<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K/A
CURRENT REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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November 23, 1999 (September 10, 1999)
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Date of Report (Date of earliest event reported)
CLARCOR Inc.
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(Exact name of registrant as specified in its charter)
Commission File Number 1-11024
DELAWARE 36-0922490
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125
- ---------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 815-962-8867
----------------
No Change
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
<PAGE> 2
Item 7. Financial Statements and Exhibits
As previously reported in a Current Report on Form 8-K, dated September 10, 1999
and filed with the Securities and Exchange Commission on September 17, 1999, the
registrant acquired substantially all the assets used in the design,
manufacture, marketing and distribution of a complete line of filtration
products (the "Industrial Filter Business") from Mark IV Industries, Inc., Facet
Holding Co., Inc., Purolator Products Air Filtration Company, George W. Dahl
Company, Inc., and Mantronics Limited on September 10, 1999. In connection
therewith, the registrant hereby files the following financial statements and
reports regarding this acquisition:
(a) Financial Statements of Businesses Acquired
Industrial Filter Business
1. Report of Independent Accountants
2. Combined Balance Sheets as of February 28, 1999 and 1998
3. Combined Statements of Income and Net Assets for years ended the last day
of February 1999, 1998, and 1997
4. Combined Statements of Cash Flows for the years ended the last day of
February 1999, 1998, and 1997
5. Combined Statements of Comprehensive Income for the years ended the last
day of February 1999, 1998, and 1997
6. Notes to Combined Financial Statements
7. Unaudited Combined Balance Sheet as of August 31, 1999 and Combined
Statements of Income and of Cash Flows for the interim six months ended
August 31, 1999 and 1998
8. Notes to Unaudited Combined Financial Statements
(b) Pro Forma Financial Information
CLARCOR Inc. and Industrial Filter Business Combined
1. Pro Forma Financial Information - Introduction
2. Unaudited Pro Forma Combined Condensed Balance Sheet as of August 28, 1999
and Notes thereto
3. Unaudited Pro Forma Combined Condensed Statement of Earnings for the fiscal
year ended November 30, 1998 and Notes thereto
4. Unaudited Pro Forma Combined Condensed Statement of Earnings for the
nine-month interim period ended August 28, 1999 and Notes thereto
(c) Exhibits
1. Consent letter from PricewaterhouseCoopers LLP
<PAGE> 3
Item 7(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
1. Report of Independent Accountants
To the Management of the Industrial Filter Business
In our opinion, the accompanying combined balance sheets and the related
combined statements of income and net assets, comprehensive income and cash
flows present fairly, in all material respects, the financial position of the
Industrial Filter Business (the "Company") as of February 28, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years in
the period ended February 28, 1999, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Rochester, New York
October 22, 1999
<PAGE> 4
Item 7(a)2.
INDUSTRIAL FILTER BUSINESS
COMBINED BALANCE SHEETS
FEBRUARY 28, 1999 AND 1998
(dollars in thousands)
ASSETS 1999 1998
-------- --------
Current Assets:
Accounts receivable, net $ 30,800 $ 27,500
Inventories, net 30,500 28,200
Other current assets 1,300 700
-------- --------
Total Current Assets 62,600 56,400
Fixed assets, net 24,500 24,100
Cost in excess of net assets acquired 62,700 62,200
-------- --------
Total Assets $149,800 $142,700
======== ========
LIABILITIES AND NET ASSETS
Current Liabilities:
Accounts payable $ 14,100 $ 12,300
Compensation related liabilities 4,200 3,700
Accrued expenses and other liabilities 3,600 1,400
Income taxes payable 900 700
-------- --------
Total Current Liabilities 22,800 18,100
Non-current liabilities 1,400 1,200
Deferred taxes 2,900 3,000
-------- --------
Total Liabilities 27,100 22,300
Net Assets 122,700 120,400
-------- --------
Total Liabilities and Net Assets $149,800 $142,700
======== ========
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 5
Item 7(a)3.
INDUSTRIAL FILTER BUSINESS
COMBINED STATEMENTS OF INCOME AND NET ASSETS
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(dollars in thousands)
1999 1998 1997
-------- -------- --------
Net sales $150,200 $141,200 $135,100
-------- -------- --------
Operating costs:
Cost of products sold 102,600 94,400 90,900
Selling and administration 29,600 27,100 26,200
Research and development 2,000 1,700 1,600
Depreciation and amortization 4,300 3,700 3,300
-------- -------- --------
Total operating costs 138,500 126,900 122,000
-------- -------- --------
Operating income 11,700 14,300 13,100
Other income 1,200 - -
-------- -------- --------
Income before taxes 12,900 14,300 13,100
Provision for income taxes 4,600 5,100 4,700
-------- -------- --------
NET INCOME 8,300 9,200 8,400
Net assets at the beginning of the year 120,400 115,700 114,400
Cash transfers to parent, net (6,000) (4,500) (7,100)
-------- -------- --------
Net assets at the end of the year $122,700 $120,400 $115,700
======== ======== ========
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
Item 7(a)4.
