil's management team.
The Company's Airguard Industries subsidiary completed a new Technical
Center located at its facility in Louisville, Kentucky. This new Technical
Center is expected to result in the development of product enhancements and new
products for the growing environmental and industrial filtration markets.
The Board of Directors announced on March 29, 1996 the adoption of a new
shareholder rights plan to replace an existing plan that expired on April 25,
1996. The new plan, as was the old plan, is designed to deter coercive takeover
tactics and to assure that all shareholders receive fair and equal treatment in
the event of any proposed takeover of CLARCOR.
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A 70,000 square foot addition to the Hasting Filters plant in Yankton,
South Dakota was completed during 1996 which added the capacity needed for the
complete manufacture of primary components for light duty filters. The plant
expansion, new and refurbished equipment installed in 1996, and improved
manufacturing processes implemented in 1996 are expected to significantly
improve the operating results for Hastings Filters in fiscal 1997.
In November 1996, the Company sold 50% of its 5% interest in G.U.D.
Holdings Limited ("GUD") and recognized an after-tax gain on the sale of
approximately $1,072,000 or $0.07 per share. The remaining 2.5% investment was
sold subsequent to the end of the fiscal year and an after-tax gain will be
recorded in the first quarter of fiscal 1997 of approximately $1,089,000 or
$0.07 per share.
(ii) Summary of Business Operations.
During 1996, the Company conducted business in two principal industry
segments: (1) Filtration Products and (2) Consumer Products.
Filtration Products. Filtration Products include filters used primarily in
the replacement market in the trucking, construction, industrial, agricultural
equipment, diesel locomotive, automotive and environmental industries. The
segment's engine and mobile products include filters for oil, air, fuel,
coolants and hydraulic fluids for trucks, automobiles, construction and
industrial equipment, locomotives, marine and agricultural equipment. The
segment's industrial and environmental products include air and antimicrobial
treated filters for commercial buildings, factories, residential buildings,
paint spray booths, gas turbine systems, medical facilities, motor vehicle
cabins, clean rooms, compressors and dust collector systems.
Consumer Products. Consumer Products include a wide variety of custom
styled containers and packaging items used primarily by the food, spice, drug,
toiletries and chemical specialties industries. The segment's products include
lithographed metal containers, flat sheet decorating, combination metal and
plastic containers, plastic closures, collapsible metal tubes, composite
containers and various specialties, such as spools for wire and cable,
dispensers for razor blades and outer shells for dry cell batteries and film
canisters.
(b) Financial Information About Industry Segments
Business segment information for the fiscal years 1994 through 1996 is
included on page 35 of the Company's 1996 Annual Report to Shareholders (the
"Annual Report"), is incorporated herein by reference and is filed as part of
Exhibit 13(a)(vi) to this 1996 Annual Report on Form 10-K ("1996 Form 10-K").
(c) Narrative Description of the Business
FILTRATION PRODUCTS
The Company's filtration products business is conducted by the CLARCOR
Filtration Products segment which includes the following wholly-owned
subsidiaries: Baldwin Filters, Inc.; Airguard Industries, Inc.; Clark Filter,
Inc.; Hastings Filters, Inc.; Baldwin Filters N.V.; and Baldwin Filters Limited.
In addition, the Company owns (i) 50% of Baldwin Filters (Aust.) Pty. Ltd., (ii)
90% of Filtros Baldwin de Mexico ("FIBAMEX"), (iii) 60% of Baldwin-Weifang
Filters Ltd., and (iv) 70% of Baldwin-Unifil S.A.
The companies market a line of over 18,000 oil, air, fuel, coolant and
hydraulic fluid filters and industrial and environmental filters. The Company's
filters are used in a wide variety of applications including engines, industrial
equipment, environmentally controlled areas and in processes where
effectiveness, reliability and durability are essential. Impure air or fluid
impinge upon a paper, cotton, synthetic, chemical or membrane filter media which
collects the impurities which are then disposed of when the filter is changed.
Pleated filter media elements are held in specially treated paper or metal
containers while cotton and synthetic filters use wound or compressed fibers
with high absorption characteristics. The Company's filters are sold throughout
the United States, Canada and worldwide,
3
<PAGE> 4
primarily in the replacement market for trucks, automobiles, locomotives,
marine, construction, industrial and agricultural equipment and for air
filtration systems for buildings. In addition, some filters are sold to the
original equipment market.
The segment distributes filtration products worldwide through each of its
subsidiaries. The Baldwin Filters N.V. and Baldwin Filters Limited subsidiaries
primarily serve the European markets. The Company's joint venture with GUD,
Baldwin Filters (Aust.) Pty. Ltd., markets heavy duty liquid and air filters in
Australia and New Zealand. FIBAMEX manufactures filters in Mexico with
distribution in Mexico and Central and South America. Through the Company's
fiscal 1996 investment in Baldwin-Weifang Filters Ltd., heavy duty filters are
being manufactured in China for distribution in China and Southeast Asia.
Additionally, through the Baldwin-Unifil S.A. acquisition, air filtration
products are manufactured in South Africa with distribution throughout South
Africa, Great Britain, Europe and the Middle East.
CONSUMER PRODUCTS
The Company's consumer products business is conducted by the Consumer
Products segment which includes the Company's wholly-owned subsidiary, J. L.
Clark, Inc. ("J. L. Clark").
In fiscal 1996 over 1,500 different types and sizes of containers and metal
packaging specialties were manufactured for the Company's customers. Flat sheet
decorating is provided by use of state-of-the-art lithography equipment. Metal,
plastic and paper containers and plastic closures manufactured by the Company
are used in packaging a wide variety of dry and paste form products, such as
food specialties (tea, spices, dry bakery products, potato chips, pretzels,
candy and other confections); beverages and juices; cosmetics and toiletries;
drugs and pharmaceuticals; and chemical specialties (hand cleaners, soaps and
special cleaning compounds). Metal packaging specialties include shells for dry
batteries, film canisters, dispensers for razor blades, spools for insulated and
fine wire, and custom decorated flat steel sheets.
Containers and metal packaging specialties are manufactured only upon
orders received from customers, and individualized containers and packaging
specialties are designed and manufactured, usually with distinctive decoration,
to meet each customer's marketing and packaging requirements and specifications.
Through the Tube Division of J. L. Clark, the Company manufactures
collapsible metal tubes for packaging ointments, artists' supplies, adhesives,
cosmetic creams and other viscous materials. Over 150 types and sizes of
collapsible metal tubes are manufactured. Tubes are custom manufactured from
aluminum to the customer's specifications as to size, shape, neck design and
decoration. Both coating and lithographic tube printing decoration techniques
are used. During 1995 the Tube Division entered into an agreement with
Kunststoffwerk Kutterer ("Kutterer") of Germany to distribute Kutterer's plastic
tube closures in North America.
DISTRIBUTION
Filtration Products are sold primarily through a combination of over 3,300
independent distributors and dealers for original equipment manufacturers. The
Australian joint venture markets heavy duty filtration products through the
distributors of GUD, the Company's joint venture partner.
Consumer Products salespersons call directly on customers and prospective
customers for containers and packaging specialties. Each salesperson is trained
in all aspects of the Company's manufacturing processes with respect to the
products sold and as a result is qualified to consult with customers and
prospective customers concerning the details of their particular requirements.
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CLASS OF PRODUCTS
The percentage of the Company's sales volume contributed by each class of
similar products within the Company's Consumer Products segment which
contributed 10% or more of sales is as follows:
<TABLE>
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1996 1995 1994
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Containers............................................... 17% 18% 20%
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No class of products within the Company's Filtration Products segment accounted
for as much as 10% of the total sales of the Company.
RAW MATERIAL
Steel, filter media, aluminum sheet and coil, stainless steel, chrome
vanadium, chrome silicon, resins and aluminum slugs for tubes, roll paper, bulk
and roll plastic materials and cotton, wood and synthetic fibers and adhesives
are the most important raw materials used in the manufacture of the Company's
products. All of these are purchased or are available from a variety of sources.
The Company has no long-term purchase commitments. The Company did not
experience shortages in the supply of raw materials during 1996.
PATENTS
Certain features of some of the Company's Filtration and Consumer Products
are covered by domestic and, in some cases, foreign patents or patent
applications. While these patents are valuable and important for certain
products, the Company does not believe that its competitive position is
dependent upon patent protection.
CUSTOMERS
The largest 10 customers of the Filtration Products segment accounted for
13.4% of the $259,617,000 of fiscal year 1996 sales of such segment.
The largest 10 customers of the Consumer Products segment accounted for
48.7% of the $73,771,000 of fiscal year 1996 sales of such segment.
No single customer accounted for 10% or more of the Company's consolidated
1996 sales.
BACKLOG
At November 30, 1996, the Company had a backlog of firm orders for products
amounting to approximately $33,900,000. The comparable backlog figure for 1995
was approximately $33,700,000. All of the orders on hand at November 30, 1996
are expected to be filled during fiscal 1997. The Company's backlog is not
subject to significant seasonal fluctuations.
COMPETITION
The Company encounters strong competition in the sale of all of its
products.
In the Filtration Products segment, the Company competes in a number of
markets against a variety of competitors. The Company is unable to state its
relative competitive position in all of these markets due to a lack of reliable
industry-wide data. However, in the replacement market for heavy duty liquid and
air filters used in internal combustion engines, the Company believes that it is
among the top five measured by annual sales. In the replacement market for
industrial and environmental filtration products, the Company believes that it
is among the top five measured by annual sales. In addition, the Company
believes that it is a leading manufacturer of liquid and air filters for diesel
locomotives.
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In the Consumer Products segment, its principal competitors are
approximately 10 manufacturers whose specialty packaging segments are smaller
than the Company's and who often compete on a regional basis only. In the
Consumer Products market, strong competition is also presented by manufacturers
of paper, plastic and glass containers. The Company's competitors generally
manufacture and sell a wide variety of products in addition to packaging
products of the type produced by the Company and do not publish separate sales
figures relative to these competitive products. Consequently, the Company is
unable to state its relative competitive position in those markets.
The Company believes that it is able to maintain its competitive position
because of the quality and breadth of its products and services.
PRODUCT DEVELOPMENT
The Company's laboratories test filters, containers, filter components,
paints, inks, varnishes, adhesives and sealing compounds to insure high quality
manufacturing results, aid suppliers in the development of special finishes and
conduct controlled tests of finishes and newly designed filters and containers
being perfected for particular uses. Product development departments are
concerned with the improvement of existing filters, consumer products and the
creation of new and individualized filters, containers and consumer products, in
order to broaden the uses of these items, counteract obsolescence and evaluate
other products available in the marketplace.
During fiscal 1993, a new 25,000 square foot technical center in Kearney,
Nebraska designed to enhance the Company's technology in the heavy duty filter
industry became operational. During the fourth quarter of 1995, the Company
added the Gas Turbine Systems Business Unit for the development of inlet air
filtration systems. In 1996, a new technical center was completed in Louisville,
Kentucky to develop new and redesigned environmental and industrial filtration
products.
In fiscal 1996, the Company employed 46 professional employees on a
full-time basis on research activities relating to the development of new
products or the improvement or redesign of its existing products. During this
period the Company spent approximately $3,335,000 on such activities as compared
with $3,013,000 for 1995 and $3,354,000 for 1994.
ENVIRONMENTAL FACTORS
The Company is not aware of any facts which would cause it to believe that
it is in material violation of existing applicable standards respecting
emissions to the atmosphere, discharges to waters, or treatment, storage and
disposal of solid or hazardous wastes. There are no pending material claims or
actions against the Company alleging violations of such standards.
The Company does anticipate, however, that it may be required to install
additional pollution control equipment to augment existing equipment in the
future in order to meet applicable environmental standards. The Company is
presently unable to predict the timing or the cost of such equipment and cannot
give any assurance that the cost of such equipment may not have an adverse
effect on earnings. However, the Company is not aware, at this time, of any
current or pending requirement to install such equipment at any of its
facilities.
EMPLOYEES
As of November 30, 1996, the Company had approximately 2,562 employees.
(d) Financial Information About Foreign and Domestic Operations and Export
Sales
Financial information relating to export sales and the Company's operations
in the United States and other countries is set forth on Page 35 of the Annual
Report and is incorporated herein by reference and filed as Exhibit 13(a)(vi) to
this 1996 Form 10-K. The Company is not aware of any unusual risks attendant to
the conduct of its operations in other countries.
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ITEM 2. PROPERTIES.
(i) Location
The corporate office building located in Rockford, Illinois, houses the
Corporate offices and the Filtration and Consumer Products headquarters offices
in 22,000 square feet of office space.
Filtration Products. The following is a description of the principal
properties owned and utilized by the Company in conducting its Filtration
Products business:
The Baldwin Filters' Kearney, Nebraska plant contains 410,000 square feet
of manufacturing and warehousing space, 25,000 square feet of research and
development space, and 40,000 square feet of office space. It is located on a
site of approximately 40 acres. In addition, Baldwin has a capital lease for a
100,000 square foot manufacturing facility on a site of 20 acres in Gothenburg,
Nebraska.
Airguard Industries has four manufacturing locations. It leases 167,000
square feet in New Albany, Indiana on a 8.5 acre tract of land, 84,000 square
feet in Corona, California and 44,500 square feet in Dallas, Texas. The Airguard
High Efficiency Filter plant, located in Jeffersontown, Kentucky on a 7.5 acre
tract of land, contains 100,000 square feet of manufacturing and office
facilities.
Airguard sales outlets with warehousing are located in Louisville,
Kentucky; Cincinnati, Ohio; Toledo, Ohio; Nashville, Tennessee; Atlanta,
Georgia; Columbus, Ohio; Birmingham, Alabama; Dallas, Texas; and Corona,
California. During 1995 Airguard added distribution centers in Wallingford,
Connecticut and New Albany, Indiana.
The Company also manufactures filters in Lancaster, Pennsylvania at its
Clark Filter plant. The building, constructed about 1968 on an 11.4 acre tract
of land, contains 168,000 square feet of manufacturing and office space and is
owned by the Company.
Hastings Filters' manufacturing and distribution facilities are located in
Yankton, South Dakota and Knoxville, Tennessee. The Yankton facility has
approximately 100,000 square feet of floor space on a 21 acre tract and the
Knoxville facility has approximately 168,000 square feet of floor space on a 22
acre tract. An addition of 70,000 square feet to the Yankton facility was
completed in 1996. Both facilities are owned by the Company.
The Company leases various facilities in other countries for the
manufacture and distribution of filtration products.
Consumer Products. The following is a description of the principal
properties owned by the Company in conducting its Consumer Products business:
The Company's J. L. Clark, Rockford, Illinois plant, located on 34 acres,
consists of one-story manufacturing buildings, the first of which was
constructed in 1910. Since then a number of major additions have been
constructed and an injection molding plant was constructed in 1972.
Approximately 429,000 square feet of floor area are devoted to manufacturing,
warehouse and office use. Of the 34 acres, approximately 12 are vacant. A 25,000
square foot addition to the injection molding facility was completed in January
1996.
