<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
QUARTERLY REPORT
-------
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the quarter ended May 27, 2000
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REGISTRANT: CLARCOR Inc. (Delaware)
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<PAGE> 2
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 27, 2000 Commission File Number 1-11024
CLARCOR Inc.
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-0922490
-------------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125
---------------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 815-962-8867
--------------------
No Change
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
24,245,572 common shares outstanding
------------------------------------------
Page 1 of 16
<PAGE> 3
CLARCOR Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
--------
<TABLE>
<CAPTION>
May 27, November 30,
ASSETS 2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
Current assets:
Cash and short-term cash investments $ 7,574 $ 14,745
Accounts receivable, less allowance for losses
of $5,504 for 2000 and $5,155 for 1999 110,238 103,986
Inventories:
Raw materials 35,008 32,731
Work in process 15,527 14,643
Finished products 50,088 42,476
--------- ---------
Total inventories 100,623 89,850
--------- ---------
Prepaid expenses and other current assets 2,786 11,830
Deferred income taxes 6,121 7,259
--------- ---------
Total current assets 227,342 227,670
--------- ---------
Plant assets at cost, 257,722 244,287
less accumulated depreciation (126,503) (118,261)
--------- ---------
131,219 126,026
--------- ---------
Excess of cost over fair value of assets acquired,
less accumulated amortization 62,903 49,784
Other acquired intangibles, less accumulated amortization 40,410 41,367
Pension assets 19,473 17,879
Other noncurrent assets 10,697 10,265
--------- ---------
$ 492,044 $ 472,991
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 5,437 $ 5,440
Accounts payable 41,146 42,477
Income taxes 4,527 4,442
Accrued and other liabilities 40,492 45,116
--------- ---------
Total current liabilities 91,602 97,475
--------- ---------
Long-term debt, less current portion 157,379 145,981
Long-term pension liabilities 5,206 3,577
Other long-term liabilities 13,413 14,845
Minority interests 374 395
Contingencies
SHAREHOLDERS' EQUITY
Capital stock 24,246 24,020
Capital in excess of par value 4,290 948
Accumulated other comprehensive earnings (5,960) (4,151)
Retained earnings 201,494 189,901
--------- ---------
224,070 210,718
--------- ---------
$ 492,044 $ 472,991
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
Page 2 of 16
<PAGE> 4
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
-----------
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
---------------------------- ----------------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 162,205 $ 110,483 $ 312,902 $ 209,649
Cost of sales 112,220 75,500 218,634 143,287
------------ ------------ ------------ ------------
Gross profit 49,985 34,983 94,268 66,362
Selling and administrative expenses 30,795 21,117 61,608 42,458
------------ ------------ ------------ ------------
Operating profit 19,190 13,866 32,660 23,904
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (2,795) (545) (5,355) (1,071)
Interest income 82 326 284 686
Other, net (565) 17 (646) (52)
------------ ------------ ------------ ------------
(3,278) (202) (5,717) (437)
------------ ------------ ------------ ------------
Earnings before income taxes and
minority interests 15,912 13,664 26,943 23,467
Provision for income taxes 5,800 4,987 9,774 8,589
------------ ------------ ------------ ------------
Earnings before minority interests 10,112 8,677 17,169 14,878
Minority interests in earnings of subsidiaries (22) (27) (16) (18)
------------ ------------ ------------ ------------
Net earnings $ 10,090 $ 8,650 $ 17,153 $ 14,860
============ ============ ============ ============
Net earnings per common share:
Basic $ 0.42 $ 0.36 $ 0.71 $ 0.62
============ ============ ============ ============
Diluted $ 0.41 $ 0.36 $ 0.70 $ 0.61
============ ============ ============ ============
Average number of common shares outstanding:
Basic 24,252,425 23,936,137 24,210,788 23,950,007
============ ============ ============ ============
Diluted 24,516,307 24,264,276 24,462,017 24,319,667
============ ============ ============ ============