INDUSTRIAL FILTER BUSINESS
COMBINED STATEMENT OF CASH FLOWS
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(dollars in thousands)
1999 1998 1997
------ ------ ------
Cash flows from operating activities:
Net income $8,300 $9,200 $8,400
Less gain from asset sale (1,200) - -
Items not affecting cash:
Depreciation and amortization 4,300 3,700 3,300
Changes in assets and liabilities, net of
effects of acquired business:
Accounts receivable 700 (3,100) (2,100)
Inventory (900) (1,500) (600)
Other assets (500) 900 (200)
Accounts payable and other liabilities (500) (2,000) 1,300
------ ------ ------
Net cash provided by
operating activities 10,200 7,200 10,100
Cash flows for investing activities, used to
purchase fixed assets (2,400) (2,700) (3,000)
Cash flows for investing activities - proceeds
from asset sale 1,200 - -
Cash flows used in acquisition (3,000) - -
------ ------ ------
Net cash transferred to parent $6,000 $4,500 $7,100
====== ====== ======
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 7
Item 7(a)5.
INDUSTRIAL FILTER BUSINESS
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997
(dollars in thousands)
1999 1998 1997
------ ------ ------
Net Income $8,300 $9,200 $8,400
Balance sheet effects of foreign
currency translation adjustments 100 (600) (900)
------ ------ ------
Comprehensive net income $8,400 $8,600 $7,500
====== ====== ======
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 8
Item 7(a)6. INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. THE INDUSTRIAL FILTER BUSINESS AND ITS SIGNIFICANT ACCOUNTING POLICIES
Prior to September 1999, Mark IV Industries, Inc. (Mark IV) was the
owner of a number of operating divisions and subsidiaries which made up
its Industrial Filter Business (the Filter Business or the Company).
Such operating divisions and subsidiaries included the following:
* Facet Holdings Co., Inc.
* Purolator Products Air Filtration Company
* George W. Dahl Company, Inc.
* G.S. Costa Mesa Inc.
* Facet USA, Inc.
* Foreign Operations
The Foreign Operations represent Filter Business activities in Italy,
the Netherlands, Germany, Australia, Switzerland, France, United
Kingdom and Spain, with each operating as a subsidiary or division of a
first or second-tier subsidiary of Mark IV.
On September 10, 1999, all of the above business units were sold by
Mark IV (or one of its affiliates) to Clarcor Inc. (Clarcor), or one of
Clarcor's affiliates, in accordance with the terms of a purchase
agreement between the parties (the "Purchase Agreement").
The accompanying combined balance sheets include the accounts of the
Filter Business and all significant inter-company transactions have
been eliminated. Such combined balance sheets have been prepared in
conformity with generally accepted accounting principles, which require
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of such financial
statements. It should be recognized that the actual results could
differ from those estimates. The Filter Business' significant
accounting policies are as follows:
Cash
All cash balances are controlled by Mark IV, and are based on Mark IV's
cash management on a country-by-country basis. Therefore, the
accompanying Combined Financial Statements exclude all cash balances
for the periods presented.
5
<PAGE> 9
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of its trade accounts
receivable. The credit risk associated with such receivables is minimal
due to the Company's large customer base and ongoing control procedures
which monitor the creditworthiness of customers.
Inventories
Inventories are stated at the lower of cost or market, with cost
determined primarily on the Last-In, First-Out (LIFO) method.
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or
otherwise disposed of, and the accumulated depreciation thereon, are
eliminated from the asset and related accumulated depreciation
accounts, and any resulting gain or loss is reflected in income. The
Filter Business provides for depreciation of plant and equipment
primarily on the straight-line method to amortize the cost of such
plant and equipment over its useful life.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized on the
straight-line method over 40 years. The Company continually evaluates
the existence of goodwill impairment on the basis of whether the
goodwill is fully recoverable from projected, undiscounted net cash
flows of the related business.
Foreign Currency
The assets and liabilities of the Filter Business' foreign operations
have been translated at exchange rates in effect as of the balance
sheet date, and resulting gains and losses have been included as a part
of net assets. Foreign currency transactions are included in income as
realized.
Income Taxes
Mark IV accounts for income taxes under Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes. This
statement requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets
and liabilities. The Company's provision for income taxes has been
calculated on the separate return basis. The tax management of the U.S.
operations of the Filter Business is controlled by Mark IV, and is
based on Mark IV's U.S. tax planning strategies on a consolidated U.S.
basis. As a result, the accompanying Combined Balance Sheets and net
asset positions exclude an income tax payable liability related to the
Filter Businesses' U.S. operations, as such the liability remains the
responsibility of Mark IV.
6
<PAGE> 10
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
2. ACQUISITIONS
In August 1998 the Company acquired the net assets of Cosema
International ("Cosema"), an Italian filtration company, for a cash
purchase price of $3.0 million.
3. ACCOUNTS RECEIVABLE
Accounts receivable are reflected net of an allowance for doubtful
accounts of approximately $1.4 million and $1.0 million at February 28,
1999 and 1998, respectively.