A J. L. Clark plant is located in Lancaster, Pennsylvania on approximately
11 acres. It consists of a two-story office building containing approximately
7,500 square feet of floor space and a manufacturing plant and warehouse
containing 236,000 square feet of floor space, most of which is on one level.
These buildings were constructed between 1924 and 1964.
The J. L. Clark Tube Division's manufacturing plant is located in Downers
Grove, Illinois on a 5-acre tract of land. The one-story building contains
58,000 square feet of floor space.
The various properties owned by the Company are considered by it to be in
good repair and well maintained. All of the manufacturing facilities are
adequate for the current sales volume of the Company's products and can
accommodate expansion of production levels before significant plant additions
are required.
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(ii) Function
Filtration Products. Oil, air, fuel, hydraulic fluid and coolant filters
are produced at the Baldwin and Hastings facilities in Kearney, and Gothenburg,
Nebraska, Yankton, South Dakota and Knoxville, Tennessee. Much of the Baldwin
plant equipment has been built or modified by Baldwin. The various processes of
pleating paper, winding cotton and synthetic fibers, placing the filter element
in a metal or fiber container and painting the containers are mechanized, but
require manual assistance. The plants also maintain an inventory of special dies
and molds for filter manufacture.
Air filters for the industrial air and environmental markets are produced
in the Airguard facilities.
Oil, air and fuel filters, primarily for use in the railroad industry, are
produced at Clark Filter in Lancaster, Pennsylvania.
Consumer Products. The Company's metal and combination metal and plastic
packaging products are produced at J. L. Clark plants located in Rockford,
Illinois, and Lancaster, Pennsylvania. The Rockford and Lancaster plants are
completely integrated facilities which include creative and mechanical art
departments and photographic facilities for color separation, preparation of
multiple-design negatives and lithographing plates. Metal sheets are decorated
on high speed coating machines and lithographing presses connected with conveyor
ovens. Decorated sheets are then cut to working sizes on shearing equipment,
following which fabrication is completed by punch presses, can-forming and
can-closing equipment and other specialized machinery for supplementary
operations. Most tooling for fabricating equipment is designed and engineered by
the Company's engineering staffs, and much of it is produced in the Company's
tool rooms.
Plastic packaging capabilities include printing and molding of irregular
shaped plastic containers and customized plastic closures. J. L. Clark has the
capability to mold and offset lithograph a one-piece irregular shaped semi-rigid
plastic container with a living hinge cover. A growing area of specialty is
custom-designed plastic closures for products which have tamper-evidence as well
as convenience features. J. L. Clark's distinctive plastic closures include the
combiTop(R) and the SST Series(TM) products.
Collapsible metal tubes are produced at the J. L. Clark Tube Division plant
in Downers Grove, Illinois from aluminum slugs on fully-automated production
lines which consist of extrusion presses, trimming machines, annealing ovens,
coating machines, printing presses and capping machines. When necessary for
customer specifications, tubes can be internally waxed or lined in order to
achieve chemical compatibility with products to be packed.
Composite containers of both spiral and convolute construction, as well as
some specialty items, are produced at J. L. Clark divisions in Rockford,
Illinois and Lancaster, Pennsylvania.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in legal actions arising in the normal course of
business. After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their outcome will not have a
material adverse effect on the Company's consolidated results of operations or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
AGE AT YEAR ELECTED
NAME 11/30/96 TO OFFICE
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<S> <C> <C>
Lawrence E. Gloyd........................................... 64 1995
Chairman of the Board and Chief Executive Officer. Mr.
Gloyd was elected President and Chief Operating Officer in
1986, President and Chief Executive Officer in 1988,
Chairman, President and Chief Executive Officer in 1991, and
Chairman of the Board and Chief Executive Officer in 1995.
Norman E. Johnson........................................... 48 1995
President and Chief Operating Officer. Mr. Johnson has
been employed by the Company since 1990. He was elected
President-Baldwin Filters, Inc. in 1990, Vice
President-CLARCOR in 1992, Group Vice President-Filtration
Products Group in 1993, and President and Chief Operating
Officer in 1995.
Bruce A. Klein.............................................. 49 1995
Vice President-Finance and Chief Financial Officer. Mr.
Klein was employed by the Company and elected Vice
President-Finance and Chief Financial Officer on January 3,
1995.
David J. Anderson........................................... 58 1994
Vice President-International/Corporate Development. Mr.
Anderson has been employed by the Company since 1990. He was
elected Vice President Marketing & Business Development for
the CLARCOR Filtration Products subsidiary in 1991, Vice
President-Corporate Development in 1993 and Vice
President-International/Corporate Development in 1994.
David J. Lindsay............................................ 41 1995
Vice President-Administration and Chief Administrative
Officer. Mr. Lindsay has been employed by the Company in
various administrative positions since 1987. He was elected
Vice President-Group Services in 1991, Vice
President-Administration in 1994 and Vice President-
Administration and Chief Administrative Officer in 1995.
William F. Knese............................................ 48 1991
Vice President, Treasurer and Controller. Mr. Knese has
been employed by the Company since 1979. He was elected Vice
President, Treasurer and Controller in 1991.
Peter F. Nangle............................................. 35 1994
Vice President-Information Services. Mr. Nangle has been
employed by the Company since 1993. He was elected Vice
President-Information Services in 1994.
Marcia S. Blaylock.......................................... 40 1996
Vice President and Corporate Secretary. Ms. Blaylock has
been an employee of the Company since 1974. She was elected
Assistant Secretary in 1994, Corporate Secretary in 1995 and
Vice President and Corporate Secretary in 1996.
</TABLE>
Each executive officer of the Company is elected for a term of one year
which begins at the Board of Directors Meeting at which he or she is elected,
held following the Annual Meeting of Shareholders, and ends on the date of the
next Annual Meeting of Shareholders or upon the due election and qualification
of his or her successor.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange; it is
traded under the symbol CLC. The following table sets forth the high and low
market prices as quoted during the relevant periods on the New York Stock
Exchange and dividends paid for each quarter of the last two fiscal years.
<TABLE>
<CAPTION>
MARKET PRICE
----------------
QUARTER ENDED HIGH LOW DIVIDENDS
- ------------- ---- --- ---------
<S> <C> <C> <C>
March 2, 1996............................................... $22 3/4 $19 $.1600
June 1, 1996................................................ 22 1/4 18 5/8 .1600
August 31, 1996............................................. 25 1/8 19 .1600
November 30, 1996........................................... 22 5/8 20 3/8 .1625
------
Total Dividends............................................. $.6425
======
</TABLE>
<TABLE>
<CAPTION>
MARKET PRICE
----------------
QUARTER ENDED HIGH LOW DIVIDENDS
- ------------- ---- --- ---------
<S> <C> <C> <C>
March 4, 1995............................................... $21 1/4 $18 1/8 $.1575
June 3, 1995................................................ 21 5/8 19 .1575
September 2, 1995........................................... 23 3/4 21 1/2 .1575
December 2, 1995............................................ 27 21 3/8 .1600
------
Total Dividends............................................. $.6325
======
</TABLE>
The approximate number of holders of record of Common Stock of the Company
as at February 1, 1997 is 1,800. In addition, the Company believes that there
are approximately 6,000 beneficial owners whose shares are held in street names.
ITEM 6. SELECTED FINANCIAL DATA.
The information required hereunder is set forth on pages 38 and 39 of the
Annual Report under the caption "11-Year Financial Summary," is incorporated
herein by reference and is filed as Exhibit 13a(ix) to this 1996 Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The information required hereunder is set forth on pages 18 through 23 of
the Annual Report under the caption "Financial Review," is incorporated herein
by reference and is filed as Exhibit 13a(x) to this 1996 Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements, the Notes thereto and the report
thereon of Coopers & Lybrand L.L.P, independent accountants, required hereunder
with respect to the Company and its consolidated subsidiaries are set forth on
pages 24 through 36, inclusive, of the Annual Report, are incorporated herein by
reference and are filed as Exhibits 13(a)(ii) through 13(a)(vii) to this 1996
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain information required hereunder is set forth on pages 1 and 2 of the
Company's Proxy Statement dated February 18, 1997 (the "Proxy Statement") for
the Annual Meeting of Shareholders to be held on March 25, 1997 under the
caption "Election of Directors -- Nominees for Election to the Board" and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required hereunder is set forth on pages 6 through 14
inclusive, of the Proxy Statement under the caption "Compensation of Executive
Officers and Other Information" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required hereunder is set forth on pages 4 and 5 of the
Proxy Statement under the caption "Beneficial Ownership of the Company's Common
Stock" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements
The following financial information is incorporated herein by reference to
the Company's Annual Report to Shareholders for the fiscal year ended November
30, 1996:
*Consolidated Balance Sheets at November 30, 1996 and 1995
*Consolidated Statements of Earnings for the years ended November 30, 1996,
1995 and 1994
*Consolidated Statements of Shareholders' Equity for the years ended
November 30, 1996, 1995 and 1994
*Consolidated Statements of Cash Flows for the years ended November 30,
1996, 1995 and 1994
*Notes to Consolidated Financial Statements
*Report of Independent Accountants
*Management's Report on Responsibility for Financial Reporting
- ------------------------------
*Filed herewith as part of Exhibit 13(a) to this 1996 Form 10-K
The following items are set forth herein on the pages indicated:
Report of Independent Accountants.......................................... F-1
Financial Statement Schedules:
II. Valuation and Qualifying Accounts................................. F-2
Financial statements and schedules other than those listed above are
omitted for the reason that they are not applicable, are not required, or the
information is included in the financial statements or the footnotes therein.
(b) The Company filed a Current Report on Form 8-K dated September 25, 1996
to report its signing of a definitive agreement to acquire United Air
Specialists, Inc. On January 6, 1997 the Company filed a Current Report on Form
8-K to report its fourth quarter and fiscal year-end 1996 results.
11
<PAGE> 12
(c) Exhibits
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of September 23, 1996,
among CLARCOR Inc., CUAC Inc. and United Air Specialists,
Inc. Incorporated by reference to Exhibit 2.1 to the
Company's registration statement on Form S-4 (registration
no. 333-19735) filed on January 14, 1997 (the "Registration
Statement").
3.1 The registrant's Restated Certificate of Incorporation.
Incorporated by reference to Exhibit 3.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
November 30, 1983.
3.1(a) Amendment to ARTICLE NINTH of Restated Certificate of
Incorporation. Incorporated by reference to Exhibit 3.1(a)
to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1988 (the "1988 10-K").
3.1(b) Amendment changing name of Registrant to CLARCOR Inc.
Incorporated by reference to Exhibit 3.1(b) to the 1988
10-K.
3.1(c) Amendment to ARTICLE FOURTH of the Restated Certificate of
Incorporation. Incorporated by reference to Exhibit 3.1(c)
to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1990.
3.2 The registrant's By-laws, as amended. Incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1995.
3.3 Certificate of Designation of Series B Junior Participating
Preferred Stock of CLARCOR as filed with the Secretary of
State of the State of Delaware on April 2, 1996.
Incorporated by reference to Exhibit 4.5 to the Registration
Statement.
4.1 Stockholder Rights Agreement dated as of March 28, 1996
between the registrant and the First Chicago Trust Company
of New York. Incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K filed April 3, 1996.
4.2 The instruments defining the rights of holders of long-term
debt securities of CLARCOR and its subsidiaries are omitted
pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K.
CLARCOR hereby agrees to furnish copies of these instruments
to the SEC upon request.
10.1* The registrant's Deferred Compensation Plan for Directors.
10.2* The registrant's Supplemental Retirement Plan.
10.2(a) The registrant's 1994 Executive Retirement Plan.
Incorporated by reference to Exhibit 10.2(a) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 3, 1994 ("1994 10-K").
10.2(b) The registrant's 1994 Supplemental Pension Plan.
Incorporated by reference to Exhibit 10.2(b) to the 1994
10-K.
10.2(c) The registrant's Supplemental Retirement Plan (as amended
and restated effective December 1, 1994). Incorporated by
reference to Exhibit 10.2(c) to the 1994 10-K.
10.3 The registrant's 1984 Stock Option Plan. Incorporated by
reference to Exhibit A to the Company's Proxy Statement
dated March 2, 1984 for the Annual Meeting of Shareholders
held on March 31, 1984.
10.4 Employment Agreements with certain officers. Incorporated by
reference to Exhibit 5 to the Company's Current Report on
Form 8-K filed July 25, 1989.
10.4(a) Form of Employment Agreement with each of David J. Anderson,
Marcia S. Blaylock, Bruce A. Klein and Peter F. Nangle.
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
10.5 The registrant's 1994 Incentive Plan. Incorporated by
reference to Exhibit A to the Company's Proxy Statement
dated February 24, 1994 for the Annual Meeting of Share-
holders held on March 31, 1994.
11 Computation of Per Share Earnings.
13 (a) The following items incorporated by reference herein from
the Company's 1996 Annual Report to Shareholders ("1996
Annual Report"), are filed as Exhibits to this Annual Report
Form 10-K:
(i) Business segment information for the fiscal years 1994
through 1996 set forth on page 35 of the 1996 Annual
Report (included in Exhibit 13(a)(vi) -- Note P of
Notes to Consolidated Financial Statements);
(ii) Consolidated Balance Sheets of the Company and its
Subsidiaries at November 30, 1996 and 1995 set forth on
page 24 of the 1996 Annual Report;
(iii) Consolidated Statements of Earnings of the Company and
its Subsidiaries for the years ended November 30, 1996,
1995 and 1994 set forth on page 25 of the 1996 Annual
Report;
(iv) Consolidated Statements of Shareholders' Equity for the
Company and its Subsidiaries for the years ended
November 30, 1996, 1995 and 1994 set forth on page 26
of the 1996 Annual Report;
(v) Consolidated Statements of Cash Flows of the Company
and its Subsidiaries for the years ended November 30,
1996, 1995 and 1994 set forth on page 27 of the 1996
Annual Report;
(vi) Notes to Consolidated Financial Statements set forth on
pages 28 through 35 of the 1996 Annual Report;
(vii) Report of Independent Accountants set forth on page 36
of the 1996 Annual Report;
(viii) Management's Report on Responsibility for Financial
Reporting set forth on page 37 of the 1996 Annual
Report;
(ix) Information under the caption "11-Year Financial
Summary" set forth on pages 38 and 39 of the 1996
Annual Report; and
(x) Management's Discussion and Analysis of Financial
Condition and Results of Operation set forth under the
caption "Financial Review" on pages 18 through 23 of
the 1996 Annual Report.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
</TABLE>
- ------------------------------
* Incorporated by reference to the Company's Annual Report on Form 10-K for the
fiscal year ended November 30, 1984, in which each Exhibit had the same number
as herein.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 19, 1997 CLARCOR Inc.