Dividends paid per share $ 0.1150 $ 0.1125 $ 0.2300 $ 0.2250
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements
Page 3 of 16
<PAGE> 5
<TABLE>
<CAPTION>
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
-----------
Six Months Ended
--------------------
May 27, May 29,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 17,153 $ 14,860
Depreciation and amortization 11,151 6,960
Changes in assets and liabilities (15,276) (7,512)
Other, net 133 70
-------- --------
Net cash provided by operating activities 13,161 14,378
-------- --------
Cash flows from investing activities:
Additions to plant assets (12,166) (11,131)
Business acquisitions, net of cash acquired (12,972) (375)
Dispositions of plant assets 148 25
Other, net (50) --
-------- --------
Net cash used in investing activities (25,040) (11,481)
-------- --------
Cash flows from financing activities:
Proceeds from line of credit 20,000 --
Payments on line of credit (8,500) --
Reduction of long-term debt (1,686) (227)
Purchases of treasury stock -- (897)
Cash dividends paid (5,560) (5,376)
Other, net 518 45
-------- --------
Net cash provided by (used in) financing activities 4,772 (6,455)
-------- --------
Net effect of exchange rate changes on cash (64) (59)
-------- --------
Net change in cash and short-term cash investments (7,171) (3,617)
Cash and short-term cash investments,
beginning of period 14,745 33,321
-------- --------
Cash and short-term cash investments,
end of period $ 7,574 $ 29,704
======== ========
Cash paid during the period for:
Interest $ 5,128 $ 1,060
======== ========
Income taxes $ 8,648 $ 10,647
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
Page 4 of 16
<PAGE> 6
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
--------------------------------------------------------------------------------
1. CONSOLIDATED FINANCIAL STATEMENTS
The November 30, 1999 consolidated balance sheet data was derived from
CLARCOR's year-end audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
The consolidated condensed balance sheet as of May 27, 2000, the
consolidated condensed statements of earnings and the consolidated
condensed statements of cash flows for the periods ended May 27, 2000, and
May 29, 1999, have been prepared by the Company without audit. The
financial statements have been prepared on the same basis as those in the
Company's November 30, 1999 annual report to shareholders. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations, and cash flows have been made. The results of operations for
the period ended May 27, 2000 are not necessarily indicative of the
operating results for the full year.
2. BUSINESS COMBINATIONS
During the six months ended May 27, 2000, the Company purchased two air
filtration distributors and one liquid process filtration manufacturer
accounted for under the purchase method. Two of the acquisitions were paid
for in cash. The purchase price of the other was paid in cash and stock.
The Company issued 160,704 shares of its common stock (or $2,895) in
connection with the acquisition. These acquisitions did not have a
significant impact on the results of the Company.
On September 10, 1999, the Company acquired three industrial filtration
businesses, Purolator Air Filtration (Purolator), Facet International
(Facet), and Purolator Facet, Inc. (PFI). The transaction was accounted for
under the purchase method of accounting with the excess of the initial
purchase price over the preliminary estimated fair value of the net
tangible and identifiable intangible assets acquired recorded as goodwill.
The initial purchase price is subject to a final adjustment based on the
net assets of the businesses. A preliminary allocation of the initial
purchase price was made to major categories of assets and liabilities. The
allocation will be completed when the Company finalizes a closing balance
sheet in accordance with the purchase agreement, completes the estimates of
liabilities assumed, and finalizes the estimates associated with exit and
other costs of the acquisitions. The Company expects to finalize its plans
for integrating the acquired businesses with its existing operations by the
end of the third quarter of fiscal 2000 and any resulting changes to the
estimated $285 accrued at November 30, 1999 for severance and exit costs
will be reflected as an adjustment to the allocation of the purchase price.
No adjustments were made to the initial allocation during the six months
ended May 27, 2000.
