Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended August 28, 2010
OR
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from _______ to ________
Commission
File Number 1-11024
CLARCOR
Inc.
|
(Exact
name of registrant as specified in its
charter)
|
DELAWARE
|
|
36-0922490
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
840
Crescent Centre Drive, Suite 600, Franklin, Tennessee
37067
|
(Address
of principal executive
offices)
|
Registrant’s
telephone number, including area code
|
615-771-3100
|
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
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Exchange
Act Rule 12b-2) Yes ¨ No x
As of
August 28, 2010, 50,390,296 common shares with a par value of $1 per share were
outstanding.
TABLE
OF CONTENTS
|
PAGE
|
|
|
|
|
Part
I – Financial Information
|
|
|
|
|
|
|
Item
1.
|
Financial
Statements
|
3
|
|
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and
|
|
|
|
|
Results
of Operations
|
26
|
|
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
38
|
|
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
38
|
|
|
|
|
Part
II – Other Information
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
39
|
|
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
39
|
|
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
39
|
|
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
*
|
|
|
|
|
|
|
|
Item
4.
|
[Removed
and Reserved]
|
*
|
|
|
|
|
|
|
|
Item
5.
|
Other
Information
|
*
|
|
|
|
|
|
|
|
Item
6.
|
Exhibits
|
39
|
|
|
|
|
|
|
|
*
Item omitted because no answer is called for or item is not
applicable
|
|
Part I - Item 1. Financial
Statements
CLARCOR
Inc.
CONSOLIDATED
CONDENSED STATEMENTS OF EARNINGS
(Dollars
in thousands, except per share data)
(Unaudited)
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
262,770 |
|
|
$ |
230,271 |
|
|
$ |
735,770 |
|
|
$ |
673,356 |
|
Cost
of sales
|
|
|
171,209 |
|
|
|
156,328 |
|
|
|
489,561 |
|
|
|
468,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
91,561 |
|
|
|
73,943 |
|
|
|
246,209 |
|
|
|
204,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and administrative expenses
|
|
|
49,869 |
|
|
|
41,863 |
|
|
|
145,409 |
|
|
|
133,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
41,692 |
|
|
|
32,080 |
|
|
|
100,800 |
|
|
|
70,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(103 |
) |
|
|
(316 |
) |
|
|
(340 |
) |
|
|
(1,848 |
) |
Interest
income
|
|
|
70 |
|
|
|
40 |
|
|
|
186 |
|
|
|
270 |
|
Other,
net
|
|
|
15 |
|
|
|
189 |
|
|
|
(582 |
) |
|
|
634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18 |
) |
|
|
(87 |
) |
|
|
(736 |
) |
|
|
(944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
before income taxes
|
|
|
41,674 |
|
|
|
31,993 |
|
|
|
100,064 |
|
|
|
70,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
13,103 |
|
|
|
10,669 |
|
|
|
32,751 |
|
|
|
22,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
|
28,571 |
|
|
|
21,324 |
|
|
|
67,313 |
|
|
|
47,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to noncontrolling interests
|
|
|
(245 |
) |
|
|
(42 |
) |
|
|
(236 |
) |
|
|
(302 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to CLARCOR Inc.
|
|
$ |
28,326 |
|
|
$ |
21,282 |
|
|
$ |
67,077 |
|
|
$ |
46,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings per share attributable to CLARCOR Inc:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.56 |
|
|
$ |
0.42 |
|
|
$ |
1.32 |
|
|
$ |
0.92 |
|
Diluted
|
|
$ |
0.55 |
|
|
$ |
0.42 |
|
|
$ |
1.31 |
|
|
$ |
0.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
number of shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,796,393 |
|
|
|
50,733,251 |
|
|
|
50,700,066 |
|
|
|
50,941,354 |
|
Diluted
|
|
|
51,248,957 |
|
|
|
51,019,060 |
|
|
|
51,145,071 |
|
|
|
51,208,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid per share
|
|
$ |
0.0975 |
|
|
$ |
0.0900 |
|
|
$ |
0.2925 |
|
|
$ |
0.2700 |
|
See Notes
to Consolidated Condensed Financial Statements
CLARCOR
Inc.