(Registrant)
By: /s/ LAWRENCE E. GLOYD
--------------------------------------
Lawrence E. Gloyd
Chairman of the Board
& Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Date: February 19, 1997 By: /s/ LAWRENCE E. GLOYD
------------------------------------------------
Lawrence E. Gloyd
Chairman of the Board &
Chief Executive Officer and Director
Date: February 19, 1997 By: /s/ BRUCE A. KLEIN
------------------------------------------------
Bruce A. Klein
Vice President -- Finance &
Chief Financial Officer
Date: February 19, 1997 By /s/ WILLIAM F. KNESE
------------------------------------------------
William F. Knese
Vice President, Treasurer, Controller & Chief
Accounting Officer
Date: February 19, 1997 By /s/ J. MARC ADAM
------------------------------------------------
J. Marc Adam
Director
Date: February 19, 1997 By /s/ MILTON R. BROWN
------------------------------------------------
Milton R. Brown
Director
Date: February 19, 1997 By /s/ CARL J. DARGENE
------------------------------------------------
Carl J. Dargene
Director
Date: February 19, 1997 By /s/ DUDLEY J. GODFREY, JR.
------------------------------------------------
Dudley J. Godfrey, Jr.
Director
</TABLE>
14
<PAGE> 15
Date: February 19, 1997 By /s/ NORMAN E. JOHNSON
------------------------------------------------
Norman E. Johnson
Director
Date: February 19, 1997 By /s/ STANTON K. SMITH, JR.
------------------------------------------------
Stanton K. Smith, Jr.
Director
Date: February 19, 1997 By /s/ DON A. WOLF
------------------------------------------------
Don A. Wolf
Director
15
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
CLARCOR Inc.
Rockford, Illinois
Our report on the consolidated financial statements of CLARCOR Inc. and
Subsidiaries has been incorporated by reference in this Form 10-K from page 36
of the 1996 Annual Report to Shareholders of CLARCOR Inc. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed on page 11 (index of exhibits) of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
January 3, 1997
F-1
<PAGE> 17
CLARCOR INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------- ---------- ----------------------- ---------- ----------
ADDITIONS
-----------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1996:
Allowance for losses on accounts
receivable......................... $1,557 $629 $ -- $402(A) $1,784
====== ==== ==== ==== ======
1995:
Allowance for losses on accounts
receivable......................... $1,580 $386 $ -- $409(A) $1,557
====== ==== ==== ==== ======
1994:
Allowance for losses on accounts
receivable......................... $1,544 $474 $288(B) $726(A) $1,580
====== ==== ==== ==== ======
</TABLE>
NOTES:
(A) Bad debts written off during year, net of recoveries.
(B) Due to acquisition addition in 1993 adjusted due to SFAS 109 adoption in
1994.
F-2
<PAGE> 1
EXHIBIT 10.4(a)
FORM OF EMPLOYMENT AGREEMENT
AGREEMENT by and between CLARCOR Inc., a Delaware corporation (the
"Corporation") and ______________________ (the "Executive") dated as of June
13, 1996. The Corporation and the Executive hereby agree as follows:
Factual Background
The Corporation wishes to attract and retain well-qualified executive and
key personnel and to assure both itself and the Executive of continuity of
management in the event of any actual or threatened Change of Control (as
defined in Section 2) of the Corporation. To achieve this purpose, the
Compensation Committee of the Board of Directors of the Corporation has
considered and recommends that agreements should be entered into with such
personnel and in accordance with that recommendation the Board of Directors has
approved this Agreement as being in the best interests of the Corporation and
its shareholders.
1. Operation of Agreement. The "effective date of this Agreement" shall
be the date on which a Change of Control occurs. Anything in this Agreement to
the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Corporation is terminated or the Executive
ceases to be an officer of the Corporation prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the Executive
that such termination of employment or cessation of status as an officer (i)
was at the request of a third party who has taken steps reasonably calculated
to effect the Change of Control or (ii) otherwise arose in connection with
<PAGE> 2
or anticipation of the Change of Control, then for all purposes of this
Agreement the "effective date of this agreement" shall mean the date
immediately prior to the date of such termination of employment or cessation of
status as an officer.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition (other than from the Corporation) by any
person, entity or "group", within the meaning of Section 13(d) (3)
or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange
Act"), of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of either the
then outstanding shares of common stock or the combined voting power
of the Corporation's then outstanding voting securities entitled to
vote generally in the election of directors; provided, however, no
Change of Control shall be deemed to have occurred for any
acquisition by any corporation with respect to which, following such
acquisition, more than 60% of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors
is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals or entities who were the
beneficial owners, respectively, of the then outstanding shares of
common stock or the combined voting power of the Corporation's then
outstanding voting securities immediately prior to such acquisition
in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Corporation's then
outstanding common stock and then outstanding voting securities, as
the case may be; or
(b) Individuals who, as of the date hereof, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the Directors of the
Corporation, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
2
<PAGE> 3
(c) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation, in each case, with respect
to which persons who were the shareholders of the Corporation
immediately prior to such reorganization, merger or consolidation do
not, immediately thereafter, own more than 60% of the combined
voting power entitled to vote generally in the election of directors
of the reorganized, merged or consolidated corporation's then
outstanding voting securities, or a liquidation or dissolution of
the Corporation or of the sale of all or substantially all of the
assets of the Corporation.
3. Employment. The Corporation hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Corporation, for the period commencing on the effective date of
this Agreement and ending on the earlier to occur of the third anniversary of
such date or the Executive's normal retirement date under the Corporation's
retirement plans (the "employment period"), to exercise such authority and
perform such executive duties as are commensurate with the authority being
exercised and duties being performed by the Executive during the 90-day period
immediately prior to the effective date of this Agreement, which services shall
be performed at the location where the Executive was employed immediately prior
to the effective date of this Agreement. During the employment period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Corporation and, to
the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the employment period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B)
3
<PAGE> 4
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (C) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's
responsibilities as an employee of the Corporation in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Executive prior to the effective
date of this Agreement, the continued conduct of such activities (or conduct of
activities similar in nature and scope thereto) subsequent to the effective
date of this Agreement shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Corporation.
4. Compensation, Compensation Plans, Benefits and Perquisites. During
the employment period, the Executive shall be compensated as follows:
(a) He shall receive an annual salary at a monthly rate at least
equal to the highest monthly base salary paid or payable to the
Executive by the Corporation during the 36 calendar months
immediately prior to the effective date of this Agreement, with the
opportunity for increases, from time to time thereafter, which are
in accordance with the Corporation's regular practices. Annual
salary shall not be reduced after any such increase and the term
"salary" as utilized in this Agreement shall refer to such annual
salary as increased.
(b) He shall be eligible to participate on a reasonable basis in
the Corporation's Stock Option Plan, Key Management Incentive Plan,
Long Range Performance Share Plan and other bonus and incentive
compensation plans (whether now or hereinafter in effect) which
provide opportunities to receive compensation which are the greater
of the opportunities provided by the Corporation for executives with
comparable duties or the opportunities under any such plans in which
he was participating during the 90-day period immediately prior to
the effective date of this Agreement.
(c) He shall be entitled to receive employee benefits and
perquisites which are the greater of the employee benefits and
perquisites provided by the Corporation to executives
4
<PAGE> 5
with comparable duties or the employee benefits and perquisites to
which he was entitled during the 90-day period immediately prior
to the effective date of this Agreement. Such benefits and
perquisites shall include, but not be limited to, the benefits and
perquisites included under the following:
CLARCOR Pension Trust
Retirement Savings Plan and Trust
Supplemental Retirement Plan
Dental Plan
Health Care Plan
Life Insurance Plan/Supplemental Life
Insurance Plan
Disability Plan
Automobile Plan
5. Termination. The term "termination" shall mean termination
by the Corporation of the employment of the Executive with the
Corporation for any reason other than death, disability or cause (as
defined below), or resignation of the Executive upon the occurrence
of any of the following events:
(a) An adverse change in the nature or scope of the Executive's
authority, duties or responsibilities from those referred to in
Section 3, as determined in good faith by the Executive, a change in
location from that referred to in Section 3, a reduction in total
compensation, compensation plans, benefits or perquisites from those
provided in Section 4, or the breach by the Corporation of any other
provision of this Agreement; or
(b) A good-faith determination by the Executive that as a result
of a Change of Control and a change in circumstances thereafter
significantly affecting his position, he is unable to exercise the
authorities, powers, function or duties attached to his position and
contemplated by Section 3 of the Agreement.
For purposes of this Section 5, any good-faith determination made by the
Executive shall be conclusive. The term "cause" means fraud, misappropriation
or intentional material damage to the property or business of the Corporation
or commission of a felony.
5
<PAGE> 6
6. Termination Payments. In the event of a termination and subject to
the provisions of Section 7 of this Agreement, the Corporation shall pay to the
Executive and provide him with the following:
(a) During the remainder of the employment period, the
Corporation shall continue to pay the Executive his salary at the
rate required by paragraph 4 (a) and in effect immediately prior to
the date of termination plus the estimated amount of any incentive
compensation or other bonuses to which he would have been entitled
had he remained in the employ of the Corporation for the remainder
of the employment period.
(b) During the remainder of the employment period, the Executive
shall continue to be treated as an employee under the provisions of
the Corporation's plans referred to in 4(b). In addition, the
Executive shall continue to be entitled to all benefits and service
credits for benefits, programs and arrangements of the Corporation
described in paragraph 4(c) as if he were still employed during such
period under this Agreement.
(c) If, despite the provisions of paragraph (b) above, benefits
or service credits or the right to accrue further benefits or
service credits under any plan referred to in Section 4(b) or (c)
shall not be payable or provided under such plan to the Executive,
or his dependents, beneficiaries and estate because he is no longer
an employee of the Corporation, the Corporation itself shall, to the
extent necessary, pay or provide for payment of such benefits and
service credits for such benefits to the Executive, his dependents,
beneficiaries and estate.
7. Non-Competition and Confidentiality. The Executive agrees that:
(a) There shall be no obligation on the part of the Corporation
to provide any further payments or benefits (other than benefits or
payments already earned, accrued or paid) described in Section 6 or
Section 9 if, (i) during the employment period, the Executive shall
be employed by or otherwise engaged or be interested (other than as
a passive investor in a publicly-owned entity) in any business which
directly competes with any business of the Corporation or of any of
its subsidiaries at such time and (ii) such employment or activity
is likely to cause, or causes, serious damage to the Corporation or
any of its subsidiaries at such time; and
6
<PAGE> 7
(b) During and after the employment period, he shall retain in
confidence any confidential information known to him concerning the
Corporation and its subsidiaries and their respective businesses so
long as such information is not publicly disclosed. Notwithstanding
the foregoing, a breach by the Executive of this Section 7(b) shall
not be used to set-off or delay amounts payable under this
Agreement.
8. No Obligation to Mitigate Damages. The Executive shall not be
obligated to seek other employment in mitigation of amounts payable or
arrangements made under the provisions of this Agreement and the obtaining of
such other employment shall in no event effect any reduction of the
Corporation's obligations under this Agreement.
9. Severance Allowance. In the event of termination of the Executive
during the employment period, the Executive may elect, within 60 days after
such termination, to be paid a lump sum severance allowance, in lieu of the
termination payments referred to in Section 6 above, in an amount which is
equal to the sum of the amounts determined in accordance with the following
paragraphs (a) and (b).
(a) An amount equivalent to salary payments for 36 calendar
months at the rate which he would have been entitled to receive in
accordance with Section 6(a) plus a pro rata share of the estimated
amount of any bonus which would have been payable for the bonus
period which includes the termination date; and
(b) An amount equivalent to 36 calendar months of bonus at the
greater of (i) the highest monthly rate of the bonus payment for the
bonus period in respect of the three fiscal years immediately prior
to the fiscal year including his termination date, or (ii) the
estimated amount of the bonus for the period which includes his
termination date.
In the event that the Executive makes an election pursuant to the preceding
sentence of this Section 9 to receive a lump sum severance allowance of the
amount described in paragraphs (a) and (b), then, in addition to such amount,
he shall receive (i) in addition to the benefits provided under any pension
benefit plan maintained by the Corporation, the pension benefits he would have
accrued under such pension benefit plan if he had remained in the employ of the
Corporation for 36 calendar months after his termination, which benefits will
be paid in a lump sum concurrently with, and in addition to, the lump sum
7
<PAGE> 8
payment of the benefits provided under such pension benefit plan, (ii)
incentive compensation (including, but not limited to, the right to receive and
exercise stock options and stock appreciation rights and other bonus and
similar incentive compensation benefits) to which he would have been entitled
under all incentive compensation plans maintained by the Corporation if he had
remained in the employ of the Corporation for 36 calendar months after such
termination, payable in a lump sum, and (iii) the employee benefits (including,
but not limited to, coverage under any medical and insurance arrangements or
programs) to which he would have been entitled under all employee benefit
plans, programs or arrangements maintained by the Corporation if he had
remained in the employ of the Corporation for 36 calendar months after his
termination, or at the election of the Executive, the value of the amounts
described in (i), (ii) and (iii) next preceding. The amount of the payments
described in the preceding sentence shall be determined by the Accounting Firm
(as defined in Section 10) and such payments shall be distributed as soon as
reasonably possible but in no event later than 30 days after the election by
the Executive pursuant to this Section 9. The Executive making an election
pursuant to this Section 9 shall not be restricted by the provisions of
paragraph 7(a).
10. Certain Additional Payments by the Corporation. The Corporation
agrees that:
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution
by the Corporation to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 10) (a
"Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax
8
<PAGE> 9
imposed upon the Gross-Up Payment, the Executive retains an amount
of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payment.
(b) Subject to the provisions of Section 10(c), all
determinations required to be made under this Section 10, including
whether and when a Gross-Up Payment is required and the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by Coopers & Lybrand (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Corporation and the Executive within 15
business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the
Corporation. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting
the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Corporation. Any
Gross-Up Payment, as determined pursuant to this Section 10, shall
be paid by the Corporation to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure to
report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be
binding upon the Corporation and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder,
it is possible that Gross-Up Payments which will not have been made
by the Corporation should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In
the event that the Corporation exhausts its remedies pursuant to
Section 10(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Corporation to or for the
benefit of the Executive.
(c) The Executive shall notify the Corporation in writing of any
claim by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later
than ten business days after the Executive is informed in writing of
such claim and shall apprise the Corporation of the nature of such
claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives
9
<PAGE> 10
such notice to the Corporation (or such shorter period ending on
the date that any payment of taxes with respect to such claim is
due). If the Corporation notifies the Executive in writing prior
to the expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Corporation any information reasonably
requested by the Corporation relating to such claim,
(ii) take such action in connection with contesting
such claim as the Corporation shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Corporation,
(iii) cooperate with the Corporation in good faith
in order effectively to contest such claim, and
(iv) permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and pay
directly all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 10(c), the Corporation shall
control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option,
either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
Corporation shall determine; provided, however, that if the
Corporation directs the Executive to pay such claim and sue for a
refund, the Corporation shall advance the amount of such payment
to the Executive, on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the
Corporation's control of the
10
<PAGE> 11
contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Corporation pursuant to Section 10(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Corporation's complying with the
requirements of Section 10(c)) promptly pay to the Corporation the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Corporation pursuant to
Section 10(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the
Corporation does not notify the Executive in writing of its intent
to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
11. Full Settlement. The Corporation's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Corporation may have against
the Executive or others. The Corporation agrees to pay, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Corporation, the Executive or others of the validity of enforceability
of, or liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus in each case
interest on any delayed payment at the applicable Federal rate provided for in
Section 7872 (f) (2) (A) of the Code.