Page 5 of 16
<PAGE> 7
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)Continued
--------------------------------------------------------------------------------
3. EARNINGS PER SHARE AND TREASURY STOCK TRANSACTIONS
The Company calculates earnings per share according to Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Diluted
earnings per share reflects the impact of outstanding stock options as if
exercised during the periods presented using the treasury stock method. The
following table provides a reconciliation of the numerators and
denominators utilized in the calculation of basic and diluted earnings per
share.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------- --------------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
------------------------- --------------------------
<S> <C> <C> <C> <C>
Net Earnings (numerator) $ 10,090 $ 8,650 $ 17,153 $ 14,860
Basic EPS:
Weighted average number of common
shares outstanding (denominator) 24,252,425 23,936,137 24,210,788 23,950,007
Basic per share amount $ 0.42 $ 0.36 $ 0.71 $ 0.62
Diluted EPS:
Weighted average number of common
shares outstanding 24,252,425 23,936,137 24,210,788 23,950,007
Dilutive effect of stock options 263,882 328,139 251,229 369,660
----------- ----------- ----------- -----------
Diluted weighted average number
of common shares outstanding
(denominator) 24,516,307 24,264,276 24,462,017 24,319,667
Diluted per share amount $ 0.41 $ 0.36 $ 0.70 $ 0.61
</TABLE>
The following options were not included in the computation of diluted
earnings per share as the options' exercise prices were greater than the
average market price of the common shares during the respective quarter and
year-to-date periods:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------------- -------------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Options 1,144,239 771,789 1,144,239 745,539
Weighted Average Exercise Price $ 18.92 $ 19.40 $ 18.92 $ 19.42
</TABLE>
During the six months ended May 29, 1999, the Company purchased and retired
50,000 shares of common stock held in treasury. All such shares resumed the
status of authorized and unissued shares of common stock of the Company.
Page 6 of 16
<PAGE> 8
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
--------------------------------------------------------------------------------
4. COMPREHENSIVE EARNINGS
The Company's total comprehensive earnings and its components are as
follows:
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------- -------------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net earnings $ 10,090 $ 8,650 $ 17,153 $ 14,860
Other comprehensive earnings, net of tax:
Foreign currency translation adjustments (732) (232) (1,809) (682)
------------------------- -------------------------
Total comprehensive earnings $ 9,358 $ 8,418 $ 15,344 $ 14,178
========================= =========================
</TABLE>
5. SEGMENT DATA
The Company operates in three principal product segments: Engine/Mobile
Filtration, Industrial/Environmental Filtration, and Packaging. The segment
data for the quarter and six-month periods ended May 27, 2000 and May 29,
1999, respectively, are shown below. Net sales represent sales to
unaffiliated customers as reported in the consolidated condensed statements
of earnings. Intersegment sales were not material.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
-------------------------- --------------------------
May 27, May 29, May 27, May 29,
2000 1999 2000 1999
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales:
Engine/Mobile Filtration $ 65,362 $ 61,407 $ 125,213 $ 114,983
Industrial/Environmental Filtration 78,770 34,045 153,815 66,743
Packaging 18,073 15,031 33,874 27,923
-------------------------- --------------------------
$ 162,205 $ 110,483 $ 312,902 $ 209,649
========================== ==========================
Operating profit:
Engine/Mobile Filtration $ 12,910 $ 11,441 $ 22,465 $ 20,295
Industrial/Environmental Filtration 4,403 1,114 6,738 1,740
Packaging 1,877 1,311 3,457 1,869
-------------------------- --------------------------
19,190 13,866 32,660 23,904
Other income (expense) (3,278) (202) (5,717) (437)
-------------------------- --------------------------
Earnings before income taxes and
minority interests $ 15,912 $ 13,664 $ 26,943 $ 23,467
========================== ==========================
Identifiable assets:
Engine/Mobile Filtration $ 146,868 $ 135,908
Industrial/Environmental Filtration 260,484 70,167
Packaging 39,397 33,118
Corporate 45,295 70,837
--------------------------
$ 492,044 $ 310,030
==========================
</TABLE>
Page 7 of 16
<PAGE> 9
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
--------------------------------------------------------------------------------
5. SEGMENT DATA (Continued)
The first six months of fiscal 2000 include the results of three industrial
filtration businesses acquired during the fourth quarter of 1999 as
discussed in Note 2.
6. MULTICURRENCY AGREEMENT
During the six months ended May 27, 2000, the Company entered into interest
swap agreements to manage its interest exposure on the outstanding amounts
under the multicurrency credit revolver. The agreement in place at May 27,
2000, covering a portion of the outstanding amount on the multicurrency
credit revolver, provides for the Company to pay a 6.565% fixed interest
rate on a notional amount of $60,000 and to receive interest at floating
rates based on LIBOR. The agreement matured in June 2000.