4. INVENTORY
Inventory consists of the following as of February 28, 1999 and 1998
(dollars in thousands):
1999 1998
------- -------
Purchased materials and parts $13,000 $10,800
Work in process 3,100 2,700
Finished goods 14,400 14,700
------- -------
Net inventory $30,500 $28,200
======= =======
As a result of the fair value determination of inventories required by
the purchase method of accounting for acquired companies as of the
acquisition date, LIFO costs exceed historical FIFO costs by
approximately $3.3 million and $3.4 million at February 28, 1999 and
1998, respectively.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following as of February 28, 1999 and 1998 (dollars in thousands):
1999 1998
------- --------
Land and improvements $ 1,900 $ 1,900
Buildings and improvements 8,500 7,800
Machinery and equipment 21,900 19,900
------- --------
Total property, plant and equipment 32,300 29,600
Less accumulated depreciation 7,800 5,500
------- --------
Property, plant and equipment, net $24,500 $ 24,100
======= ========
Depreciation expense was approximately $2.5 million, $2.0 million and
$1.6 million in fiscal 1999, 1998 and 1997, respectively. In fiscal
1999, the Filter Business sold land with a nominal carrying value, for
a cash purchase price of approximately $1.2 million. The resulting gain
has been recognized in other income in the Combined Statements of
Income for the fiscal year ended February 28, 1999.
7
<PAGE> 11
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
6. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $7.6 million and $5.8 million at February
28, 1999 and 1998, respectively. Cost in excess of net assets acquired
at February 28, 1999 reflects approximately $2.3 million related to the
Company's acquisition of Cosema in fiscal 1999. Amortization expense
was approximately $1.8 million, $1.7 million and $1.7 million in fiscal
1999, 1998 and 1997.
7. LONG-TERM DEBT
The Filter Business' Foreign Operations in Italy have debt outstanding
in the amount of $2.2 million at February 28, 1999. The amount of such
indebtedness is controlled by Mark IV, and is based on Mark IV's
financing plans on a consolidated country by country basis. As a
result, the accompanying Combined Financial Statements exclude all such
indebtedness and related interest expense for the periods presented.
8. INCOME TAXES
The related provision for income taxes for fiscal 1999, 1998 and 1997
consists of the following (dollars in thousands):
Income before provision for taxes: 1999 1998 1997
------- ------- -------
United States $ 9,600 $11,100 $ 9,400
International 3,300 3,200 3,700
------- ------- -------
Total $12,900 $14,300 $13,100
======= ======= =======
Provision for taxes:
Currently payable:
United States $ 3,800 $ 3,800 $ 3,200
International 1,300 1,200 1,400
------- ------- -------
Total currently payable $ 5,100 $ 5,000 $ 4,600
======= ======= =======
Deferred:
United States $ (400) $ 200 $ 200
International (100) (100) (100)
------- ------- -------
Total deferred (500) 100 100
------- ------- -------
Total provision for taxes $ 4,600 $ 5,100 $ 4,700
======= ======= =======
8
<PAGE> 12
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
The provision for taxes for fiscal 1999, 1998 and 1997 differs from the
amount computed using the United States statutory income tax rate as
follows (dollars in thousands):
1999 1998 1997
---- ---- ----
Expected tax at United States
statutory income tax rate $4,500 $5,000 $4,600
State and local income taxes 400 400 400
International tax rate differences
and other items, net (300) (300) (300)
------ ------ -------
Total provision for taxes $4,600 $5,100 $4,700
====== ====== ======
The tax effects of temporary differences which give rise to deferred
tax assets (liabilities) consist of the following at February 28, 1999
and 1998 (dollars in thousands):
1999 1998
---- -----
Current:
Accounts receivable $ 300 $ -
Inventories (700) (800)
Compensation related liabilities 500 500
Other items - 100
-------- --------
Net current deferred tax asset/(liability)
(included in other current assets) $ 100 $ (200)
======== ========
Non-current:
Fixed and intangible assets $ (3,100) $ (3,200)
Post-retirement health-care liability 200 200
-------- --------
Net non-current deferred tax liability $ (2,900) $ (3,000)
======== ========
The undistributed earnings of the Company's international subsidiaries
have been reinvested in each country, and are not expected to be
remitted back to the parent company.
9. LEASES
The Company has operating leases with, in some instances, cost
escalation and renewal privileges. Total rental expense under operating
leases was approximately $1.2 million, $1.2 million and $1.3 million in
fiscal 1999, 1998 and 1997, respectively. Future minimum rental
payments under operating leases (for fiscal years ended the last day of
February) are approximately: 2000 - $1.2 million; 2001 - $1.0 million;
2002 - $.9 million; 2003 - $.6 million; 2004 - $.2 million; and 2005
and thereafter - $.2 million.
9
<PAGE> 13
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
10. PENSION AND RETIREMENT SAVINGS PLANS
The Filter Business' U.S. employees participate in a defined-benefit
pension plan which is funded and administered by Mark IV. Such plan
provides retirement benefits based upon the employees' earnings and
years of service. The plan is a part of Mark IV's Master Defined
Benefit Plan, and the funded position and responsibility for benefit
payments to retirees for service through February 28, 1999 remains with
Mark IV and its related Master Defined Benefit Plan Trust. The service
cost associated with the Filter Business' employees in each of fiscal
1999, 1998 and 1997 was approximately $.5 million, and such amounts
have been recognized as an expense in the accompanying Combined
Statements of Income.