11
<PAGE> 12
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at _____________, or at the last
address he has filed in writing with the Corporation or, in the case of the
Corporation, at its principal executive offices.
13. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by
operation of law, except by will or the laws of descent and distribution.
14. Governing Law. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Illinois.
15. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person
and, so long as the Executive lives, no person, other than the parties hereto,
shall have any rights under or interest in this agreement or the subject matter
hereof.
16. Successors.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by
the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation
to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be required
to perform it if no such succession had taken place. As used in
this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its business
12
<PAGE> 13
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise. Any failure by
the Corporation to comply with and satisfy this Section 16(c)
shall constitute a termination as provided in Section 5 of this
Agreement, provided that such successor has received at least ten
days prior written notice from the Corporation or the Executive of
the requirements of this Section 16(c).
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason,
the remaining provisions of this Agreement shall be unaffected thereby and
shall remain in full force and effect.
18. "At Will". The Executive and the Corporation acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Corporation, the employment of the Executive by the
Corporation is "at will" and, prior to the effective date of this Agreement and
except as otherwise provided herein, may be terminated by either the Executive
or the Corporation at any time. Moreover, if prior to the effective date of
this Agreement, (i) the Executive's employment with the Corporation terminates
or (ii) the Executive ceases to be an officer of the Corporation, then the
Executive shall have no further rights under this Agreement.
13
<PAGE> 14
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Corporation has
caused these presents to be executed in its name on its behalf, and its
corporate seal to be hereunto affixed and attested by its Secretary, all as of
the day and year first above written.
----------------------------
the Executive
CLARCOR Inc.
By
----------------------------
Its Chief Executive Officer
ATTEST:
- --------------------------
Secretary
(Seal)
14
<PAGE> 1
EXHIBIT 11
CLARCOR INC.
EXHIBIT 11--COMPUTATION OF PER SHARE EARNINGS
FOR THE FIVE YEARS ENDED NOVEMBER 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NOVEMBER 30,
--------------------------------------------------------------
AVERAGE SHARES OUTSTANDING 1996 1995 1994 1993 1992
-------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1. Average number of shares
outstanding................ 14,859,252 14,800,872 14,813,925 14,837,741 14,972,639
2. Net additional shares
resulting from assumed
exercise of stock
options*................... 293,656 316,630 225,599 213,725 230,202
---------- ---------- ---------- ---------- ----------
3. Adjusted average shares
outstanding for fully
diluted computation (1 plus
2)......................... 15,152,908 15,117,502 15,039,524 15,051,466 15,202,841
========== ========== ========== ========== ==========
Earnings per share of common
stock:
Primary...................... $1.68 $1.48 $1.43 $1.16 $0.94
========== ========== ========== ========== ==========
Assuming full dilution....... $1.65 $1.45 $1.41 $1.15 $0.93
========== ========== ========== ========== ==========
</TABLE>
- ------------------------------
* Assumes proceeds from exercise of stock options used to purchase treasury
shares at the greater of the year-end or the average market price during the
period.
<PAGE> 1
EXHIBIT 13(a)
CONSOLIDATED BALANCE SHEETS
November 30, 1996 and 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and short-term cash investments .................... $ 17,372 $ 18,769
Accounts receivable, less allowance for losses
of $1,784 for 1996 and $1,557 for 1995 ............... 52,509 50,034
Inventories ............................................. 49,773 42,972
Prepaid expenses ........................................ 1,476 2,018
Deferred income taxes ................................... 3,249 3,777
-------- --------
Total current assets ........................ 124,379 117,570
-------- --------
Marketable securities, at fair value .................... 3,292 4,696
Investment in affiliates, at cost ....................... 530 --
Plant assets, at cost less accumulated depreciation ..... 78,586 67,036
Excess of cost over fair value of assets acquired,
less accumulated amortization ........................ 15,120 14,893
Pension assets .......................................... 12,453 11,218
Other assets ............................................ 9,604 7,849
-------- --------
Total assets ................................ $243,964 $223,262
======== ========
LIABILITIES
- --------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt ....................... $ 6,928 $ 7,596
Accounts payable and accrued liabilities ................ 34,976 32,851
Income taxes ............................................ 3,252 2,013
-------- --------
Total current liabilities ................... 45,156 42,460
-------- --------
Long-term debt, less current portion ...................... 35,522 34,417
Postretirement health care benefits ....................... 1,914 2,908
Long-term pension liabilities ............................. 6,607 5,226
Deferred income taxes ..................................... 7,798 6,228
Other liabilities ......................................... -- 867
Minority interests ........................................ 908 341
Contingencies
SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Capital stock:
Preferred, par value $1, authorized 1,300,000
shares, issuable in series, none issued .............. -- --
Common, par value $1, authorized 30,000,000
shares, issued 14,874,969 in 1996 and
14,825,296 in 1995 ................................... 14,875 14,825
Capital in excess of par value .......................... 1,393 1,121
Foreign currency translation adjustments ................ (1,858) (1,607)
Unrealized holding gain on marketable equity
securities, net of taxes ............................. 992 1,285
Retained earnings ....................................... 130,657 115,191
-------- --------
Total shareholders' equity .................. 146,059 130,815
-------- --------
Total liabilities and shareholders' equity .. $243,964 $223,262
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 2
CONSOLIDATED STATEMENTS OF EARNINGS
for the years ended November 30, 1996, 1995 and 1994
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales ....................................... $333,388 $290,194 $ 270,123
Cost of sales ................................... 239,119 209,653 192,456
------------------------------
Gross profit ................................. 94,269 80,541 77,667
Selling and administrative expenses ............. 53,739 45,176 45,301
------------------------------
Operating profit ............................. 40,530 35,365 32,366
------------------------------
Other income (expense):
Interest expense ............................... (3,243) (2,693) (2,788)
Interest and dividend income ................... 1,130 1,076 548
Gain on sale of investment ..................... 1,675 -- 4,166
Other, net ..................................... (73) 459 (2,689)
------------------------------
(511) (1,158) (763)
------------------------------
Earnings before income taxes,
equity in net earnings of
affiliate, minority interests,
and cumulative effect of
change in accounting method ............ 40,019 34,207 31,603
Provision for income taxes ...................... 14,896 12,182 11,935
------------------------------
Earnings before equity in net earnings
of affiliate, minority interests,
and cumulative effect of change
in accounting method ................... 25,123 22,025 19,668
Equity in net earnings of affiliate ............. -- -- 959
Minority interests in earnings of subsidiaries .. (145) (71) (2)
------------------------------
Earnings before cumulative effect of
change in accounting method ............ 24,978 21,954 20,625
Cumulative effect of change
in accounting method ........................... -- -- 630
------------------------------
Net earnings .................................... $ 24,978 $ 21,954 $ 21,255
==============================
Net earnings per common share:
Earnings before cumulative effect of change
in accounting method ........................ $1.68 $ 1.48 $1.39
Cumulative effect of change
in accounting method ....................... -- -- 0.04
------------------------------
$1.68 $ 1.48 $1.43
==============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
25
<PAGE> 3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended November 30, 1996, 1995 and 1994
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Common Stock
----------------------------------------
Issued In Treasury Foreign
-------------------- ----------------- Capital in Currency Unrealized
Number Number Excess of Translation Holding Retained
of Shares Amount of Shares Amount Par Value Adjustments Gain Earnings
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, November 30, 1993 ...... 14,819,199 $14,819 -- $ -- $ 328 $(1,465) $ -- $ 90,959
Net earnings .................... -- -- -- -- -- -- -- 21,255
Purchase of treasury stock ...... -- -- 72,900 1,327 -- -- -- --
Retirement of treasury stock .... (30,000) (30) (30,000) (487) (457) -- -- --
Stock options exercised ......... 5,775 6 -- -- 78 -- -- --
Issuance of stock under
award plans ................... 8,814 9 -- -- 234 -- -- --
Cash dividends -- $.6225
per common share .............. -- -- -- -- -- -- -- (9,201)
Unrealized holding gain on
marketable equity securities .. -- -- -- -- -- -- 911 --
Translation adjustments ......... -- -- -- -- -- 856 -- --
- -------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1994 ...... 14,803,788 14,804 42,900 840 183 (609) 911 103,013
Net earnings .................... -- -- -- -- -- -- -- 21,954
Retirement of treasury stock .... (42,900) (43) (42,900) (840) (351) -- -- (446)
Stock options exercised ......... 28,849 29 -- -- 547 -- -- --
Issuance of stock under
award plans ................... 35,559 35 -- -- 742 -- -- --
Cash dividends -- $.6325
per common share .............. -- -- -- -- -- -- -- (9,330)
Unrealized holding gain on
marketable equity securities .. -- -- -- -- -- -- 374 --
Translation adjustments ......... -- -- -- -- -- (998) -- --
- --------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1995 ...... 14,825,296 14,825 -- -- 1,121 (1,607) 1,285 115,191
Net earnings .................... -- -- -- -- -- -- -- 24,978
Purchase of treasury stock ...... -- -- 21,900 22 -- -- -- --
Retirement of treasury stock .... (21,900) (22) (21,900) (22) (408) -- -- --
Stock options exercised ......... 58,641 59 -- -- 133 -- -- --
Issuance of stock under
award plans ................... 12,932 13 -- -- 547 -- -- --
Cash dividends -- $.6425
per common share .............. -- -- -- -- -- -- -- (9,512)
Unrealized holding gain on
marketable securities ......... -- -- -- -- -- -- 653 --
Realized gain on sale of
marketable securities ......... -- -- -- -- -- 72 (946) --
Translation adjustments ......... -- -- -- -- -- (323) -- --
- --------------------------------------------------------------------------------------------------------------------------
Balance, November 30, 1996 ...... 14,874,969 $14,875 -- $ -- $1,393 $(1,858) $ 992 $130,657
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
26
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended November 30, 1996, 1995 and 1994 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings and cumulative effect of accounting change .. $ 24,978 $ 21,954 $ 21,255
Adjustments to reconcile net earnings to net
cash provided by operations:
Depreciation .......................................... 9,276 7,736 6,778
Amortization .......................................... 509 508 514
Equity in net earnings of affiliate ................... -- -- (959)
Gain on sale of investment ............................ (1,675) -- (4,166)
Minority interests in earnings of subsidiaries ........ 145 71 2
Net (gain) loss on dispositions of plant assets ....... (243) (177) 1,862
Cumulative effect of accounting change ................ -- -- (630)
Changes in assets and liabilities:
Accounts receivable ................................ (2,314) (8,030) (1,981)
Inventories ........................................ (6,306) (6,316) (2,863)
Prepaid expenses ................................... 579 899 (1,786)
Accounts payable and accrued liabilities ........... (2,702) 4,522 4,021
Pension assets and liabilities, net ................ 185 (1,713) 681
Income taxes ....................................... 1,444 87 (137)
Deferred income taxes .............................. 2,295 (81) 2,012
-------------------------------
Net cash provided by operating activities ....... 26,171 19,460 24,603
-------------------------------
Cash flows from investing activities:
Proceeds from sale of investment ......................... 3,067 -- 10,731
Business acquisitions, net of cash acquired .............. (1,298) (14,125) (1,512)
Investment in affiliate .................................. (530) -- --
Dividends from marketable securities ..................... (302) (246) --
Dividends from affiliate, net of reinvestments ........... -- (327) 363
Additions to plant assets ................................ (21,652) (13,910) (11,416)
Dispositions of plant assets ............................. 2,290 72 331
Other, net ............................................... -- (63) 1,034
-------------------------------
Net cash used in investing activities ........... (18,425) (28,599) (469)
-------------------------------
Cash flows from financing activities:
Borrowing under long-term debt ........................... 8,410 25,000 --
Reduction of long-term debt .............................. (8,016) (7,579) (7,946)
Sales of capital stock, stock option plan ................ 421 278 69
Purchases of treasury stock .............................. (430) -- (1,327)
Cash dividends paid ...................................... (9,512) (9,330) (9,201)
-------------------------------
Net cash provided by (used in)
financing activities ......................... (9,127) 8,369 (18,405)
-------------------------------
Net effect of exchange rate changes on cash ................ (16) (28) --
-------------------------------
Net change in cash and short-term cash investments ......... (1,397) (798) 5,729
Cash and short-term cash investments, beginning of year .... 18,769 19,567 13,838
-------------------------------
Cash and short-term cash investments, end of year .......... $ 17,372 $ 18,769 $ 19,567
===============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
27
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
- ------------------------------------------------------------------------------
A. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include all domestic and foreign
subsidiaries which are more than 50% owned and controlled. Investments in
nonconsolidated companies which are at least 20% owned are carried at cost plus
equity in undistributed earnings since acquisition.
Minority interests represent an outside shareholder's 10% ownership of the
common stock of Filtros Baldwin de Mexico (FIBAMEX), an outside shareholder's
30% ownership of Baldwin-Unifil S.A., and an outside shareholder's 50%
ownership of Baldwin Filters (Aust.) Pty. Limited.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign subsidiaries are translated into U.S.
dollars at current rates, except that revenues, costs and expenses are
translated at average current rates during each reporting period. Net exchange
gains or losses resulting from the translation of foreign financial statements
and the effect of exchange rate changes on intercompany transactions of a
long-term investment nature are accumulated and credited or charged directly to
a separate component of shareholders' equity.
INVESTMENTS IN MARKETABLE SECURITIES
On November 30, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, (SFAS 115) "Accounting for Certain Investments in
Debt and Equity Securities." The Company's marketable securities, with an
average cost basis, have been classified as available-for-sale.
PLANT ASSETS
Depreciation is provided by the straight-line and accelerated methods for
financial statement purposes and by the accelerated method for tax purposes.
The provision for depreciation is based on the estimated useful lives of the
assets. It is the policy of the Company to capitalize renewals and betterments
and to charge to expense the cost of current maintenance and repairs.
EXCESS OF COST OVER FAIR VALUE OF
ASSETS ACQUIRED
The excess of cost over fair value of assets acquired is being amortized
over a forty-year period, using the straight-line method subject to impairment
write-offs determined by underlying cash flows. Accumulated amortization was
$6,422 and $5,913 at November 30, 1996 and 1995, respectively.
STATEMENTS OF CASH FLOWS
All highly liquid investments purchased with an original maturity of three
months or less are considered to be short-term cash investments. The carrying
amount approximates fair value. The Company has certain noncash transactions
related to stock option and award plans which are described in Note M.
CONCENTRATIONS OF CREDIT
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of short-term cash
investments and trade receivables. The Company places its short-term cash
investments with high credit quality financial institutions and in high grade
municipal securities. At November 30, 1996 and 1995, the Company held
short-term securities with a total cost of $15,780 and $17,225, respectively.
Concentrations of credit risk with respect to trade receivables are limited due
to the Company's large number of customers and their dispersion across many
different industries and locations.
INCOME TAXES
As of December 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes." SFAS
109 requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the financial
statement carrying amounts and the tax basis of assets and liabilities.
Previously, the Company deferred the past tax effects of timing differences
between financial reporting and taxable income.
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to customers.