Page 8 of 16
<PAGE> 10
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
CLARCOR reported record sales, operating profit, net earnings and earnings per
share for the second quarter and first six months of fiscal 2000. Fiscal 2000
includes the results of operations from three industrial filtration businesses
that were acquired in the fourth quarter of 1999. These businesses (the
"Industrial Filtration Acquisitions") are included in the
Industrial/Environmental Filtration segment. Final balance sheet adjustments for
the acquisitions will be determined by the end of the third quarter of fiscal
2000. No adjustments were made to the initial allocation during the six months
ended May 27, 2000. In addition, several smaller acquisitions were made during
fiscal 2000 as discussed below.
SECOND QUARTER OF 2000 COMPARED WITH SECOND QUARTER OF 1999.
Net sales of $162,205,000 increased 46.8% from $110,483,000 reported for the
second quarter of 1999, or an increase of approximately 9% excluding the effect
of acquisitions. Each of the Company's business segments reported increased
sales for the quarter compared to the prior year quarter. The Engine/Mobile
Filtration segment reported increased sales of 6.4% to $65,362,000 from
$61,407,000 recorded in 1999. The segment's domestic and international sales
were strong for the quarter and included increased sales volume for heavy-duty,
light-duty and railroad filters. The Company's Industrial/Environmental
Filtration segment recorded a 131.4% increase in sales for the 2000 second
quarter including the Industrial Filtration Acquisitions and several small
acquisitions made in fiscal 2000. The first of the acquisitions in 2000 occurred
early in the first quarter and is a distributor of air filtration products and
in the second quarter of 2000, the Company acquired a liquid process filtration
manufacturing company. The Industrial/Environmental segment's sales increased
approximately 8% for the second quarter, excluding the acquisitions, and
included strong sales of environmental air filters and slightly increased sales
of air quality equipment and systems. The Packaging segment reported a 20.2%
increase in sales for the 2000 quarter primarily as a result of increased sales
of lithographed metal containers and sheets. This sales increase was anticipated
as a result of a refocus that began in 1998 on non-promotional packaging
products for food and other consumer and industrial products.
Operating profit for the second quarter 2000 was $19,190,000 compared to
$13,866,000 in 1999, an increase of 38.4%, or approximately 21% excluding the
results from acquisitions. Operating profit was 11.8% of net sales in 2000
compared to 12.6% in 1999. The reduction in operating profit margin compared to
1999 resulted primarily from the acquired companies and includes the effect of
increased amortization and depreciation from the acquisitions.
The Engine/Mobile Filtration segment recorded an operating profit increase in
second quarter 2000 of 12.8% compared to 1999 and resulted in an operating
margin of 19.8% compared to 18.6% recorded in 1999. The increased profit for the
2000 quarter resulted primarily from higher sales volumes, reduced legal costs
from the settlement of several outstanding matters, and continued productivity
improvements that were partially offset by competitive pricing discounts and
temporary costs related to combining two distribution facilities. The
Industrial/Environmental Filtration segment
Page 9 of 16
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
reported an increase in operating profit in 2000 to $4,403,000 from $1,114,000
recorded in 1999. Excluding the effect of acquisitions, operating profit
increased approximately $900,000 primarily due to increased sales volume of air
filtration products and reduced overhead and administrative costs related to the
segment's air quality equipment business. The Packaging segment's increase in
operating profit to $1,877,000 from $1,311,000 recorded in the 1999 quarter
resulted from significantly higher sales volume and improved capacity
utilization. For the quarter, the segment's operating margin improved to 10.4%
compared to 8.7% for the 1999 quarter.
Net other expense for the quarter of $3,278,000 included higher interest expense
and reduced interest income as a result of higher debt and lower cash balances
due primarily to the Industrial Filtration Acquisitions. Interest expense
increased to $2,795,000 in 2000 compared to $545,000 in 1999. In addition,
currency exchange losses of approximately $360,000 were recorded during the 2000
quarter. Net other expense for second quarter 1999 totaled $202,000.
Earnings before income taxes and minority interests for second quarter of 2000
totaled $15,912,000, up from $13,664,000 in the comparable quarter last year.
The increase resulted from improved results of operations from the Company's
businesses and the operating results from the Industrial Filtration Acquisitions
offset by increased interest expense on the debt related to the acquisitions.
The provision for income taxes in 2000 was $5,800,000, an effective rate of
36.5%, and compares to an effective tax rate of 36.5% of pre-tax earnings in the
1999 quarter.