CONSOLIDATED
CONDENSED BALANCE SHEETS
(Dollars
in thousands)
|
|
August 28,
|
|
|
November 28,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
87,224 |
|
|
$ |
59,277 |
|
Restricted
cash
|
|
|
765 |
|
|
|
762 |
|
Short-term
investments
|
|
|
- |
|
|
|
32,171 |
|
Accounts
receivable, less allowance for losses
|
|
|
|
|
|
|
|
|
of
$11,995 for 2010 and $15,150 for 2009
|
|
|
184,178 |
|
|
|
164,545 |
|
Inventories:
|
|
|
|
|
|
|
|
|
Raw
materials
|
|
|
68,007 |
|
|
|
57,579 |
|
Work
in process
|
|
|
27,980 |
|
|
|
23,405 |
|
Finished
products
|
|
|
90,447 |
|
|
|
76,432 |
|
Total
inventories
|
|
|
186,434 |
|
|
|
157,416 |
|
Deferred
income taxes
|
|
|
29,732 |
|
|
|
27,567 |
|
Prepaid
expenses and other current assets
|
|
|
6,978 |
|
|
|
6,790 |
|
Total
current assets
|
|
|
495,311 |
|
|
|
448,528 |
|
|
|
|
|
|
|
|
|
|
Plant
assets at cost,
|
|
|
452,148 |
|
|
|
447,241 |
|
less
accumulated depreciation
|
|
|
(271,713 |
) |
|
|
(259,150 |
) |
|
|
|
180,435 |
|
|
|
188,091 |
|
|
|
|
|
|
|
|
|
|
Assets
held for sale
|
|
|
3,769 |
|
|
|
- |
|
Goodwill
|
|
|
226,920 |
|
|
|
228,182 |
|
Acquired
intangibles, less accumulated amortization
|
|
|
92,195 |
|
|
|
95,990 |
|
Deferred
income taxes
|
|
|
457 |
|
|
|
630 |
|
Other
noncurrent assets
|
|
|
11,168 |
|
|
|
12,469 |
|
Total
assets
|
|
$ |
1,010,255 |
|
|
$ |
973,890 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$ |
99 |
|
|
$ |
99 |
|
Accounts
payable
|
|
|
61,922 |
|
|
|
54,627 |
|
Accrued
insurance liabilities
|
|
|
12,043 |
|
|
|
10,572 |
|
Accrued
salaries, wages and commissions
|
|
|
23,834 |
|
|
|
8,599 |
|
Customer
deposits
|
|
|
13,151 |
|
|
|
8,705 |
|
Compensated
absences
|
|
|
7,860 |
|
|
|
7,903 |
|
Other
accrued liabilities
|
|
|
37,622 |
|
|
|
36,018 |
|
Income
taxes
|
|
|
3,523 |
|
|
|
5,419 |
|
Total
current liabilities
|
|
|
160,054 |
|
|
|
131,942 |
|
|
|
|
|
|
|
|
|
|
Long-term
debt, less current portion
|
|
|
17,327 |
|
|
|
52,096 |
|
Postretirement
healthcare benefits
|
|
|
696 |
|
|
|
689 |
|
Long-term
pension liabilities
|
|
|
63,625 |
|
|
|
61,746 |
|
Deferred
income taxes
|
|
|
30,521 |
|
|
|
32,136 |
|
Other
long-term liabilities
|
|
|
4,660 |
|
|
|
5,394 |
|
Total
liabilities
|
|
|
276,883 |
|
|
|
284,003 |
|
|
|
|
|
|
|
|
|
|
Contingencies
|
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interest
|
|
|
1,570 |
|
|
|
1,412 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
50,390 |
|
|
|
50,393 |
|
Capital
in excess of par value
|
|
|
37,160 |
|
|
|
36,814 |
|
Accumulated
other comprehensive loss
|
|
|
(41,322 |
) |
|
|
(32,879 |
) |
Retained
earnings
|
|
|
684,554 |
|
|
|
632,291 |
|
Total
CLARCOR Inc. equity
|
|
|
730,782 |
|
|
|
686,619 |
|
Noncontrolling
interests
|
|
|
1,020 |
|
|
|
1,856 |
|
Total
shareholders' equity
|
|
|
731,802 |
|
|
|
688,475 |
|
Total
liabilities and shareholders' equity
|
|
$ |
1,010,255 |
|
|
$ |
973,890 |
|
See Notes
to Consolidated Condensed Financial Statements
CLARCOR
Inc.
CONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars
in thousands)
(Unaudited)
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
earnings
|
|
$ |
67,313 |
|
|
$ |
47,167 |
|
Depreciation
|
|
|
20,357 |
|
|
|
20,434 |
|
Amortization
|
|
|
3,563 |
|
|
|
3,662 |
|
Stock-based
compensation expense
|
|
|
4,004 |
|
|
|
3,664 |
|
Excess
tax benefit from stock-based compensation
|
|
|
(1,893 |
) |
|
|
(1,513 |
) |
Changes
in short-term investments
|
|
|
32,171 |
|
|
|
(16,834 |
) |
Changes
in assets and liabilities, excluding short-term
|
|
|
|
|
|
|
|
|
investments
|
|
|
(24,800 |
) |
|
|
19,958 |
|
Other,
net
|
|
|
227 |
|
|
|
(188 |
) |
Net
cash provided by operating activities
|
|
|
100,942 |
|
|
|
76,350 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to plant assets
|
|
|
(17,305 |
) |
|
|
(15,019 |
) |
Proceeds
from disposition of plant assets
|
|
|
88 |
|
|
|
- |
|
Business
acquisitions, net of cash acquired
|
|
|
- |
|
|
|
(9,389 |
) |
Proceeds
from insurance claim
|
|
|
557 |
|
|
|
- |
|
Investment
in affiliates
|
|
|
(100 |
) |
|
|
(1,794 |
) |
Other,
net
|
|
|
- |
|
|
|
462 |
|
Net
cash used in investing activities
|
|
|
(16,760 |
) |
|
|
(25,740 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Net
payments under line of credit
|
|
|
(35,000 |
) |
|
|
(15,000 |
) |
Borrowings
under long-term debt
|
|
|
- |
|
|
|
8,410 |
|
Payments
on long-term debt
|
|
|
(115 |
) |
|
|
(809 |
) |
Sale
of capital stock under stock option
|
|
|
|
|
|
|
|
|
and
employee purchase plans
|
|
|
4,979 |
|
|
|
2,944 |
|
Acquisition
of noncontrolling interest
|
|
|
(732 |
) |
|
|
(2,388 |
) |
Purchase
of treasury stock
|
|
|
(10,009 |
) |
|
|
(19,767 |
) |
Excess
tax benefits from stock-based compensation
|
|
|
1,893 |
|
|
|
1,513 |
|
Cash
dividends paid
|
|
|
(14,828 |
) |
|
|
(13,754 |
) |
Net
cash used in financing activities
|
|
|
(53,812 |
) |
|
|
(38,851 |
) |
|
|
|
|
|
|
|
|
|
Net
effect of exchange rate changes on cash
|
|
|
(2,423 |
) |
|
|
4,380 |
|
|
|
|
|
|
|
|
|
|
Net
change in cash and cash equivalents
|
|
|
27,947 |
|
|
|
16,139 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of period
|
|
|
59,277 |
|
|
|
40,715 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
87,224 |
|
|
$ |
56,854 |
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
1,126 |
|
|
$ |
1,930 |
|
Income
taxes
|
|
$ |
37,058 |
|
|
$ |
17,301 |
|
See Notes
to Consolidated Condensed Financial Statements
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
1.
|
CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
|
Basis of
Presentation
The
Consolidated Condensed Statements of Earnings and the Consolidated Condensed
Statements of Cash Flows for the periods ended August 28, 2010 and August 29,
2009 and the Consolidated Condensed Balance Sheet as of August 28, 2010 have
been prepared by CLARCOR Inc. (“CLARCOR” or “the Company”) without
audit. The Consolidated Condensed Financial Statements have been
prepared on the same basis as those in the Company’s Annual Report on Form 10-K
for the fiscal year ended November 28, 2009 (“2009 Form 10-K”). The
November 28, 2009 Consolidated Condensed Balance Sheet data was derived from the
Company’s year-end audited Consolidated Financial Statements as presented in the
2009 Form 10-K but does not include all disclosures required by accounting
principles generally accepted in the United States of America. 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 August 28, 2010, are not necessarily indicative of the
operating results for the full year. The information included in this
Form 10-Q should be read in conjunction with the audited Consolidated Financial
Statements and accompanying notes included in the Company’s 2009 Form
10-K.