28
<PAGE> 6
- ------------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE
Net earnings per common share is based on the weighted average number of
common shares outstanding during the respective years.
USE OF MANAGEMENT'S ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
ACCOUNTING PERIOD
The Company's fiscal year ends on the Saturday closest to November 30.
The fiscal years ended November 30, 1996, December 2, 1995, and December 3,
1994, were comprised of fifty-two, fifty-two, and fifty-three weeks,
respectively. In the consolidated financial statements, all fiscal years are
shown to begin as of December 1 and end as of November 30 for clarity of
presentation.
RECLASSIFICATION
Certain reclassifications have been made to conform prior years' data to
the current presentation.
B. ACQUISITIONS
During 1996, Baldwin-Unifil South Africa, in which the Company owns a 70%
equity interest, was incorporated in South Africa. Baldwin-Unifil South Africa
acquired certain assets from Unifil (Pty.) Ltd. for $1,298 in cash. The
acquisition did not have a significant impact on the results of the Company.
During 1996, the Company also entered into a joint venture in China with a
$530 investment, called Baldwin-Weifang Filters Ltd., and accounts for its
investment on a cost basis. The acquisition did not have a significant impact
on the results of the Company
The Company purchased certain assets comprising the filtration business of
Hastings Manufacturing Company on September 4, 1995 for $14,125 in cash,
including acquisition expenses. The business is a manufacturer of automotive
and light truck filter products. The acquisition has been accounted for by the
purchase method of accounting and the operating results of the business are
included in the Company's consolidated statement of earnings from the date of
the acquisition.
The following unaudited pro forma amounts are presented as if the Hastings
acquisition had occurred at the beginning of the period presented immediately
preceding the acquisition and does not purport to be indicative of what would
have occurred had the acquisition been made as of those dates or of results
which may occur in the future. Unaudited pro forma net sales for the Company
would have been $320,194 and $310,493 for the years ended November 30, 1995,
and 1994, respectively. Net earnings and earnings per share for these periods
would not have been significantly affected.
During 1994, FIBAMEX, in which the Company owns a 90% equity interest, was
incorporated in Mexico. FIBAMEX acquired certain assets from Filtros
Continental, S.A. de C.V. for $1,512 in cash. The acquisition did not have a
significant impact on the results of the Company.
C. INVESTMENT IN MARKETABLE SECURITIES
In October 1994, the Company sold 75% of its 20% interest in G.U.D.
Holdings Limited, recognizing a pretax gain on the sale of $4,166.
In November 1996, the Company sold 50% of its 5% interest in G.U.D.
Holdings Limited, recognizing a pretax gain on the sale of $1,675. The
remaining 2.5% has been classified as available for sale under the provisions of
SFAS 115. The quoted market value of the investment was $3,292 and $4,696 as of
November 30, 1996 and 1995, respectively, which includes unrealized holding
gains, net of deferred income taxes, of $992, $1,285, and $911 as of November
30, 1996, 1995, and 1994, respectively. The 1996, 1995, and 1994 unrealized
holding gains, net of deferred income taxes, have been included as a component
of shareholders' equity at November 30.
Subsequent to the end of the year, the Company sold its remaining 2.5%
investment, recognizing a pretax gain on the sale of $1,706.
29
<PAGE> 7
- ------------------------------------------------------------------------------
D. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for approximately 57% and 62% of the
Company's inventories at November 30, 1996 and 1995, respectively, and by the
first-in, first-out (FIFO) method for all other inventories. The FIFO method
would approximate the current cost. The inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Raw materials ........... $16,315 $14,285
Work-in-process ......... 9,943 8,392
Finished products ....... 25,882 23,051
------- -------
Total at FIFO .......... 52,140 45,728
Less excess of FIFO
cost over LIFO values .. 2,367 2,756
------- -------
$49,773 $42,972
======= =======
</TABLE>
During 1994, LIFO inventory quantities were reduced resulting in a partial
liquidation of the LIFO bases, the effect of which increased net earnings by
approximately $480.
E. PLANT ASSETS
Plant assets at November 30, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land ............................. $ 2,173 $ 2,483
Buildings and building fixtures .. 44,784 42,670
Machinery and equipment .......... 106,773 90,034
Construction-in-process .......... 8,593 8,176
-------- --------
162,323 143,363
Less accumulated depreciation .... 83,737 76,327
-------- --------
$ 78,586 $ 67,036
======== ========
</TABLE>
F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at November 30, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts payable ............. $18,509 $20,378
Accrued salaries, wages
and commissions ............ 5,900 3,537
Compensated absences ......... 2,744 2,726
Accrued pension liabilities .. 996 996
Other accrued liabilities .... 6,827 5,214
------- -------
$34,976 $32,851
======= =======
</TABLE>
G. LONG-TERM DEBT
Long-term debt at November 30, 1996 and 1995 consists of the following:
<TABLE>
<Caption
1996 1995
------- -------
<S> <C> <C>
Promissory note,
interest payable
quarterly at 9.71% ........ $ 6,416 $13,416
Promissory note,
interest payable
semi-annually at 6.69% .... 25,000 25,000
Industrial Revenue Bonds,
variable interest rate ..... 8,410 --
Other obligations,
at 7% to 9% interest rates. 2,624 3,597
------- -------
42,450 42,013
Less current portion ........ 6,928 7,596
------- -------
$35,522 $34,417
======= =======
</TABLE>
The promissory notes mature March 31, 1997 (9.71%) and July 25, 2004
(6.69%), but the Company is required to prepay, without premium, certain
principal amounts as stated in the agreements. A fair value estimate of
$42,913 and $41,389 for the long-term debt, in 1996 and 1995, respectively, is
based on the current interest rates available to the Company for debt with
similar remaining maturities. Under the note agreements, the Company must meet
certain restrictive covenants. The primary covenants include maintaining
minimum consolidated net worth at $100,000, limiting new borrowings, and certain
restrictions regarding changes in ownership as stipulated in the agreement.
On February 1, 1996, the Company, in cooperation with the South Dakota
Economic Development Finance Authority, issued $8,410 of Industrial Revenue
Bonds. The bonds are due February 1, 2016, with a variable rate of interest
which is reset weekly. In conjunction with the issuance of the Industrial
Revenue Bonds, the Company holds in trust certain investments restricted and
committed for the acquisition of plant equipment. At November 30, 1996, the
restricted asset balance of $2,780 is included in other assets.
Other obligations include a 15 year capital lease for a manufacturing
facility acquired in 1991 from the Community Development Authority of the City
of Gothenburg, Nebraska, and debt acquired in the acquisitions of Airguard
Industries and Guardian/U.E.L., including an industrial revenue bond due in
2003.
30
<PAGE> 8
- ------------------------------------------------------------------------------
The Company has a $25,000 revolving credit facility with a financial
institution, against which $9,421 letters of credit have been issued at
November 30, 1996. The agreement related to this obligation includes certain
restrictive covenants that are similar to the promissory notes. The agreement
expires in 2000.
Principal maturities of long-term debt for the next five fiscal years
ending November 30, approximates: $6,928 in 1997, $384 in 1998, $186 in 1999,
$5,210 in 2000 and $5,230 in 2001 and $24,512 thereafter.
Interest paid totaled $3,399, $2,226, and $2,916 during 1996, 1995 and
1994, respectively.
H. RETIREMENT PLANS
The Company has defined benefit pension plans covering nonemployee
directors and most of its employees. Plan benefits are principally based upon
years of service, compensation, and social security benefits. The Company's
funding policy is to contribute annually the maximum amount that can be
deducted for federal income tax purposes.
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at November 30:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulated benefit
obligation, including
vested benefits of
$47,269 and $49,294
in 1996 and 1995,
respectively ............ $48,628 $7,603 $46,120 $ 6,222
=====================================================
Plan assets
at fair value ........... $66,857 $ - $62,647 $ -
Less projected benefit
obligation for service
rendered to date ........ 54,266 8,785 51,374 7,011
-----------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation ...... 12,591 (8,785) 11,273 (7,011)
Unrecognized net loss from
past experience different
from that assumed ....... 4,214 1,988 5,385 1,398
Unrecognized net asset
being recognized over
approximately 15 years .. (4,352) - (5,440) -
Recognition of additional
minimum liability ....... - (806) - (609)
-----------------------------------------------------
Accrued pension
asset (liability) for
defined benefit plans ... $12,453 $(7,603) $11,218 $(6,222)
=====================================================
</TABLE>
In addition to the plan assets related to qualified plans, the Company has
funded approximately $2,829 and $2,800 at November 30, 1996 and 1995,
respectively, in a restricted trust for its nonqualified plans. This trust is
included in other long-term assets in the Company's consolidated balance
sheets.
The net pension expense includes the following components for the three
years ended November 30:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits
earned during
the period ............... $ 1,986 $ 1,789 $ 1,979
Interest cost on
projected benefit
obligation ............... 4,394 4,139 4,046
Actual return on assets .. (7,232) (8,791) (298)
Net amortization
and deferral ............. 1,062 3,208 (4,646)
---------------------------
Net pension expense ...... $ 210 $ 345 $ 1,081
===========================
</TABLE>
The projected benefit obligation has been determined with a weighted
average discount rate of 7.5% in 1996 and 1995, and a rate of increase in
future compensation of 5.0% for both years. The expected weighted average
long-term rate of return was 9.0% in 1996 and 1995. Plan assets consist of
group annuity insurance contracts, corporate stocks, bonds and notes,
certificates of deposit and U.S. Government securities.
The defined benefit pension plan covering the Company's nonemployee
directors was terminated as of December 1, 1996. The payment of the net
present value of the Company's obligation for directors' retirement benefits
was deferred and will be paid to the directors at their normal retirement date.
The Company also has various defined contribution plans. The Company
recognized expense related to these plans of $707, $476 and $499 in 1996, 1995
and 1994, respectively.
I. POSTRETIREMENT HEALTH CARE BENEFITS
The Company provides certain health care benefits for certain of the
Company's retired employees. These employees become eligible for benefits if
they meet minimum age and service requirements and are eligible for retirement
benefits. The Company has the right to modify or terminate these benefits.
31
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
- ------------------------------------------------------------------------------
The following table sets forth the plan's obligation and cost at November
30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees ................................. $2,063 $2,260
Fully eligible active plan participants .. 13 12
Other active plan participants ........... 147 606
--------------
Accumulated postretirement
benefit obligation ....................... 2,223 2,878
Unrecognized gain ......................... - 327
--------------
Accrued postretirement benefit liability .. 2,223 3,205
Less current portion,
included in accrued liabilities ........ 309 297
--------------
$1,914 $2,908
==============
</TABLE>
The net periodic postretirement benefit cost includes the following
components for the three years ended November 30:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------
<S> <C> <C> <C>
Service cost-benefits attributed
to service during the period ............. $ 11 $ 25 $ 28
Interest cost on accumulated
postretirement benefit obligations ....... 236 218 216
-------------------
Net periodic postretirement benefit cost .. $ 247 $ 243 $ 244
===================
</TABLE>
During 1996, the Company entered into an irrevocable agreement with the
Healthcare Financing Administration (HCFA), the Federal agency that oversees
Medicare, whereby certain employees and retirees of the Company's locations in
Pennsylvania relinquished their rights to receive Medicare and accepted
healthcare insurance from an insurance carrier. The HCFA entered into a
contract with the insurance carrier to administer the healthcare claims and
Medicare for these employees and retirees. This agreement terminated the
Company's primary responsibility to provide for the postretirement benefit
obligation and eliminated significant risks related to the obligation and plan
assets related to those employees and retirees. The Company recognized a
pretax gain of $672 on the curtailment of its postretirement healthcare plan
for certain employees and retirees as defined above.
Substantially all future health care benefit cost increases will be
assumed by the participants, and therefore, future increases in health care
costs will not increase the postretirement benefit obligation or cost to the
Company. The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% in 1996 and 1995.
J. INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------
<S> <C> <C> <C>
Current:
Federal ... $11,215 $11,000 $ 8,886
State ..... 1,356 1,372 1,577
Foreign ... 225 135 84
Deferred .. 2,100 (325) 1,388
--------------------------
$14,896 $12,182 $11,935
==========================
</TABLE>
Income taxes paid, net of refunds, totaled $10,723, $11,868, and $10,087
during 1996, 1995 and 1994, respectively.
The components of the net deferred tax liability as of November 30, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation ........... $ 1,457 $ 1,352
Other postretirement benefits ... 855 1,191
Foreign net operating
loss carryforward ........... 939 1,132
Other items ...................... 2,441 2,617
------------------
Total gross deferred tax assets .. 5,692 6,292
------------------
Deferred tax liabilities:
Pensions ........................ (2,107) (2,216)
Plant assets .................... (6,503) (5,210)
Other items ..................... (1,631) (1,317)
------------------
Total gross deferred
tax liabilities ................. (10,241) (8,743)
------------------
Net deferred tax liability ....... $ (4,549) $(2,451)
==================
</TABLE>
Deferred tax assets, including foreign net operating loss carryforwards,
are expected to be realized through reversal of taxable temporary differences
and future earnings.
The cumulative effect of adopting SFAS 109 in the first quarter of 1994
was $630.
Earnings before income taxes, equity in net earnings of affiliates,
minority interests, and cumulative effect of change in accounting method
included the following components:
32
<PAGE> 10
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Domestic income ........ $39,309 $33,683 $32,554
Foreign income (loss) .. 710 524 (951)
------- ------- -------
Total .................. $40,019 $34,207 $31,603
======= ======= =======
</TABLE>
The provision for income taxes resulted in effective tax rates which
differ from the statutory federal income tax rates. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
Percent of
Pretax Earnings
-----------------------------
1996 1995 1994
----- --------------- -----
<S> <C> <C> <C>
Statutory U.S. tax rates .......... 35.0% 35.0% 35.0%
State income taxes,
net of federal benefit ........... 2.3 2.6 3.2
Reduction of previously
established accruals ............. - - (1.4)
Capital loss utilization .......... - - (1.3)
Foreign tax credit (utilization) .. - (0.1) -
Foreign net operating
loss (utilization) ............... - (3.3) 1.3
Other, net ........................ (0.1) 1.4 1.0
---- -------- ----
Consolidated effective
income tax rate .................. 37.2% 35.6% 37.8%
==== ======== ====
</TABLE>
K. CONTINGENCIES
The Company is involved in legal actions arising in the normal course of
business. After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their outcome will not have a
material adverse effect on the Company's consolidated results of operations or
financial position.
L. PREFERRED STOCK PURCHASE RIGHTS
In March 1996, the Board of Directors of the Company adopted a Shareholder
Rights Plan to replace an existing plan that expired on April 25, 1996. Under
the terms of the Plan, each shareholder received rights to purchase shares of
CLARCOR Series B Junior Participating Preferred Stock. The rights become
exercisable only after the earlier to occur of (i) 10 business days after the
first public announcement that a person or group (other than a CLARCOR related
entity) has become the beneficial owner of 15% or more of the outstanding
shares of CLARCOR Common Stock, or (ii) 10 business days (unless extended by
the CLARCOR Board in accordance with the Rights Agreement) after the
commencement of, or the intention to make, a tender or exchange offer the
consumation of which would result in any person or group (other than a CLARCOR
related entity) becoming such a 15% beneficial owner. Each right entitles the
holder to buy one-hundredth of a share of such preferred stock at an exercise
price of $80.