Net earnings in the second quarter of the current year were $10,090,000, or
$0.41 per share on a diluted basis. The 1999 net earnings for the quarter of
$8,650,000 resulted in diluted earnings per share of $0.36. Basic average shares
outstanding were 24,252,425 and diluted average shares outstanding were
24,516,307 at the end of the second quarter of 2000.
SIX MONTHS 2000 COMPARED TO SIX MONTHS OF 1999.
Net sales for the six-month 2000 period totaled $312,902,000, an increase of
49.3% over 1999, and include the Industrial Filtration Acquisitions and several
small acquisitions in 2000. Excluding these acquisitions, sales increased
approximately 10.5% over the 1999 six-month period. As a result of strong
domestic and international sales of filtration products, the Engine/Mobile
Filtration segment recorded an increase of 8.9% over the 1999 period and the
Industrial/Environmental segment, excluding acquisitions, also recorded an
increase of 8.9% over 1999. Including the sales from the acquisitions, the
Industrial/Environmental Filtration sales for the 2000 six-month period were
$153,815,000 compared to $66,743,000 in 1999, or an increase of 130.5%. The
Packaging segment's sales were 21.3% higher than in 1999 as a result of
increased sales of metal and plastic packaging products and metal lithographed
sheets.
Operating profit for the 2000 six-month period was $32,660,000, which compares
to $23,904,000 in 1999. Operating profit was 10.4% of sales in 2000 compared to
11.4% in 1999. The reduction in operating margin from 1999 was primarily due to
the Industrial Filtration Acquisitions and related additional depreciation and
amortization. The Engine/Mobile Filtration segment recorded an increase in
operating profit of 10.7% compared to 1999 primarily due to the strong sales for
the
Page 10 of 16
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
period. In addition, cost reduction initiatives, reduced legal costs and
improved capacity utilization offset increased costs related to the start-up of
the new distribution center in Kearney, Nebraska. Legal costs and further
start-up costs related to the distribution center are not expected to have a
material impact on the remainder of fiscal 2000. The Industrial/Environmental
Filtration segment's operating profit increased to $6,738,000 compared to
$1,740,000 in 1999. The increase is primarily due to the acquisitions and an
increase in operating margin, excluding the acquisitions, to 4.8% in 2000 from
2.6% recorded in 1999. This increase in operating margin resulted primarily from
higher capacity utilization and cost reduction initiatives. The Packaging
segment's operating margin improved to 10.2% for the 2000 period from 6.7% of
sales in 1999 due primarily to significantly increased sales and capacity
utilization.
Net other expense of $5,717,000 for the 2000 six-month period was higher than
the $437,000 recorded in the 1999 period due primarily to additional interest
expense and lower interest income. Net interest expense increased primarily due
to higher debt and lower cash balances related to the Industrial Filtration
Acquisitions. Currency exchange losses of approximately $400,000 also were
higher in the 2000 six-month period.
Earnings before income taxes and minority interests for the six-month 2000
period totaled $26,943,000 compared to $23,467,000 in 1999. This increase
reflects improved operating results and operating results from the acquisitions
in fiscal 1999 and 2000 offset by increased interest expense. The effective tax
rate of 36.3% for the six-month 2000 period compares to 36.6% in 1999.
Net earnings of $17,153,000 in 2000, or diluted earnings per share of $0.70,
compare to $14,860,000, or $0.61 per diluted share in 1999. Basic average shares
outstanding were 24,210,788 and diluted average shares outstanding were
24,462,017 at the end of the six months of 2000.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $13,161,000 for the six-month 2000
period and included increased net earnings, depreciation and amortization. The
increase in depreciation and amortization was primarily due to the effect of the
1999 acquisitions. The net increase in assets and liabilities was $15,276,000
for six months 2000 compared to $7,512,000 recorded in the 1999 period. Accounts
receivable and inventories were increased during the 2000 six-month period due
to a higher level of business activity throughout the Company. Other current
assets and accrued current liabilities were reduced during the second quarter of
2000 due to the use of restricted trust assets for payment of nonqualified
pension liabilities. Cash flows used in investing activities increased in 2000
primarily due to the cash used for several acquisitions totaling $12,972,000. In
addition, the Company issued 160,704 common shares related to one of the
acquisitions. Additions to plant assets totaled $12,166,000 compared to
$11,131,000 in 1999. Cash provided by financing activities in 2000 included
additional net borrowing of $11,500,000 from a revolving credit agreement
established in September 1999. Payments on long-term debt in the 2000 six-month
period were $1,686,000 compared to $227,000 in 1999. Dividends paid totaled
$5,560,000 during the 2000 six-month period. In the 1999 six-month period, the
Company repurchased 50,000 shares of common stock for $897,000 and paid
dividends of $5,376,000.