The Filter Business' U.S. employees also participate in a defined
contribution (401(k)) plan which is also funded and administered by
Mark IV. Mark IV's contribution match to the 401(k) plan was in the
form of Mark IV common stock and the accompanying combined statements
of income in fiscal 1999, 1998 and 1997 reflects an expense of
approximately $.7 million, $.6 million and $.6 million, respectively.
Once Clarcor has established a Trust for the benefit of the Filter
Business employees, it is anticipated that all applicable funds held in
Mark IV's Trust will be transferred over to Clarcor's Trust.
11. POST-RETIREMENT BENEFITS
The Filter Business U. S. operations currently have a number of active
employees who may receive health and life insurance benefits upon their
retirement. The following table sets forth the liability for the cost
of these benefits included in the Combined Balance Sheets at February
28, 1999 and 1998 (dollars in thousands):
Accumulated post-retirement benefit obligation (APBO): 1999 1998
----- ----
Active employees fully eligible for benefits $ 100 $ 100
Active employees not yet fully eligible for benefits 300 300
------ ------
Post-retirement benefit liability recognized
in the Combined Balance Sheets $ 400 $ 400
====== ======
The Filter Business also has a number of retired employees who receive
such benefits. Since the funded position and responsibility for paying
such benefits remains with Mark IV, the related cost of such benefits
have been excluded from these Financial Statements. The Company's
post-retirement benefit expense on the accrual method for fiscal 1999,
1998 and 1997, associated with active employees of the Filter Business
was approximately $.1 million, respectively. Such amounts have been
recognized as an expense in the accompanying Combined Statements of
Income.
10
<PAGE> 14
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
The APBO was calculated using a discount rate of 7.0%, and assumes an
initial health- care cost trend rate of approximately 7.0%, trending down
ratably to an ultimate rate of 4.5%. A one-percentage-point increase in
such trend rate would not have a significant effect on the Company's
obligations or annual expense.
12. GEOGRAPHIC INFORMATION
The Company's operations outside the United States are located primarily
in Europe. Information concerning the Company's operations by geographic
area for fiscal 1999, 1998 and 1997 are as follows (dollars in thousands):
Net Sales to Customers: 1999 1998 1997
-------- -------- --------
United States $117,300 $111,200 $102,100
International 32,900 30,000 33,000
-------- -------- --------
Total Combined $150,200 $141,200 $135,100
======== ======== ========
Identifiable Long-Lived Assets:
United States $ 69,300 $ 70,400 $ 71,400
International 17,900 15,900 16,200
-------- -------- --------
Total Combined $ 87,200 $ 86,300 $ 87,600
======== ======== ========
13. LEGAL AND ENVIRONMENTAL MATTERS
The Filter Business is involved in various legal and environmental
matters. In the opinion of Mark IV management, the ultimate cost to
resolve these matters will not have a material adverse effect on the
Filter Business' financial position, results of operations or cash flows.
14. ANCILLARY AGREEMENTS AND COMMITMENTS
As a part of the sale transaction between Mark IV and Clarcor, a
transition services agreement was entered into in order to formalize
shared activities and/or commitments. These agreements provide for the
following arrangements:
* Transition Services have been established to facilitate each party's
ability to operate in the post-closing environment with the least
amount of disruption, with the intention for the Filter Business to
be completely self-sufficient at the earliest possible date. Such
agreement provided for payroll processing services, employee benefits
administration, provision of leased vehicles, long distance telephone
services, and various administrative and accounting services. The
costs for all such services are assessed on a monthly basis, to the
extent remaining in place,
11
<PAGE> 15
INDUSTRIAL FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
and are expected to result initially in a net payment to Mark IV of
approximately $5,000 per month. It is anticipated that
substantially all of such shared arrangements will be eliminated in
less than six months from the acquisition date.
The accompanying Combined Statements of Income for the three year period
ended February 28, 1999 reflects the cost of the above arrangements as if
such formal agreements were in effect on March 1, 1996, the beginning of
such period.
15. OTHER RELATED PARTY TRANSACTIONS
Mark IV provided or coordinated treasury, tax, audit, legal, medical and
risk insurance, and employee benefits administration services to the
various operating locations of the Filter Business in the U.S. Insurance,
legal, audit and direct employee benefits-related costs are charged
specifically to the Filter Business. An allocation of Mark IV's costs for
tax, treasury and other administrative work performed in the U.S. is not
made, as they are not believed to be significant. All inter-company
accounts with Mark IV, and other affiliates outside of the Filter
Business, have been included as a part of net assets.
The Company's financing needs are established primarily through
inter-company borrowing arrangements with Mark IV or one of its affiliates
outside of the Filter Business. No interest costs have been allocated to
the Filter Business for any of such financing needs; therefore, the
accompanying Combined Statements of Income do not reflect any costs for
interest expense.
12
<PAGE> 16
Item 7(a)7.