Once the rights become exercisable, each right will entitle the holder,
other than the acquiring individual or group, to purchase a number of CLARCOR
common shares at a 50% discount to the then-market price of CLARCOR Common
Stock. In addition, under certain circumstances, if the rights become
exercisable, the holder will be entitled to purchase the stock of the acquiring
individual or group, at a 50% discount. The Board may also elect to redeem the
rights at $.01 per right. The rights expire on April 25, 2006.
The authorized preferred stock includes 300,000 shares designated as
Series B Junior Participating Preferred Stock.
M. INCENTIVE PLAN
In 1994, the shareholders of the Company adopted the 1994 Incentive Plan,
which allows the Company to grant stock options, restricted stock and
performance awards to officers, directors and key employees. The 1994
Incentive Plan incorporates the various incentive plans in existence prior to
March 1994, including the 1984 Stock Option Plan, the 1987 Long Range
Performance Share Plan, and the 1990 Directors' Restricted Stock Compensation
Plan.
At the inception of the 1994 Incentive Plan there were 1,000,000 shares
authorized for future grants. At November 30, 1996 and 1995, respectively,
there were 494,349 and 689,039 shares reserved for future grants, of which
183,260 and 180,258 shares were granted in December 1996 and 1995,
respectively. The remaining ungranted shares expire in December 2003.
The following is a description and a summary of key provisions related to
this plan.
STOCK OPTIONS
Nonqualified stock options may, at the discretion of the Board of
Directors, be granted at the fair market value at the date of grant or an
exercise price less than the fair market value at the date of grant.
33
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
- ------------------------------------------------------------------------------
Shares under nonqualified stock options are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Outstanding at beginning
of year ...................... 1,252,906 1,112,269 862,206
Granted (prices ranging from
$18.25 to $21.875 per share).. 208,500 195,250 261,500
Exercised/surrendered ......... (126,606) (54,613) (11,437)
--------- --------- ---------
Outstanding at end of year
(prices ranging from $9.33
to $21.875 per share) ........ 1,334,800 1,252,906 1,112,269
========== ========= =========
Exercisable at end of year .... 744,175 726,000 572,033
========== ========= =========
</TABLE>
On October 23, 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock
Based Compensation" (SFAS 123). SFAS 123 encourages, but does not require,
companies to adopt a fair value based method for determining expense related to
stock based compensation. Companies who do not adopt the provisions of SFAS
123 for recognition purposes must disclose pro forma effects as if the fair
value based method of accounting had been applied. The Company does not intend
to adopt the new recognition aspects of SFAS 123 but will provide required
disclosure of pro forma information beginning in 1997. The pro forma impact
has not yet been determined.
LONG RANGE PERFORMANCE AWARDS
Officers and key employees may be granted target awards of Company shares
of common stock and performance units which represent the right to a cash
payment. The awards are earned and shares are issued only to the extent that
the Company achieves performance goals determined by the Board of Directors
during a three-year performance period.
During the performance period, officers and key employees are permitted to
vote the restricted stock and receive compensation equal to dividends declared
on common shares. The Company accrues compensation expense for the performance
opportunity ratably during the performance cycle. Compensation expense for the
plan totaled $522, $446 and $284 in 1996, 1995 and 1994, respectively.
Distribution of Company common stock and cash for the performance periods ended
November 30, 1996, 1995 and 1994 were $350, $312 and $237, respectively.
DIRECTORS' RESTRICTED STOCK COMPENSATION
The 1994 Incentive Plan grants all nonemployee directors, in lieu of cash,
shares of common stock equal to five years directors' annual retainer. The
directors' rights to the shares vest 20% on date of grant and 20% annually
during the next four years. The directors are entitled to receive dividends
and exercise voting rights with respect to all shares prior to vesting. Any
unvested shares are forfeited if the director ceases to be a nonemployee
director for any reason. Compensation expense for the plan totaled $165, $104
and $125 in 1996, 1995 and 1994, respectively. During 1996 and 1995, $5 and
$26 of Company common stock were issued under the plan.
N. SUBSEQUENT EVENT
In September, 1996, the Company announced the signing of a definitive
agreement to acquire United Air Specialists, Inc. (UAS), a manufacturer of air
quality equipment based in Cincinnati, Ohio. Subsequent to year-end, the
Company filed a registration statement in connection with this transaction with
the Securities and Exchange Commission. The transaction is structured as a
merger under which the Company will issue common stock in exchange for each
fully diluted share of UAS common stock. It is expected that the acquisition
will be accounted for as a pooling of interests. As a result of the
acquisition, UAS will become a subsidiary of the Company.
Consummation of the merger is subject, among other things, to approval by
the shareholders of UAS.
O. UNAUDITED QUARTERLY FINANCIAL DATA
The unaudited quarterly data for 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
NET SALES ..... $72,084 $81,574 $88,925 $90,805 $333,388
GROSS PROFIT .. 19,976 23,537 24,836 25,920 94,269
NET EARNINGS .. 3,937 5,803 6,526 8,712 24,978
NET EARNINGS
PER COMMON
SHARE ........ $ 0.27 $ 0.39 $ 0.44 $ 0.58 $ 1.68
1995:
Net sales ..... $62,137 $70,478 $71,829 $85,750 $290,194
Gross profit .. 17,692 20,099 20,480 22,270 80,541
Net earnings .. 3,972 4,906 5,886 7,190 21,954
Net earnings
per common
share ........ $ 0.27 $ 0.33 $ 0.40 $ 0.48 $ 1.48
</TABLE>
34
<PAGE> 12
- ------------------------------------------------------------------------------
P. SEGMENT INFORMATION
The Company operates in two principal product segments: Filtration
Products and Consumer Products. Filtration Products manufactures and markets a
complete line of filters used in the filtration of internal combustion engines,
commercial and industrial buildings, residences, clean rooms, and lubrication
oils, air, fuel, coolant, hydraulic and transmission fluids in both the
domestic and international markets, including Europe, Australia, Mexico, South
Africa and the Far East. Consumer Products manufactures and markets plastic
closures, custom designed lithographed metal and metal-plastic containers, and
collapsible metal tubes in both domestic and international markets, including
Canada and Germany.
Net sales represent sales to unaffiliated customers, as reported in the
consolidated statements of earnings. Intersegment sales were not material.
Assets are those assets used in each business segment. Corporate assets
consist of cash and short-term cash investments, deferred income taxes, world
headquarters facility, pension assets and various other assets which are not
specific to an industry segment.
The segment data for the years ended November 30, 1996, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------
<S> <C> <C> <C>
Net sales:
Filtration Products ...... $259,617 $221,034 $199,793
Consumer Products ........ 73,771 69,160 70,330
----------------------------
Total ................... $333,388 $290,194 $270,123
============================
- ----------------------------------------------------------
Operating profit:
Filtration Products ...... $ 33,149 $ 28,698 $ 26,597
Consumer Products ........ 7,381 6,667 5,769
----------------------------
Total ................... $ 40,530 $ 35,365 $ 32,366
============================
- ----------------------------------------------------------
Assets:
Filtration Products ...... $154,252 $138,706 $114,501
Consumer Products ........ 41,334 39,853 32,386
Corporate ................ 48,378 44,703 41,561
----------------------------
Total ................... $243,964 $223,262 $188,448
============================
- ----------------------------------------------------------
Additions to plant assets:
Filtration Products ...... $ 12,637 $ 8,142 $ 6,715
Consumer Products ........ 4,275 5,591 4,157
Corporate ................ 4,740 177 544
----------------------------
Total ................... $ 21,652 $ 13,910 $ 11,416
============================
- ----------------------------------------------------------
Depreciation:
Filtration Products ...... $ 5,969 $ 4,742 $ 3,840
Consumer Products ........ 2,946 2,787 2,763
Corporate ................ 361 207 175
----------------------------
Total ................... $ 9,276 $ 7,736 $ 6,778
============================
- ----------------------------------------------------------
</TABLE>
The following details sales volume by class of product for Consumer
Products segment for those classes of products which contributed 10% or more to
total Corporate revenue.
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------
<S> <C> <C> <C>
Containers.......................... 17% 18% 20%
</TABLE>
No class of products within the Company's Filtration Products segment
accounted for as much as 10% of the total sales of the Company
Financial data relating to the geographic areas in which the Company
operates are shown for the years ended November 30, 1996, 1995, and 1994. Net
sales by geographic area are based on sales to final customers within that
segment.
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------------------------------
<S> <C> <C> <C>
Net sales:
Sales within the
United States ..... $283,633 $251,483 $242,830
Export Sales to
Other Countries ... 34,134 25,760 21,159
Sales within
Other Countries .. 15,621 12,951 6,134
-------- -------- --------
$333,388 $290,194 $270,123
======== ======== ========
--------------------------------------------------
Operating profit:
On Sales within the
United States ..... $ 34,101 $ 32,381 $ 31,154
On Export Sales to
Other Countries ... 5,488 2,505 1,895
On Sales within
Other Countries .. 941 479 (683)
-------- -------- --------
$ 40,530 $ 35,365 $ 32,366
======== ======== ========
--------------------------------------------------
Identifiable Assets:
United States .... $231,123 $211,315 $178,969
Other Countries .. 12,841 11,947 9,479
-------- -------- --------
$243,964 $223,262 $188,448
======== ======== ========
</TABLE>
35
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
The Board of Directors and Shareholders
CLARCOR Inc.
Rockford, Illinois
We have audited the accompanying consolidated balance sheets of CLARCOR
Inc. and Subsidiaries as of November 30, 1996 and 1995, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended November 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CLARCOR Inc.
and Subsidiaries as of November 30, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended November 30, 1996, in conformity with generally accepted
accounting principles.
As discussed in Note A to the consolidated financial statements, the
Company changed its method of accounting for income taxes, effective December
1, 1993 and changed its method of accounting for certain investments in debt
and equity securities, effective November 30, 1994.
Coopers & Lybrand L.L.P.
Chicago, Illinois
January 3, 1997
<PAGE> 14
MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
================================================================================
The management of CLARCOR is responsible for the preparation, integrity
and objectivity of the Company's financial statements and the other financial
information in this report. The financial statements were prepared in
conformity with generally accepted accounting principles and reflect in all
material respects the results of operations and the Company's financial
position for the periods shown. The financial statements are presented on the
accrual basis of accounting and, where appropriate, reflect estimates based
upon judgments of management.
In addition, management maintains a system of internal controls designed
to assure that Company assets are safeguarded from loss or unauthorized use or
disposition. Also, the controls system provides assurance that transactions are
authorized according to the intent of management and are accurately recorded to
permit the preparation of financial statements in accordance with generally
accepted accounting principles. For the periods covered by the financial
statements in this report, management believes this system of internal controls
was effective concerning all material matters. The effectiveness of the
controls system is supported by the selection and training of qualified
personnel, an organizational structure that provides an appropriate division of
responsibility, a strong budgetary system of control and a comprehensive
internal audit program.
The Audit Committee of the Board of Directors, which is composed of three
outside directors, serves in an oversight role to assure the integrity and
objectivity of the Company's financial reporting process. The Committee meets
periodically with representatives of management and the independent and
internal auditors to review matters of a material nature related to financial
reporting and the planning, results and recommendations of audits. The
independent and internal auditors have free access to the Audit Committee. The
Committee is also responsible for making recommendations to the Board of
Directors concerning the selection of the independent auditors.
/s/ Lawrence E. Gloyd /s/ Bruce A. Klein /s/ William F. Knese
Lawrence E. Gloyd Bruce A. Klein William F. Knese
Chairman of the Board & Vice President-Finance & Vice President,
Chief Executive Officer Chief Financial Officer Treasurer & Controller
January 3, 1997
<PAGE> 15
11-YEAR FINANCIAL SUMMARY
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
Equity ................................. $ 9.82 $ 8.82 $ 7.96 $ 7.06
Earnings from Continuing Operations .... 1.68 1.48 1.39 1.16
Net Earnings ........................... 1.68 1.48 1.43 1.16
Dividends .............................. 0.6425 0.6325 0.6225 0.610
Price: High ............................ 25.13 27.00 22.38 20.00
Low ............................. 18.63 18.13 15.88 16.00
- --------------------------------------------------------------------------------
EARNINGS DATA ($000)
Net Sales .............................. $333,338 $290,194 $270,123 $225,319
Operating Profit ....................... 40,530 35,365 32,366 29,067
Interest Expense ....................... 3,243 2,693 2,788 3,525
Pretax Income (1) ...................... 40,019 34,207 31,603 27,078
Income Taxes ........................... 14,896 12,182 11,935 9,827
Earnings from Continuing Operations .... 24,978 21,954 20,625 17,251
Earnings from Discontinued Operations .. -- -- -- --
Net Earnings ........................... 24,978 21,954 21,255 17,251
Average Shares Outstanding ............. 14,859 14,801 14,814 14,838
- --------------------------------------------------------------------------------
EARNINGS ANALYSIS
Operating Margin ....................... 12.2% 12.2% 12.0% 12.9%
Pretax Margin .......................... 12.0% 11.8% 11.7% 12.0%
Effective Tax Rate ..................... 37.2% 35.6% 37.8% 36.3%
Net Margin-Continuing Operations ....... 7.5% 7.6% 7.6% 7.7%
Net Margin ............................. 7.5% 7.6% 7.9% 7.7%
Return on Assets ....................... 11.2% 11.6% 12.2% 10.7%
Return on Equity ....................... 19.1% 18.7% 20.3% 17.3%
Dividend Payout to Net Earnings ........ 38.1% 42.5% 43.3% 52.4%
- --------------------------------------------------------------------------------
BALANCE SHEET DATA ($000)
Current Assets ......................... $124,379 $117,570 $ 98,450 $ 86,161
Plant Assets, net ...................... 78,586 67,036 52,615 47,636
Total Assets ........................... 243,964 223,262 188,448 173,567
Current Liabilities .................... 45,156 42,460 39,461 33,288
Long-Term Debt ......................... 35,522 34,417 17,013 24,617
Shareholders' Equity ................... 146,059 130,815 117,462 104,641
- --------------------------------------------------------------------------------
BALANCE SHEET ANALYSIS ($000)
Debt to Capitalization ................. 19.6% 20.8% 12.7% 19.0%
Working Capital ........................ $ 79,223 $ 75,110 $ 58,989 $ 52,873
Quick Ratio ............................ 1.5:1 1.6:1 1.6:1 1.6:1
- --------------------------------------------------------------------------------
CASH FLOW DATA ($000)
From Operations ........................ $ 26,171 $ 19,460 $ 24,603 $ 19,992
For Investment ......................... (18,425) (28,599) (469) (1,193)
From/(for) Financing ................... (9,127) 8,369 (18,405) (20,012)
Change in Cash & Equivalents ........... (1,397) (798) 5,729 (1,213)
Capital Expenditures ................... 21,652 13,910 11,416 10,218
Depreciation ........................... 9,276 7,736 6,778 5,816
Dividends Paid ......................... 9,512 9,330 9,201 9,036
Interest (Income)/Expense .............. 2,415 1,863 2,240 2,650
Income Taxes Paid ...................... 10,723 11,868 10,087 9,860
- --------------------------------------------------------------------------------
CASH FLOW ANALYSIS ($000)
Operating Cash Flow (2) ................ $ 39,309 $ 33,191 $ 36,930 $ 32,502
Net Cash Flow (3) ...................... 17,657 19,281 25,514 22,284
Elective Cash Flow (4) ................. (4,993) (3,780) 3,986 738
- --------------------------------------------------------------------------------
</TABLE>
(1) Pretax income in 1995 and 1994 was restated to reflect minority interests
in earnings of subsidiaries and the equity in net earnings of affiliate
as separate line items after tax in the statements of earnings.