Page 11 of 16
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
CLARCOR's current operations continue to generate cash and sufficient lines of
credit remain available to fund current operating needs, pay dividends, and
provide for interest payments and required principal payments related to the
Company's long-term debt. In fiscal 1999, the Company entered into a
$185,000,000 multicurrency revolving credit facility against which $126,500,000
has been used primarily for the Industrial Filtration Acquisitions and the
acquisitions in fiscal 2000. Principal payments on long-term debt will be
approximately $6,700,000 in fiscal 2000; however, no payments are required in
fiscal 2000 on the multicurrency revolving credit facility. The Company is in
compliance with restrictive covenants related to the facility. EBITDA, or
operating profit before depreciation and amortization, increased to $43,811,000
compared to $30,864,000 in 1999. Capital expenditures in fiscal year 2000 are
expected to be approximately $29,000,000 compared to the total of $21,822,000 in
1999. The 2000 amounts will be used to increase production capacity, reduce
manufacturing costs, integrate and improve the businesses acquired in 1999, and
develop new products.
The Company's financial position at the end of the second quarter reflected
additional investments in working capital to support the level of business
activity for fiscal 2000 and the acquisitions made in 1999 and 2000. Cash and
short-term investments totaled $7,574,000 at the end of the quarter, a decrease
from $14,745,000 at year-end 1999. Accounts receivable increased to $110,238,000
and inventory increased to $100,623,000 at the end of the second quarter 2000
due to higher sales activities. The inventory increase also reflects anticipated
sales levels for the remainder of fiscal 2000. The current ratio at the end of
the second quarter was 2.5:1 compared to 2.3:1 at the end of fiscal 1999. The
current year ratio of long-term debt to total capitalization was 41.3% compared
to the level at year-end of 40.9%.
At May 27, 2000, CLARCOR had 24,245,572 shares of common stock outstanding
including 160,704 shares issued related to an acquisition in December 1999.
OTHER MATTERS
Market Risk
The Company's interest expense on long-term debt is sensitive to changes in
interest rates. In addition, changes in foreign currency exchange rates may
affect assets, liabilities and commitments that are to be settled in cash and
are denominated in foreign currencies. During second quarter 2000, the Company
entered into a three-month interest rate swap agreement at a fixed interest rate
of 6.565% on a notional amount of $60,000,000 and the Company will receive
interest at floating rates based on LIBOR. Similar interest rate swap agreements
may be entered into depending on market conditions. These market risks are
similar to those discussed in the Company's Annual Report and Form 10-K for the
year ended November 30, 1999 (the "Annual Report") in the Financial Review on
page 13.
Recent Accounting Pronouncements
The Company currently expects to adopt Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," in fiscal year 2001 as discussed in the Financial Review on page 13
of the Annual Report.
Page 12 of 16
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements,"
relating to revenue recognition under generally accepted accounting principles
in financial statements. SAB 101 will be effective for the Company in the first
quarter of fiscal 2001 and the Company expects to fully review the guidance
provided in SAB 101 during fiscal 2000.
Outlook
Since the end of the first quarter of 2000, there has been no significant change
in the business outlook for CLARCOR for the remainder of fiscal 2000. The order
rate in each of the Company's business segments continues to be good, and as a
result, sales and operating profit are expected to continue to increase compared
to the prior year levels. New product introductions and additional distribution
of the Company's product lines are expected to increase sales during fiscal
2000. Several product lines from the Industrial Filtration Acquisitions,
including aerospace filters and sand control filters for oil drilling, have
higher sales growth than previously expected. In addition, the Company's
emphasis on cost control and productivity improvements will continue throughout
fiscal 2000. Overall, operating margins are expected to be lower in 2000 than in
1999 due to the Industrial Filtration Acquisitions and related depreciation and
amortization. On an EBITDA basis, the new acquisitions generate higher margins
than the historical results from the Industrial/Environmental segment, but are
generally lower than the Company's other business segments. Without the
additional depreciation and amortization arising from those acquisitions,
operating margins would have improved significantly for the
Industrial/Environmental segment.