INDUSTRIAL FILTER BUSINESS
COMBINED BALANCE SHEET
(dollars in thousands)
Unaudited
August 31,
ASSETS 1999
----------
Current Assets:
Cash $ 4,314
Accounts receivable, net 30,825
Inventories, net 30,426
Other current assets 1,773
--------
Total Current Assets 67,338
Fixed assets, net 23,985
Other noncurrent assets 4
Cost in excess of net assets acquired 61,800
--------
Total Assets $153,127
========
LIABILITIES AND NET ASSETS
Current Liabilities:
Accounts payable $ 12,658
Compensation related liabilities 4,300
Accrued expenses and other liabilities 2,584
Income taxes payable 629
--------
Total Current Liabilities 20,171
Deferred taxes 2,297
Non-current liabilities 2,527
--------
Total Liabilities 24,995
Net Assets 128,132
--------
Total Liabilities and Net Assets $153,127
========
See Notes to Unaudited Combined Financial Statements
<PAGE> 17
Item 7(a)7.
INDUSTRIAL FILTER BUSINESS
COMBINED STATEMENTS OF INCOME
(dollars in thousands except per share data)
(Unaudited)
_________
Six Months Ended
------------------------
August 31, August 31,
1999 1998
Net sales $ 77,600 $ 74,200
-------- --------
Operating costs:
Cost of products sold 53,100 50,700
Selling and administration 14,700 14,900
Research and development 900 1,000
Depreciation and amortization 2,300 2,100
-------- --------
Total operating costs 71,000 68,700
-------- --------
Operating income 6,600 5,500
Other income (100) -
-------- --------
Income before taxes 6,500 5,500
Provision for income taxes 2,300 2,000
-------- --------
NET INCOME $ 4,200 $ 3,500
======== ========
See Notes to Unaudited Combined Financial Statements
<PAGE> 18
Item 7(a)7.
INDUSTRIAL FILTER BUSINESS
COMBINED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
________
Six Months Ended
-----------------------
August 30, August 30,
1999 1998
---------- ----------
Cash flows from operating activities:
Net income $4,200 $3,500
Items not affecting cash:
Depreciation and amortization 2,300 2,100
Changes in assets and liabilities, net of
effects of acquired business:
Accounts receivable (25) (200)
Inventory 74 800
Other assets (766) (400)
Accounts payable and other liabilities (2,864) 700
---------- ----------
Net cash provided by
operating activities 2,919 6,500
Cash flows for investing activities, used to
purchase fixed assets (885) (800)
Cash flows for investing activities, change in parent
company's investment for advances and withdrawals 2,280 (5,700)
---------- ----------
Net increase in cash $4,314 $ -
========== ==========
See Notes to Unaudited Combined Financial Statements
<PAGE> 19
Item 7(a) 8.
Industrial Filter Business
Notes to Unaudited Combined Financial Statements
1. BASIS OF PRESENTATION
The financial statements should be read in conjunction with the Industrial
Filter Business historical financial statements for the years ended on the
last day of February 1999, 1998, and 1997. The financial statements reflect
all adjustments, which in the opinion of management, are necessary for a
fair presentation of Industrial Filter Business financial position at
August 31, 1999 and its results of operations and cash flows for the
six-month periods ended August 31, 1999 and 1998.
The accompanying financial statements may not necessarily be indicative of
the financial position, results of operations or cash flows of Industrial
Filter Business for the full year or what the financial position, results
of operations or cash flows would have been had Industrial Filter Business
been a separate independent company during the periods presented.
2. LEGAL AND ENVIRONMENTAL MATTERS
The Industrial Filter Business is involved in various legal and
environmental matters. In the opinion of Mark IV management, the ultimate
cost to resolve these matters will not have a material adverse effect on
the Filter Business' financial position, results of operations or cash
flows.
<PAGE> 20
Item 7(b) PRO FORMA FINANCIAL INFORMATION
1. Pro Forma Financial Information - Introduction
The accompanying unaudited pro forma condensed combined financial statements
(pro forma statements) present the effect of the acquisition of the Industrial
Filter Business on the financial position and results of operations of CLARCOR
Inc. (hereinafter referred to as CLARCOR or the Company). The unaudited pro
forma condensed combined balance sheet as of August 28, 1999 is based upon the
unaudited historical balance sheets of CLARCOR as of August 28, 1999 and of
Industrial Filter Business as of August 31, 1999 and assumes the acquisition
took place on August 28, 1999. The unaudited pro forma condensed combined
statement of earnings for the year ended November 30, 1998 is based on the
audited historical statements of earnings of CLARCOR for the fiscal year ended
November 30, 1998 and of Industrial Filter Business for the fiscal year ended
February 28, 1999 and has been prepared assuming the acquisition took place
December 1, 1997. The unaudited pro forma condensed combined statement of
earnings for the interim nine month period ended August 28, 1999 is based on the
unaudited historical statements of earnings of CLARCOR for the interim nine
month period ended August 28, 1999 and of Industrial Filter Business for the
interim nine month period ended August 31, 1999 and has been prepared assuming
the acquisition took place December 1, 1997. The unaudited pro forma condensed
combined financial statements do not purport to be indicative of the results of
operations or financial position of CLARCOR that would have actually occurred
had the acquisition been completed on December 1, 1997, or which may occur in
the future.
The acquisition will be accounted for by the purchase method of accounting.