New Accounting
Guidance
In
February 2010, the Financial Accounting Standards Board (“FASB”) issued guidance
which amended its subsequent events guidance issued in May 2009. This
guidance eliminated the requirement for an SEC filer to disclose the date
through which subsequent events were evaluated and refined the scope of the
disclosure requirement for reissued financial statements. The impact
of adopting this guidance during the quarterly period ended February 27, 2010
only affected disclosures in the Consolidated Condensed Financial
Statements.
In
January 2010, the FASB issued guidance related to fair value measurements (see
Note 6) requiring new disclosures regarding transfers in and out of Level 1 and
2 and requiring the gross presentation of activity within Level
3. The guidance also clarifies existing disclosures of inputs and
valuation techniques for Level 2 and 3 fair value
measurements. Additionally, the guidance includes conforming
amendments to employers’ disclosures about postretirement benefit plan
assets. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosure of activity within Level 3
fair value measurements, which is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those years. The
impact of adopting this guidance during the quarterly period ended May 29, 2010
resulted in additional disclosures in the Notes to the Consolidated Condensed
Financial Statements.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
In
October 2009, the FASB issued guidance on revenue arrangements with multiple
deliverables effective for the Company’s 2011 fiscal year, although early
adoption is permitted. The guidance revises the criteria for
separating, measuring, and allocating arrangement consideration to each
deliverable in a multiple element arrangement. The guidance requires
companies to allocate revenue using the relative selling price of each
deliverable, which must be estimated if the company does not have a history of
selling the deliverable on a stand-alone basis or third-party evidence of
selling price. The impact of adopting this guidance on November 28,
2010 is not anticipated to be material to the Consolidated Condensed Financial
Statements.
In
December 2008, the FASB expanded the required disclosures for pension and other
postretirement plans by requiring disclosures about how investment allocation
decisions are made by management, major categories of plan assets and
significant concentration of risk. Additionally, an employer is
required to disclose information about the valuation of plan
assets. This accounting guidance is effective for the Company’s
fiscal year 2010 year-end and will affect the disclosures in the annual
Consolidated Financial Statements.
In June
2008, the FASB issued guidance that requires that unvested share-based payment
awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) be considered participating securities and be included
in the computation of earnings per share pursuant to the two-class
method. The Company’s unvested restricted stock unit awards discussed
in Note 3 qualify as participating securities under this
guidance. The impact of adopting this guidance on November 29, 2009
was not material to the Consolidated Condensed Financial
Statements.
In
December 2007, the FASB issued guidance affecting the accounting for businesses
acquired, the presentation of noncontrolling interests, previously called
minority interests, and requiring that assets acquired or liabilities assumed in
a business combination and arising from a contingency be recognized at fair
value at the acquisition date if the acquisition date fair value can be
determined during the measurement period. The Company adopted this
guidance on November 29, 2009. The guidance dealing with
noncontrolling interests was retrospectively applied to all prior period
information for presentation and disclosure requirements and resulted in the
reclassification of certain prior year amounts. For all periods
presented, noncontrolling interests are classified in the Consolidated Condensed
Balance Sheets as either a separate component of shareholders’ equity or as
redeemable noncontrolling interests. Net earnings attributable to
CLARCOR and the noncontrolling interests are reflected in the Consolidated
Condensed Statements of Earnings. Payments for the acquisition of
noncontrolling interests in entities of which the Company did not previously
have control are included in investing activities in the Consolidated Condensed
Statements of Cash Flows. Payments for acquisitions of noncontrolling
interest in entities of which the Company did have previous control are treated
as equity transactions and are included in financing activities in the
Consolidated Condensed Statements of Cash Flows. Prior to the
adoption of this guidance, payments related to controlled entities were included
in investing activities.