For the remainder of fiscal 2000, the Engine/Mobile segment's sales and
operating profit are expected to increase compared to the 1999 periods. The
Industrial Filtration Acquisitions will continue to be integrated into the
Industrial/Environmental Filtration segment and additional cost savings and
synergies are expected to be recognized, net of integration costs. In the first
six months of fiscal 2000, these businesses achieved many of the operating goals
originally set at the acquisition date, and the integration activities are on
schedule and will continue throughout 2000 and 2001. The Packaging segment will
continue with its transition to a business model focused on growth in its core
strength of flat sheet metal lithography, and this repositioning is expected to
result in improved sales overall for 2000 compared to fiscal 1999. As in past
years due to higher third and fourth quarter sales levels, the Packaging
segment's operating margin for the remainder of the year is expected to increase
from the 10.4% recorded for the first six months of fiscal 2000.
Although higher energy prices, foreign currency fluctuations and higher interest
rates may affect the economy as the year progresses, the Company remains
enthusiastic and confident about the remainder of fiscal 2000. As product demand
remains good overall, the Company expects to continue to perform during the rest
of the year as it has in the first half with record sales and profits. CLARCOR
continues to produce a very strong, stable cash flow. EBITDA should exceed $90
million, a 25% increase over 1999. Capital expenditure spending is expected to
continue at the planned rate, as these investments remain important for the
Company's future growth.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements quoted in the body of this report, and statements in the
"Outlook" section of this report are forward-looking. These statements involve
risk and uncertainty. Actual future results and
Page 13 of 16
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
trends may differ materially depending on a variety of factors including: the
volume and timing of orders received during the quarter; the mix of changes in
distribution channels through which the Company's products are sold; the timing
and acceptance of new products and product enhancements by the Company or its
competitors; changes in pricing, labor availability, product life cycles, raw
material costs, energy costs, and purchasing patterns of distributors and
customers; competitive conditions in the industry; business cycles affecting the
markets in which the Company's products are sold; the effectiveness of plant
conversions, plant expansions and productivity improvement programs; the
management of both growth and acquisitions; the fluctuation in foreign and U.S.
currency exchange rates; the fluctuation in interest rates, primarily LIBOR,
which affect the cost of borrowing under the revolving credit facility;
extraordinary events, such as litigation or acquisitions or divestitures
including related charges; and economic conditions generally or in various
geographic areas. All of the foregoing matters are difficult to forecast. The
future results of the Company may fluctuate as a result of these and the other
risk factors detailed from time to time in the Company's Securities and Exchange
Commission reports.
Due to the foregoing items it is possible that in some future quarters the
Company's operating results will be below the expectation of some stock market
analysts and investors. In such event, the price of CLARCOR common stock could
be materially adversely affected.
Page 14 of 16
<PAGE> 16
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the annual meeting of shareholders of CLARCOR Inc. held on
March 25, 2000, all of management's nominees for directors, as
listed in the proxy statement dated February 23, 2000, were
elected. The Company had 24,255,740 shares of common stock
outstanding as of the close of business on the February 11,
2000 record date, and the holders of 21,316,924 shares of
common stock were present at the meeting, in person or by
proxy.
The three nominees elected received votes as follows:
For Withheld
J. Marc Adam 21,187,166 129,758
James L. Packard 21,187,206 129,718
Stanton K. Smith, Jr. 21,184,535 132,389
Item 6a - Exhibit 27 Financial Data Schedule.
Item 6b - On March 29, 2000, the Company filed a Form 8-K
announcing that the Board of Directors appointed Norman E.
Johnson as Chairman, President, and Chief Executive Officer of
the Company.
Page 15 of 16
<PAGE> 17
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)
June 26, 2000 By /s/ Bruce A. Klein
------------------------- -------------------------------------------
(Date) Bruce A. Klein, Vice President - Finance
and Chief Financial Officer
Page 16 of 16