Under purchase accounting, the total purchase price will be allocated to the
tangible and intangible assets and liabilities of Industrial Filter Business
based upon their respective fair values as of the effective time of the
acquisition based on valuations and other studies which are not yet complete.
The initial purchase price was based on the net assets of the business acquired
as shown on a February 28, 1999 balance sheet and is subject to a final
adjustment based on the net assets of the businesses shown on a final balance
sheet as of August 31, 1999 and the provisions of the purchase agreement. A
preliminary allocation of the initial purchase price has been made to major
categories of assets and liabilities in the accompanying pro forma statements
based on available information and is currently subject to change. The
allocation will be completed when CLARCOR receives a closing balance sheet in
accordance with the purchase agreement from the seller, obtains a final
appraisal of the assets acquired (which includes completing an assessment of the
liabilities assumed), and finalizes the estimates associated with exit and other
costs related to the acquisition. The actual allocation of the finalized
purchase price and the resulting effect on income from operations may differ
from the unaudited pro forma amounts included herein. The pro forma adjustments
are described in the accompanying notes and represent CLARCOR's preliminary
determination of purchase accounting adjustments based upon available
information and certain assumptions that CLARCOR believes are reasonable. The
accompanying unaudited pro forma statements should be read in connection with
the separate historical financial statements and notes thereto of CLARCOR and
Industrial Filter Business.
<PAGE> 21
Item 7(b)2. Unaudited Pro Forma Condensed Combined Balance Sheet as of August
28, 1999 and Notes
CLARCOR Inc.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of August 28, 1999
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Industrial Acquisition
ASSETS CLARCOR Filter Business Adjustments Pro Forma
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Current assets:
Cash and short-term cash investments $ 39,361 $ 4,314 $ $ 43,675
Accounts receivable, 72,397 32,633 105,030
less allowance for losses (3,019) (1,808) (4,827)
Inventories 61,791 30,426 (1,826) a 87,055
(3,336) a
Prepaid expenses 1,169 1,773 2,942
Other current assets 6,253 - 6,253
----------- ------------ ------------ -----------
Total current assets 177,952 67,338 (5,162) 240,128
----------- ------------ ------------ -----------
Plant assets, net 89,474 23,985 10,192 a 123,651
Excess of cost over fair value of assets acquired,
less accumulated amortization 21,100 61,800 (61,800) a 51,869
30,769 a
Pension assets 18,034 - 18,034
Other noncurrent assets 13,699 4 1,941 a 16,182
538 a
Purchased intangible assets - - 42,959 a 42,959
----------- ------------ ------------ -----------
$ 320,259 $ 153,127 $ 19,437 $ 492,823
=========== ============ ============ ===========
LIABILITIES
Current liabilities
Current portion of long-term debt $ 5,435 $ - $ $ 5,435
Accounts payable 25,293 12,658 37,951
Income taxes 3,671 629 4,300
Accrued and other liabilities 28,151 6,884 1,540 a 36,575
----------- ------------ ------------ -----------
Total current liabilities 62,550 20,171 1,540 84,261
----------- ------------ ------------ -----------
Long-term debt, less current portion 31,504 - 146,029 b 177,533
Long-term pension liabilities 10,622 - 10,622
Deferred taxes 10,487 2,297 12,784
Other long-term liabilities 1,873 2,527 4,400
Minority interests 362 - 362
Contingencies
SHAREHOLDERS' EQUITY
Capital stock 23,980 23,980
Capital in excess of par value 591 591
Accumulated other comprehensive earnings (3,544) (3,544)
Retained earnings 181,834 181,834
Parent company's net assets 128,132 (128,132) c -
----------- ------------ ------------ -----------
202,861 128,132 (128,132) 202,861
----------- ------------ ------------ -----------
$ 320,259 $ 153,127 $ 19,437 $ 492,823
=========== ============ ============ ===========
</TABLE>
<PAGE> 22
Notes to the Unaudited Pro Forma Condensed Combined Balance Sheet
a Reflects the estimated purchase accounting adjustments for the acquisition
based upon a preliminary appraisal of the asset and liabilities assumed.
For purchase accounting, Industrial Filter Business assets have been
recorded at estimated fair market value subject to adjustments based upon
the results of a preliminary independent appraisal. The estimated amount
recorded for assets and liabilities acquired are not expected to differ
materially from the final assigned values. Purchase accounting adjustments
were recorded as shown below. These adjustments are necessary to record
these assets and liabilities at their estimated fair market values.