2.
|
BUSINESS ACQUISITIONS,
INVESTMENTS AND REDEEMABLE NONCONTROLLING
INTERESTS
|
Business
Acquisitions
On June
8, 2010, the Company purchased the 15% noncontrolling ownership interests in
Pujiang Novaeastern International Mesh Co., Ltd. (“Pujiang”) and Purolator
Advanced Filtration (Quzhou) Co., Ltd. (“Quzhou”) for $732, thereby making the
companies 100% owned subsidiaries of CLARCOR. This transaction
decreased noncontrolling interests by $971 and increased capital in excess of
par value by $239. The following table reflects the effects on
CLARCOR equity as a result of changes in CLARCOR’s ownership interest in its
subsidiaries.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
earnings attributable to CLARCOR
|
|
$ |
28,326 |
|
|
$ |
21,282 |
|
|
$ |
67,077 |
|
|
$ |
46,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers
from noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in capital in excess of par value for purchase of remaining 15%
noncontrolling interests in Puijang and Quzhou
|
|
|
239 |
|
|
|
- |
|
|
|
239 |
|
|
|
- |
|
Change
from net income attributable to CLARCOR and transfers from noncontrolling
interests
|
|
$ |
28,565 |
|
|
$ |
21,282 |
|
|
$ |
67,316 |
|
|
$ |
46,865 |
|
Investments
Effective
May 1, 2008, the Company acquired a 30% share in BioProcessH2O LLC
(“BPH”), a Rhode Island based manufacturer of industrial waste water and water
reuse filtration systems, for $4,000. Under the terms of the
agreement with BPH, the Company has the right, but not the obligation, to
acquire additional ownership shares and eventually complete ownership of the
company over several years at a price based on, among other factors, BPH’s
operating income. The investment, with a carrying amount of $3,361
included in other noncurrent assets, is being accounted for under the equity
method of accounting. The carrying amount is adjusted each period to
recognize the Company’s share of the earnings or losses of BPH based on the
percentage of ownership, as well as the receipt of any
dividends. During the nine months ended August 28, 2010, the Company
received dividends of $382 from BPH. The Company did not receive any
dividends from BPH during the nine months ended August 29, 2009. The
equity investment is periodically reviewed for indicators of
impairment. The amount of undistributed BPH earnings included within
the retained earnings of the Company was not material at August 28, 2010 or
November 28, 2009.
The
Company also owns a 15% share in BioProcess Algae LLC (“Algae”), a Delaware
based company developing technology to grow and harvest algae which can be used
to consume carbon dioxide and also be used as a renewable energy
source. During the quarter ended August 28, 2010, the Company
invested an additional $300. The investment, with a carrying amount
of $300 included in other noncurrent assets, is being accounted for under the
cost method of accounting. Under the cost method, the Company
recognizes dividends as income when received and reviews the cost basis of the
investment for impairment if factors indicate that a decrease in value of the
investment has occurred. The Company has not received any dividends
from Algae.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
Redeemable Noncontrolling
Interests
In March
2007, the Company acquired an 80% ownership share in Sinfa SA (“SINFA”), a
manufacturer of automotive and heavy-duty engine filters based in Casablanca,
Morocco. As part of the purchase agreement, the Company and the
noncontrolling owners each have an option to require the purchase of the
remaining 20% ownership shares by the Company after December 31, 2012 which
would result in SINFA becoming a wholly owned subsidiary. The
remaining 20% of SINFA owned by the noncontrolling owners has been reported as
redeemable noncontrolling interests and classified as mezzanine equity in the
Consolidated Condensed Balance Sheets. The redeemable noncontrolling
interests will be accreted to the redemption price, through equity, at the point
at which the redemption becomes probable.
3.
|
INCENTIVE PLANS AND
STOCK-BASED COMPENSATION
|
On March
23, 2009, the shareholders of CLARCOR approved the 2009 Incentive Plan, which
replaced the 2004 Incentive Plan. The 2009 Incentive Plan allows the
Company to grant stock options, restricted stock unit awards, restricted stock,
performance awards and other awards to officers, directors and key employees of
up to 3,800,000 shares during a ten-year period that ends in December
2019. Upon share option exercise or restricted stock unit award
conversion, the Company issues new shares unless treasury shares are
available. The key provisions of the Company’s stock-based incentive
plans are described in Note N of the Company’s Consolidated Financial Statements
included in the 2009 Form 10-K.