(2) From operations before interest income/expense and taxes paid.
(3) Operating Cash Flow less capital expenditures.
(4) Net Cash Flow less dividends +(-) interest income/expense and less taxes
paid.
<PAGE> 16
<TABLE>
<CAPTION>
====================================================================
1992 1991 1990 1989 1988 1987 1986
- --------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 6.64 $ 6.42 $ 5.57 $ 4.83 $ 6.99 $ 6.36 $ 5.76
1.10 1.24 1.29 0.69 1.02 0.95 0.90
0.94 1.26 1.37 0.42 1.15 1.04 0.96
0.600 0.550 0.520 0.480 0.453 0.431 0.418
22.50 22.67 17.83 18.92 14.59 16.89 14.17
15.00 13.00 11.83 11.75 9.75 9.25 10.09
- --------------------------------------------------------------------
$188,625 $179,538 $170,279 $156,530 $149,468 $146,225 $135,319
27,630 30,853 30,832 22,128 27,287 29,045 25,032
3,803 3,682 3,675 1,327 151 176 192
25,305 28,543 30,204 22,084 28,833 30,378 29,769
8,796 10,068 10,999 10,474 10,647 13,270 13,566
16,509 18,475 19,205 11,610 18,186 17,108 16,203
-- 297 1,200 (4,493) 2,412 1,672 1,165
14,139 18,772 20,405 7,117 20,598 18,780 17,368
14,973 14,873 14,843 17,040 17,926 18,121 18,094
- --------------------------------------------------------------------
14.6% 17.2% 18.1% 14.1% 18.3% 19.9% 18.5%
13.4% 15.9% 17.7% 14.1% 19.3% 20.8% 22.0%
34.8% 35.3% 36.4% 47.4% 36.9% 43.7% 45.6%
8.8% 10.3% 11.3% 7.4% 12.2% 11.7% 12.0%
7.5% 10.5% 12.0% 4.5% 13.8% 12.8% 12.8%
8.9% 13.0% 15.6% 4.9% 15.3% 15.3% 14.9%
14.8% 22.7% 28.1% 5.7% 17.9% 18.0% 18.4%
63.4% 43.5% 37.8% 116.5% 39.4% 41.6% 43.5%
- --------------------------------------------------------------------
$ 93,627 $ 75,207 $ 72,623 $ 58,019 $ 70,028 $ 67,523 $ 75,457
35,584 45,712 42,748 44,223 42,063 39,828 32,431
161,255 157,999 144,127 131,009 143,842 134,877 122,779
25,272 20,570 20,758 21,405 14,244 15,899 13,153
29,325 35,834 35,810 32,634 1,116 1,507 1,634
99,551 95,662 82,689 72,662 125,012 115,015 104,186
- --------------------------------------------------------------------
22.8% 27.3% 30.2% 31.0% 0.9% 1.3% 1.5%
$ 68,355 $ 54,637 $ 51,865 $ 36,614 $ 55,784 $ 51,624 $ 62,304
2.5:1 2.1:1 2.1:1 1.4:1 3.3:1 2.9:1 4.2:1
- --------------------------------------------------------------------
$ 22,807 $ 18,343 $ 25,284 $ 17,791 $ 18,545 $ 22,015 $ 16,330
(7,185) (14,719) (4,973) (8,251) (1,374) (16,231) (7,923)
(10,200) (8,805) (10,316) (23,915) (11,105) (8,374) (7,767)
5,422 (5,181) 9,995 (14,375) 6,066 (2,590) 640
7,450 8,128 8,638 8,334 6,137 5,086 9,720
7,044 6,707 6,619 6,321 6,287 6,008 4,384
8,958 8,165 7,708 8,290 8,121 7,814 7,560
3,505 2,560 3,143 53 (946) (911) (1,876)
10,982 9,474 10,068 11,234 13,313 14,502 13,117
- --------------------------------------------------------------------
$ 37,294 $ 30,377 $ 38,495 $ 29,078 $ 30,912 $ 35,606 $ 27,571
29,844 22,249 29,857 20,744 24,775 30,520 17,851
6,399 2,050 8,938 1,167 4,287 9,115 (950)
- --------------------------------------------------------------------
</TABLE>
<PAGE> 17
FINANCIAL REVIEW
- ----------------
(SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
===============================================================================
In 1996, CLARCOR reported its third consecutive year of record performance
in sales, operating profit, net earnings and earnings per share. This
performance was achieved on the strength of new records in sales and operating
profit in the Filtration Products segment, augmented by a strong performance by
the Consumer Products segment. The information presented in this financial
review should be read in conjunction with other financial information presented
throughout this 1996 Annual Report.
CLARCOR's business segment information is shown on page 35, and this
financial review should be read in conjunction with that segment information
and other information presented elsewhere in this report. Operating results for
the current and prior years are shown in comparative form in the table below.
<TABLE>
<CAPTION>
OPERATING RESULTS
1996 VS. 1995 1995 VS. 1994
CHANGE CHANGE
-------------------------------- ---------------------------------
$1996 %SALES $ % $1995 % SALES $ %
-------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales ..................................... $333.4 100.0% $43.2 14.9% $290.2 100.0% $20.1 7.4%
Cost of Sales ................................. 239.1 71.7% 29.5 14.1% 209.6 72.2% 17.2 8.9%
Selling & Administrative Expenses ............ 53.8 16.1% 8.6 19.0% 45.2 15.6% (0.1) (0.3%)
Operating Profit .............................. 40.5 12.2% 5.1 14.6% 35.4 12.2% 3.0 9.3%
Other Income (Deductions) ..................... (0.5) (0.2%) 0.7 -- (1.2) (0.4%) (0.4) --
Earnings Before Taxes, Equity in Net
Earnings of Affiliate, Minority Interests, and
Cumulative Effect of Accounting Change ....... 40.0 12.0% 5.8 17.0% 34.2 11.8% 2.6 8.2%
Income Taxes .................................. 14.9 4.5% 2.8 22.3% 12.1 4.2% 0.2 2.1%
Earnings Before Equity in
Net Earnings of Affiliate, Minority
Interests and Cumulative Effect of
Accounting Change ............................ 25.1 7.5% 3.0 14.1% 22.1 7.6% 2.4 12.0%
Equity in Net Earnings of Affiliate
and Minority Interests ....................... (0.1) -- -- -- (0.1) -- (1.1) --
Cumulative Effect of Accounting Change ........ -- -- -- -- -- -- (0.6) --
Net Earnings .................................. $ 25.0 7.5% $ 3.0 13.8% $ 22.0 7.6% $ 0.7 3.3%
================================ =================================
Earnings Per Share ............................ $1.68 $0.20 13.5% $1.48 $0.09 6.5%
Cumulative Effect of Accounting Change ........ -- -- -- -- ($0.04) --
Total ...................................... $1.68 $0.20 13.5% $1.48 $0.05 3.5%
Average Shares Outstanding .................... 14.9 14.8
====================================================================================================================
</TABLE>
SALES
Consolidated net sales of $333.4 set a new CLARCOR record, the seventh
consecutive year of record sales. Net sales in 1996 were 14.9% higher than
sales of $290.2 reported in fiscal year 1995. Fiscal 1996 included a full year
of sales from the 1995 Hastings Filters acquisition, compared to one quarter of
Hastings sales included in fiscal 1995. Excluding Hastings sales, the
Company's net sales increased 5.5% in 1996. Sales growth came from both the
Filtration Products and Consumer Products segments. Net sales of $290.2 for
the 1995 fiscal year were 7.4% higher than sales in 1994 and reflected higher
Filtration Products segment and lower Consumer Products segment sales. The
1995 sales benefited from the inclusion of sales from the fourth quarter
acquisition of Hastings Filters, Inc. Sales at Baldwin Filters and Clark
Filter increased, while lower sales were recorded at Airguard Industries in
1995.
Comparative net sales information related to CLARCOR's operating
segments is shown in the tables below.
<TABLE>
<CAPTION>
1996 VS. 1995
CHANGE
NET SALES 1996 % TOTAL $ %
- --------------------------------------------------------
<S> <C> <C> <C> <C>
Filtration Products .. $259.6 77.9% $38.6 17.5%
Consumer Products .... 73.8 22.1% 4.6 6.7%
--------------------------------
Total .............. $333.4 100.0% $43.2 14.9%
================================
</TABLE>
<TABLE>
<CAPTION>
1995 VS. 1994
CHANGE
NET SALES 1995 % TOTAL $ %
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
Filtration Products .. $221.0 76.2% $21.2 10.6%
Consumer Products .... 69.2 23.8% (1.1) (1.7%)
---------------------------------
Total .............. $290.2 100.0% $20.1 7.4%
=================================
</TABLE>
<PAGE> 18
================================================================================
The Filtration Products segment reported 1996 sales of $259.6, an increase
of 17.5% over sales of $221.0 in 1995. The increase was principally the result
of the inclusion in the current year of a full year of sales from the
acquisition of Hastings Filters, Inc., compared to three months of sales
included in 1995, the year of acquisition. The 1996 sales also benefited from
increased sales in each of the segment's filtration businesses. Sales from
Baldwin's domestic plants increased over 6% from 1995. Worldwide sales of
Baldwin's heavy duty filter products increased 5.4%. Sales of Airguard's
industrial and environmental filter products increased 3.8% over the prior
year. Clark Filter continued its growth in railroad locomotive filter
products, recording a sales increase of 8.6% over 1995 levels. Filtration
Products segment 1995 net sales of $221.0 increased 10.6% over sales of $199.8
in 1994, chiefly as a result of the fourth quarter acquisition of Hastings
Filters, Inc., and strong sales growth from Baldwin Filters and Clark Filter,
which more than offset a sales decline at Airguard Industries.
Current year Consumer Products net sales totaled $73.8, and increased 6.7%
over fiscal 1995 sales. Both plastics and metals sales increased over the prior
year, 9.0% and 7.9%, respectively. The increase in metals sales resulted from
new products and steady demand from traditional metals customers for flat sheet
decorating, specialty containers and commemorative tins. In 1995, Consumer
Products segment sales declined 1.7% to $69.2 from $70.3 in 1994. This decline
was due principally to lower spice can sales, flat sheet decorating and
promotional business in 1995 compared to 1994.
Earnings
For the third consecutive year, CLARCOR earned record consolidated
operating profit. Fiscal 1996's operating profit totaled $40.5, and was up
14.6% over fiscal 1995. Both of the Company's business segments recorded double
digit gains. In 1995, the Company achieved consolidated operating profit of
$35.4. Fiscal 1995 operating profit increased 9.3% over operating profit of
$32.4 recorded in 1994, with gains in both Filtration Products and Consumer
Products. Comparative operating profit information related to the Company's
business segments is as follows.
<TABLE>
<CAPTION>
1996 vs. 1995
Change
OPERATING PROFIT 1996 % Total $ %
--------------------------------------------------------
<S> <C> <C> <C> <C>
Filtration Products .. $33.1 81.8% $4.4 15.5%
Consumer Products .... 7.4 18.2% .7 10.7%
--------------------------------
Total .............. $40.5 100.0% $5.1 14.6%
================================
</TABLE>
<TABLE>
<CAPTION>
1995 vs. 1994
Change
OPERATING PROFIT 1995 % Total $ %
--------------------------------------------------------
<S> <C> <C> <C> <C>
Filtration Products .. $28.7 81.1% $2.1 7.9%
Consumer Products .... 6.7 18.9% .9 15.6%
--------------------------------
Total .............. $35.4 100.0% $3.0 9.3%
================================
</TABLE>
<TABLE>
<CAPTION>
OPERATING PROFIT AS A
PERCENT OF NET SALES 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Filtration Products .. 12.8% 13.0% 13.3%
Consumer Products .... 10.0% 9.6% 8.2%
-------------------
Total .............. 12.2% 12.2% 12.0%
===================
</TABLE>
Increased profits in the Filtration segment's businesses offset a loss
recorded at Hastings, an operation acquired in 1995. Profit gains were led by
Baldwin Filters' domestic operations, which increased operating profits over
12% through productivity improvements, cost reductions and new product
introductions. Clark Filter increased operating profits over 20% on an 8.6%
increase in sales. Airguard Industries recorded a dramatic improvement over
its 1995 results as margins improved by over three percentage points on a sales
increase of 3.8%. The Filtration segment's international business continues to
grow. Profits were recorded in each of Baldwin's international operations,
except in China. FIBAMEX, the segment's Mexican operation, recorded a small
operating profit on flat sales in a weak Mexican economy. Baldwin's European
operations, Baldwin Ltd. in England and Baldwin N.V. in Belgium, together
reported an operating margin of over 7% on a combined 12% sales increase.
Baldwin-Unifil, the South African operation acquired in early 1996, reported an
operating margin of over 4%. Baldwin-Australia recorded an operating profit
increase of over 50% on a 9% increase in sales. Baldwin-Weifang Filters Ltd.,
the start-up Chinese joint venture, began manufacturing filters for the Chinese
market in late 1996 and is expected to be marginally profitable in 1997.
<PAGE> 19
FINANCIAL REVIEW
- ----------------
(SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
================================================================================
Filtration Products segment operating profit totaled $28.7 in 1995, 7.9%
higher than operating profit of $26.6 reported in the prior year. The
increased 1995 operating profit reflected gains in the Baldwin heavy duty
operations, both domestic and international. Profit at the segment's Airguard
unit declined in 1995, the result of severe increases in raw material prices, a
product failure caused by faulty media from an outside vendor, startup problems
with a new distribution center and costs related to a new management
information system. The September 4, 1995 acquisition of Hastings Filters,
Inc. had an immaterial operating profit impact in 1995.
Filtration operating profit as a percent of net sales was 12.8% in 1996,
compared to 13.0% in 1995 and 13.3% in 1994. Operating profit in the
Filtration segment represented 81.8% of the consolidated total, compared to
81.1% in 1995 and 82.2% in 1994.
Operating profit in 1996 in the Consumer Products segment increased 10.7%
over fiscal 1995 operating profit. Increased sales levels in both the metals
and plastics businesses were the principal reasons for the increase. Sales of
metals products increased following declines in recent years. Increased metals
sales resulted from new product introductions and continuing demand for flat
sheet decorating, specialty containers and commemorative tins. In plastics,
specialty closures, particularly the combiTop(R) and SST Series(TM) closures,
added to growth in the current year. Consumer Products segment operating
profit in 1995 totaled $6.7. This was an increase of 15.6% from 1994 and
primarily reflected cost reduction programs. Operating profit as a percent of
sales increased to 10.0% in 1996 from 9.6% in 1995 and 8.2% in 1994. The 1996
profit was 18.2% of consolidated operating profit. This compares to 18.9% of
the total in 1995 and 17.8% in 1994.