The calculation of excess purchase cost over fair value of net assets
acquired is as follows:
<TABLE>
<S> <C> <C>
Purchase price subject to final adjustments $ 143,550
Loan origination fees and expenses 538
Acquisition fees and expenses 1,941
----------
Total preliminary purchase price 146,029
Book value of net assets acquired 128,132
----------
Purchase price in excess of net assets acquired $ 17,897
==========
Preliminary allocation of purchase price in excess of book
value of net assets acquired:
Reduce inventory to estimated fair value $ (3,336)
Incremental exit costs:
Exit product lines $ (1,826)
Rationalize manufacturing operations (1,540) (3,366)
---------
Increase property, plant and equipment to estimated
fair value 10,192
Increase trademarks, patents, and other intangible assets to
estimated fair value 42,959
Eliminate existing unamortized goodwill (61,800)
Record excess of purchase cost over fair
value of assets acquired 30,769
Capitalized loan origination fees and expenses 538
Capitalized acquisition fees and expenses 1,941
----------
$ 17,897
==========
</TABLE>
The exit costs are estimated and subject to final determination at this
time. These costs relate to exiting certain activities of the acquired
companies.
b Reflects the acquisition financing as if the total purchase price, loan
origination fees and acquisition expenses were paid in cash with the
proceeds of loans obtained by the Company pursuant to a Multicurrency
Credit Agreement dated as of September 9, 1999. Interest rates for the
borrowings under this revolving line of credit vary with the LIBOR rate.
c Reflects the elimination of Industrial Filter Business' parent company's
net assets.
<PAGE> 23
Item 7(b)3. Unaudited Pro Forma Condensed Combined Statement of Earnings for
fiscal year ended November 30, 1998 and Notes
CLARCOR Inc.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
For the year ended November 30, 1998
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Industrial Acquisition
CLARCOR Filter Business Adjustments Pro Forma
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 426,773 $ 150,200 $ $ 576,973
Cost of sales 291,537 104,242 1,075 a 396,854
------------- ---------- ------------ ------------
Gross profit 135,236 45,958 (1,075) 180,119
Selling and administrative expenses 83,573 34,258 563 a
884 b
388 c 119,666
------------- ---------- ------------ ------------
Operating profit 51,663 11,700 (2,910) 60,453
------------- ---------- ------------ ------------
Other Income (expense):
Interest expense (2,336) - (9,506) d
(179) e (12,021)
Interest income 1,283 - - 1,283
Other, net 737 1,200 - 1,937
------------- ---------- ------------ ------------
(316) 1,200 (9,685) (8,801)
------------- ---------- ------------ ------------
Earnings before income taxes and minority interests 51,347 12,900 (12,595) 51,652
Provision for income taxes 19,262 4,600 (4,493) f 19,369
------------- ---------- ------------ ------------
Earnings before minority interests 32,085 8,300 (8,102) 32,283
Minority interests in (earnings) of subsidiaries (6) - - (6)
------------- ---------- ------------ ------------
Net earnings $ 32,079 $ 8,300 $ (8,102) $ 32,277
============= ========== ============ ============
Net earnings per common share:
Basic $ 1.32 $ 1.33
============= ============
Diluted $ 1.30 $ 1.31
============= ============
Average number of common shares outstanding:
Basic 24,268,250 24,268,250
============= ============
Diluted 24,648,623 24,648,623
============= ============
</TABLE>
Notes to the Unaudited Pro Forma Condensed Combined Statement of Earnings for
the year ended November 30, 1998.
The Unuaudited Pro Forma Condensed Combined Statement of Earnings for the year
ended November 30, 1998 reflects the combination of the audited Consolidated
Statement of Earnings of the Company for the year ended November 30, 1998 and
the audited Statement of Earnings of the Industrial Filter Business for the year
ended February 28, 1999. It is presented as if the acquisition had occurred on
December 1, 1997.
a Reflects the estimated adjusted depreciation expense related to the
acquired property, plant and equipment of the Industrial Filter Business
assuming the acquisition had taken place on December 1, 1997. These assets
have been restated at their estimated fair market values and depreciated
using the Company's depreciation methods over the remaining useful lives of
the assets. The increase in depreciation expense of $1,638, as compared to
that recorded by the Industrial Filter
<PAGE> 24
Business, was allocated to cost of sales and to selling and administrative
expenses as indicated.
b Reflects an increase in amortization expense of intangible assets and the
excess of purchase price over assets acquired based on their preliminary
appraised values, using the straight-line method and an estimated weighted
average useful life of 37 years. The allocation to specific intangible
assets is preliminary.
c Estimated capitalized acquisition costs of $1,941, including professional
fees for legal and accounting, will be amortized over a five-year life.
Estimated pro forma amortization is $388 per year.
d Reflects the additional interest expense incurred on the debt to finance
the acquisition assuming the entire purchase price was paid in cash with
the proceeds of loans obtained by the Company pursuant to a Multicurrency
Credit Agreement dated as of September 9, 1999. Interest rates for the
borrowings under this revolving line of credit vary with the LIBOR rate.
The effective interest rate was approximately 6.51%. A 1/8% change in the
rate would increase or decrease interest expense on the debt by
approximately $180 annually.
e Debt issue costs of $538, including loan underwriting fees and associated
costs, are being amortized over a three-year life. Estimated pro forma
amortization is $179 per year.
f Reflects the tax effect of the pro forma adjustments using an effective tax
rate of 37.5%.
The amounts recorded relating to the acquisitions are currently subject to
adjustment as the Company has not yet completed the final allocation of the
purchase price.
The unaudited pro forma condensed combined financial statements do not reflect
any future benefits associated with integrating the Industrial Filter Business
into CLARCOR.
<PAGE> 25
Item 7(b)4. Unaudited Pro Forma Condensed Combined Statement of Earnings for
the nine month interim period ended August 28, 1999 and Notes
CLARCOR Inc.