Fiscal 1996 other expense totaled $.5, compared to a total of $1.2 in
fiscal 1995. Interest expense in the current year was $3.2, up from $2.7
recorded in the prior year, and reflects CLARCOR's higher debt level for all of
the current year, compared to the higher level for approximately one quarter of
1995. In the fourth quarter of 1995, long-term debt increased to finance the
Hastings Filters acquisition. The 1995 interest expense approximated that of
1994. Interest income was virtually unchanged from 1995. In 1996, the Company
recorded a gain of $1.7 on the liquidation of one half of the Company's
remaining investment in the shares of G.U.D. Holdings Ltd. In 1994, CLARCOR
sold 75% of its original investment in these shares and recorded a pretax gain
of $4.2.
Current year earnings before taxes, equity in net earnings of affiliate,
minority interests and the cumulative effect of a change in accounting method
totaled $40.0, up $5.8 from last year. This increase is the result of
increased profitability in both of the Company's business segments. These
earnings in 1995 totaled $34.2, up 8.2% from $31.6 in the prior year.
The current year provision for income taxes totaled $14.9, due to
increased profitability and the gain recorded on the sale of the G.U.D. shares.
The 1995 provision for income taxes totaled $12.1 and was higher than the 1994
provision due principally to taxes on higher profits. In 1995, the Company
recorded deferred tax assets on foreign net operating loss carryforwards that
are expected to be realized which reduced the effective tax rate in 1995.
CLARCOR's provision for income taxes in 1994 totaled $11.9. The effective tax
rates were 37.2% for the current year, compared to 35.6% in 1995 and 37.8% for
1994.
Fiscal 1996 earnings before equity in the net earnings of affiliate,
minority interests and the cumulative effect of a change in accounting method
totaled $25.1. In 1995, these earnings were $22.1, compared to $19.7 in 1994.
In 1994, CLARCOR adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The adoption of this new standard contributed
$.6 to earnings in the first quarter of the year of adoption.
Record net earnings reached $25.0 in 1996, up 13.8% over net earnings of
$22.0 in 1995. Net earnings in 1995 were 3.3% higher than 1994 net earnings of
$21.3.
Net earnings per share set a new CLARCOR record at $1.68, an increase of
13.5% over 1995 per share earnings of $1.48. Included in the 1996 earnings per
share was a gain of $.07 related to the sale of the G.U.D. shares. The 1995
earnings reflected an increase of 6.5% over comparable earnings of $1.39 in
1994. In 1994, the cumulative effect of the income tax accounting change
contributed an additional $.04 per share, resulting in 1994 total earnings per
share of $1.43.
On October 23, 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (SFAS 123). SFAS 123 encourages, but does not
require, companies to adopt a fair value
<PAGE> 20
===============================================================================
based method for determining expense related to stock based compensation.
Companies which do not adopt the provisions of SFAS 123 for recognition
purposes must disclose pro forma effects as if the fair value based method of
accounting had been applied. The Company does not intend to adopt the new
recognition aspects of SFAS 123, but will provide required disclosure of pro
forma information at fiscal 1997 year-end. The effect of the pro forma impact
has not been determined.
FINANCIAL CONDITION
CORPORATE LIQUIDITY
The Consolidated Statements of Cash Flows are shown on page 27, and the
discussion of corporate liquidity should be read in conjunction with
information presented in those statements.
In 1996, CLARCOR's cash flows included a new $8.4 borrowing through an
industrial revenue bond to finance the construction of an addition to the
Hastings Filters Yankton, South Dakota plant. Gross cash flow, consisting of
net earnings plus non-cash charges of depreciation and amortization, reached
$34.8. Net cash flows from operating activities grew to $26.2, fueled by
higher net earnings and depreciation and amortization. The investment in
working capital increased by $9.3 in 1996 compared to an increase in 1995 of
$8.8 and an increase in 1994 of $2.7. Investing activities used $18.4 of cash
in 1996, compared to $28.6 in 1995. The decrease resulted from a lower cash
use for acquisitions in the current year than in 1995, plus cash proceeds from
the sale of the G.U.D. shares, partially offset by a significant increase in
plant assets from the previous year. The increase in plant assets was due to
the Hastings plant expansion and related new equipment, completion of a new
plastics facility at J. L. Clark and additional capital expenditures at
Corporate. Cash flows from financing activities reflected net cash used of
$9.1, compared to net cash provided of $8.4 in 1995. This change was reflective
of the reduction in current borrowing in 1996 to $8.4, from $25.0 in 1995. The
net change in cash and short-term cash investments was a reduction of $1.4,
compared to a reduction of $.8 in the prior year.
CLARCOR's cash flows in the year 1995 included a borrowing under a new
$25.0 note to finance the Hastings Filters, Inc. acquisition. Fiscal 1995 net
cash flows from operating activities totaled $19.5, down 20.9% from net cash
flows which totaled $24.6 in 1994. Fiscal year 1995 operating activities
included higher gross cash flow of $30.2 from net earnings and non-cash charges
of depreciation and amortization. The higher gross cash flow was reduced by a
net investment in assets and liabilities of $10.6 and asset additions from the
Hastings acquisition. Cash flows used in investing activities in 1995 totaled
$28.6, compared to $.5 in 1994. In 1995, the Hastings acquisition used $14.1,
and $13.9 was used for investment in other plant assets. Cash was provided by
financing activities in 1995, and totaled $8.4. This compares to $18.4 used in
1994. The 1995 total reflects cash inflows of $25.0 from the new note. Cash
used in financing activities included $7.6 of payments on long-term debt and
dividend payments of $9.3.
In 1994, cash provided by operating activities totaled $24.6. Changes in
the assets and liabilities in 1994 were a mix of increases and decreases which
mostly offset each other. In 1994, cash of $10.7 was provided from the sale of
G.U.D. stock, and cash of $1.7 was received from other sources. Cash used
included $11.4 for plant additions and $1.5 for the acquisition of a business.
In 1994, cash of $18.4 was used for financing activities, principally for
dividend payments of $9.2, debt payments of $7.9, and treasury share purchases
of $1.3.
CLARCOR continues to generate sufficient cash to maintain current
operating levels, to provide for the addition and replacement of necessary
plant assets, and to service and repay long-term debt. Sufficient lines of
credit remain available to fund the Company's current operations and planned
future growth.
CAPITAL RESOURCES
CLARCOR's balance sheet continues to exhibit liquidity and financial
strength, employing a mixture of equity and debt capital to finance its
assets.
<TABLE>
<CAPTION>
SUMMARY BALANCE 1996 1995
----------------------------------------
SHEET $ % Change $ % Change
----------------------------------------
<S> <C> <C> <C> <C>
CURRENT ASSETS .......... $124.4 5.8% $117.6 19.4%
Plant Assets, net ....... 78.6 17.2% 67.0 27.4%
Excess Cost over
Fair Value, net ........ 15.1 1.5% 14.9 (2.0%)
Pension & Other Assets .. 25.9 8.9% 23.8 7.7%
Total Assets ............ $244.0 9.3% $223.3 18.5%
CURRENT LIABILITIES ..... $ 45.2 6.3% $ 42.5 7.6%
Long-Term Debt .......... 35.5 3.2% 34.4 102.3%
Pension & Other Liabilities 17.2 10.6% 15.6 8.3%
Shareholders' Equity .... 146.1 11.7% 130.8 11.4%
Total Liabilities &
Shareholders' Equity ... $244.0 9.3% $223.3 18.5%
</TABLE>
<PAGE> 21
FINANCIAL REVIEW
- ----------------
(SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
===============================================================================
At the end of fiscal 1996, CLARCOR's total assets reached $244.0, up $20.7
from year-end 1995 levels. Working capital increased to $79.2 from $75.1 in
1995. The current ratio remained unchanged from 1995 at 2.8:1. Current assets
rose a modest $6.8, principally in inventories which were increased at Hastings
to maintain customer service levels while production machinery was moved from
Michigan to the Hastings plant in Yankton, South Dakota. Net plant assets
totaled $78.6 at year-end 1996, and rose $11.6, reflecting the Hastings plant
expansion and related new equipment, completion of a new plastics facility at
J.L. Clark and additional capital expenditures at Corporate. Capital
expenditures totaled $21.7 in 1996. Capital additions in 1997 are not
anticipated to be at this level. With the exception of the industrial revenue
bond used to finance the Hastings plant addition, the Company funded capital
additions with internally generated funds. Net plant assets totaled $67.0 at
the end of 1995, reflecting both the Hastings acquisition and normal asset
additions. In 1996 and 1995, marketable equity securities reflected the
Company's remaining 2.5% and 5.0% interest, respectively, in G.U.D. Holdings
Limited which was classified as available-for-sale and valued at current market
value under the provisions of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities."
Current liabilities increased modestly, to $45.2 in 1996, from $42.5 in
the prior year. Long-term debt remained approximately constant, at $35.5,
reflecting the additional debt from the IRB financing offset by scheduled
repayment on the 9.71% promissory note. The long-term debt balance increased to
$34.4 in 1995, and reflected the new promissory note, reduced by scheduled
repayments on the old note. Shareholders' equity continued to grow, increasing
11.7% during 1996 to $146.1, from $130.8 at year-end 1995. The current year
ratio of long-term debt to equity was 24.3% compared to 26.3% in 1995.
Shareholders' equity represented 80.4% of total capitalization at year-end 1996
compared to 79.2% at the end of 1995.
<TABLE>
<CAPTION>
1996 1995
------------
<S> <C> <C>
Current Ratio .................. 2.8:1 2.8:1
Quick Ratio .................... 1.5:1 1.6:1
Long-Term Debt/Equity .......... 24.3% 26.3%
Long-Term Debt/Capitalization .. 19.6% 20.8%
</TABLE>
At November 30, 1996, CLARCOR had 14,874,969 shares of common stock
outstanding at $1.00 par value, compared to 14,825,296 shares outstanding at
the end of 1995.
THE FUTURE
The Company continues to be very optimistic about the future, and believes
that sales, operating profit, and earnings will continue to increase in future
years. CLARCOR's operations, Baldwin Filters, Airguard Industries, Clark
Filter and J. L. Clark continue to demonstrate a superior ability to grow while
maintaining strong operating margins. The strength of these operations is
demonstrated by CLARCOR's ability to realize its 1996 earnings target while
absorbing $2.2 in unanticipated losses from the Hastings Filters operation.
The Hastings Filters business is expected to improve throughout 1997 and reach
expected levels of profitability by 1999. Baldwin Filters will continue to be
the principal driving force for CLARCOR. The primary focus at Baldwin will
continue to be supplying the highest quality mobile filtration products to its
customers and distributors. The combination of Hastings Filters with Baldwin
provides CLARCOR with the widest product range and the largest distribution
network of any company in the mobile filtration industry. Hastings Filters is
expected to add to earnings per share in 1997 and will be a significant part of
CLARCOR's future growth and profits.
Both Airguard's sales and margins are expected to continue the improvement
which began in 1996. Operating profit as a percent of sales is anticipated to
progress toward its ultimate goal of 8% to 10%.
On September 23, 1996 the Company announced the signing of a definitive
agreement to acquire United Air Specialists, Inc. (UAS), based in Cincinnati,
Ohio. Upon the completion of the transaction, UAS will become a wholly-owned
subsidiary of CLARCOR.
UAS is engaged in the design, manufacture and sale of commercial and
industrial air cleaners, electrostatic fluid contamination and control
equipment and high precision spraying equipment. For the fiscal year ended June
30, 1996, UAS had net sales of approximately $40.8 and net earnings of
approximately $1.5. For the first quarter of fiscal 1997, its net sales were
approximately $9.7 and net earnings approximately $.3.
J. L. Clark will continue to invest resources in the expansion of its
plastics business and expects to continue strong growth in sales and operating
margins. In early 1996, J. L. Clark completed a 25,000 sq. ft. addition to its
plastics manufacturing facility enabling it to continue meeting the increasing
demand for its plastic products.
Continued growth is anticipated in international sales, from nearly 15% of
sales in 1996 to the Company's
<PAGE> 22
===============================================================================
goal of 25% of sales in the year 2000. Continued profit growth is expected.
The Company is exploring other acquisitions and alliances outside the United
States and expects to announce additional ventures in the future.
CLARCOR's plan for internal growth, coupled with anticipated future
acquisitions and expected strategic alliances, will further the realization of
the Company's sales, profits, and earnings objectives. The realization of
these objectives will provide liquidity and financial strength and lead to an
increase in shareholder value.
FORWARD-LOOKING STATEMENTS
Certain statements quoted in the body of this report, and statements in
the "The Future" section of this review 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 year, 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 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 the future, the
Company's operating results will be below the expectations of stock market
analysts and investors. In such event, the price of CLARCOR common stock could
be materially adversely affected.
<PAGE> 1
EXHIBIT 21
CLARCOR INC. SUBSIDIARIES
AS OF FEBRUARY 19, 1997
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION OR PERCENT OF
NAME ORGANIZATION OWNERSHIP
- ------------------------------------ ---------------- ----------
<S> <C> <C>
CLARCOR Consumer Products, Inc. Delaware 100%
J.L. Clark, Inc. Delaware 100%
Clark Europe, Inc. Delaware 100%
CLARCOR Filtration Products, Inc. Delaware 100%
Airguard Industries, Inc. Kentucky 100%
Baldwin Filters, Inc. Delaware 100%
Baldwin Filters N.V. Belgium 100%*
Baldwin Filters Limited United Kingdom 100%*
Baldwin South Africa, Inc. Delaware 100%
Baldwin-Unifil S.A. South Africa 70%
Hastings Filters, Inc. Delaware 100%
Hastings Filters Ltd. Canada Canada 100%
Baldwin Filters (Aust.) Pty.
Limited Australia 50%
Clark Filter, Inc. Delaware 100%
Filtros Baldwin de Mexico Mexico 90%
CLARCOR International, Inc. Delaware 100%
Baldwin-Weifang Filters Ltd. China 60%
CLARCOR Foreign Sales Corporation Virgin Islands 100%
CLARCOR Trading Company Delaware 100%*
</TABLE>
- ------------------------------
* Direct or indirect
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in each Registration Statement
of CLARCOR Inc. on Form S-8 (file numbers 33-5456, 33-38590, 33-39374, 33-53763
and 33-53899) and on Form S-4 (registration number 333-19735) of our reports
dated January 3, 1997, on our audits of the consolidated financial statements of
CLARCOR Inc. and Subsidiaries as of November 30, 1996 and 1995 and for the years
ended November 30, 1996, 1995 and 1994, and the financial statement schedule for
the years ended November 30, 1996, 1995, and 1994, which reports are included or
incorporated by reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 19, 1997
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<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-03-1995
<PERIOD-END> NOV-30-1996
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0
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<COMMON> 14,875
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