PRO FORMA CONDENSED STATEMENTS OF EARNINGS
For the nine months August 28, 1999
(Dollars in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Industrial Acquisition
CLARCOR Filter Business Adjustments Pro Forma
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 321,739 $ 114,000 $ $ 435,739
Cost of sales 221,187 81,063 657 a 302,907
------------ ----------- ------------- ------------
Gross profit 100,552 32,937 (657) 132,832
Selling and administrative expenses 62,988 23,437 345 a
276 b
291 c 87,337
------------ ----------- ------------- ------------
Operating profit 37,564 9,500 (1,569) 45,495
------------ ----------- ------------- ------------
Other income (expense):
Interest expense (1,632) - (7,130) d
(134) e (8,896)
Interest income 1,061 - - 1,061
Other, net 1,699 1,109 - 2,808
------------ ----------- ------------- ------------
1,128 1,109 (7,264) (5,027)
------------ ----------- ------------- ------------
Earnings before income taxes and minority interests 38,692 10,609 (8,833) 40,468
Provision for income taxes 14,062 3,743 (3,115) f 14,690
------------ ----------- ------------- ------------
Earnings before minority interests 24,630 6,866 (5,718) 25,778
Minority interests in (earnings) or subsidiaries (34) - - (34)
------------ ----------- ------------- ------------
Net earnings $ 24,596 $ 6,866 $ (5,718) $ 25,744
============ =========== ============= ============
Net earnings per common share:
Basic $ 1.03 $ 1.07
============ ============
Diluted $ 1.01 $ 1.06
============ ============
Average number of common shares outstanding:
Basic 23,958,282 23,958,282
============ ============
Diluted 24,315,706 24,315,706
============ ============
</TABLE>
Notes to the Unaudited Pro Forma Condensed Combined Statement of Earnings for
the nine month interim period ended August 28, 1999.
The Unaudited Pro Forma Condensed Combined Statement of Earnings for the nine
month interim period ended August 28, 1999 reflects the combination of the
unaudited Consolidated Statement of Earnings of the Company for the nine months
ended August 28, 1999 and the unaudited Statement of Earnings of the Industrial
Filter Business for the nine months ended August 31, 1999, which was derived by
adding its unaudited results for the six months ended August 31, 1999 to the
three months ended February 28, 1999. It is presented as if the acquisition had
occurred on December 1, 1997.
<PAGE> 26
a Reflects the estimated adjusted depreciation expense related to the
acquired property, plant and equipment of the Industrial Filter Business
assuming the acquisition had taken place on December 1, 1997. These assets
have been restated at their estimated fair market values and depreciated
using the Company's depreciation methods over the remaining useful lives of
the assets. The increase in depreciation expense of $1,002, as compared to
that recorded by the Industrial Filter Business, was allocated to cost of
sales and to selling and administrative expenses as indicated.
b Reflects an increase in amortization expense of intangible assets and the
excess of purchase price over assets acquired based on their preliminary
appraised values using the straight-line method and an estimated weighted
average useful life of 37 years. The allocation to specific intangible
assets is preliminary.
c Estimated capitalized acquisition costs of $1,941, including professional
fees for legal and accounting, will be amortized over a five-year life.
Estimated pro forma amortization is $388 per year or $291 for nine months.
d Reflects the additional interest expense incurred on the debt to finance
the acquisition assuming the entire purchase price was paid in cash with
the proceeds of loans obtained by the Company pursuant to a Multicurrency
Credit Agreement dated as of September 9, 1999. Interest rates for the
borrowings under this revolving line of credit vary with the LIBOR rate.
The effective interest rate was approximately 6.51%. A 1/8% change in the
rate would increase or decrease interest expense on the debt by
approximately $180 annually or $135 for nine months.
e Debt issue costs of $538, including loan underwriting fees and associated
costs, are being amortized over a three-year life. Estimated pro forma
amortization is $179 per year or $134 for nine months.
f Reflects the tax effect of the pro forma adjustments using an effective tax
rate of 36.3%.
The amounts recorded relating to the acquisitions are currently subject to
adjustment as the Company has not yet completed the final allocation of the
purchase price.
The unaudited pro forma condensed combined financial statements do not reflect
any future benefits associated with integrating the Industrial Filter Business
into CLARCOR.
<PAGE> 27
Item 7(c) Exhibits
1. Consent of Independent Accountants
We hereby consent to the incorporation by reference in the registration
statements of CLARCOR Inc. on Form S-8 (file numbers 33-5456, 33-38590,
33-39374, 33-53763 and 33-53899) of our report, dated October 22, 1999, on our
audits of the combined financial statements of the Industrial Filter Business as
of February 28, 1999 and 1998, and for each of the three years in the period
ended February 28, 1999, which appears in the Current Report on Form 8-K/A of
CLARCOR Inc. dated November 23, 1999.
PricewaterhouseCoopers LLP
Rochester, New York
November 23, 1999
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARCOR INC.
(Registrant)
November 23, 1999 By /s/ Bruce A. Klein
- ----------------------- ----------------------------------------
(Date) Bruce A. Klein, Vice President - Finance
and Chief Financial Officer