Stock
Options
Nonqualified
stock options are granted at exercise prices equal to the market price of
CLARCOR common stock at the date of grant, which is the date the Company’s Board
of Directors approves the grant and the participants receive it. The
Company’s Board of Directors determines the vesting requirements for stock
options at the time of grant and may accelerate vesting. In general,
options granted to key employees vest 25% per year beginning at the end of the
first year; therefore, they become fully exercisable at the end of four
years. Vesting may be accelerated in the event of retirement,
disability or death of a participant or change in control of the
Company. Options granted to non-employee directors vest
immediately. All options expire ten years from the date of grant
unless otherwise terminated.
The
following table summarizes compensation expense related to stock options during
the quarter and nine months ended August 28, 2010 and August 29,
2009.
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Pre-tax
compensation expense
|
|
$ |
603 |
|
|
$ |
411 |
|
|
$ |
3,133 |
|
|
$ |
2,688 |
|
Tax
benefits
|
|
|
(175 |
) |
|
|
(131 |
) |
|
|
(1,026 |
) |
|
|
(855 |
) |
Excess
tax benefits associated with tax deductions over the amount of
compensation expense recognized in the Consolidated Condensed Financial
Statements
|
|
|
185 |
|
|
|
1,105 |
|
|
|
1,968 |
|
|
|
1,672 |
|
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
following table summarizes activity with respect to stock options granted by the
Company and includes options granted under the 1994 Incentive Plan, the 2004
Incentive Plan and the 2009 Incentive Plan.
|
|
Shares Granted
under Incentive
Plans
|
|
|
Weighted
Average
Exercise Price
|
|
Outstanding
at beginning of year
|
|
|
3,229,187 |
|
|
$ |
27.43 |
|
Granted
|
|
|
476,960 |
|
|
$ |
32.63 |
|
Exercised
|
|
|
(335,655 |
) |
|
$ |
21.36 |
|
Surrendered
|
|
|
(36,754 |
) |
|
$ |
33.00 |
|
Outstanding
at August 28, 2010
|
|
|
3,333,738 |
|
|
$ |
28.73 |
|
|
|
|
|
|
|
|
|
|
Options
exercisable at August 28, 2010
|
|
|
2,450,657 |
|
|
$ |
27.08 |
|
At August
28, 2010, there was $3,412 of unrecognized compensation cost related to option
awards which the Company expects to recognize over a weighted-average period of
2.6 years.
The
following table summarizes information about the Company’s outstanding and
exercisable options at August 28, 2010.
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of
Exercise Prices
|
|
Number
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Intrinsic
Value
|
|
|
Weighted
Average
Remaining
Life in Years
|
|
|
Number
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Intrinsic
Value
|
|
|
Weighted
Average
Remaining
Life in Years
|
|
$9.25 - $13.75
|
|
|
154,084 |
|
|
$ |
12.71 |
|
|
$ |
3,342 |
|
|
|
1.00 |
|
|
|
154,084 |
|
|
$ |
12.71 |
|
|
$ |
3,342 |
|
|
|
1.00 |
|
$16.01 - $22.80
|
|
|
596,443 |
|
|
$ |
20.05 |
|
|
|
8,560 |
|
|
|
2.69 |
|
|
|
596,443 |
|
|
$ |
20.05 |
|
|
|
8,560 |
|
|
|
2.69 |
|
$25.31 - $34.40
|
|
|
2,076,861 |
|
|
$ |
30.59 |
|
|
|
7,906 |
|
|
|
6.53 |
|
|
|
1,346,162 |
|
|
$ |
29.48 |
|
|
|
6,624 |
|
|
|
5.43 |
|
$35.11 - $38.23
|
|
|
506,350 |
|
|
$ |
36.17 |
|
|
|
- |
|
|
|
6.24 |
|
|
|
353,968 |
|
|
$ |
36.04 |
|
|
|
- |
|
|
|
5.80 |
|
|
|
|
3,333,738 |
|
|
$ |
28.73 |
|
|
$ |
19,808 |
|
|
|
5.54 |
|
|
|
2,450,657 |
|
|
$ |
27.08 |
|
|
$ |
18,526 |
|
|
|
4.54 |
|
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
following table summarizes information about stock option exercises during the
quarter and nine months ended August 28, 2010 and August 29, 2009.
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Fair
value of options exercised
|
|
$ |
197 |
|
|
$ |
905 |
|
|
$ |
1,939 |
|
|
$ |
1,353 |
|
Total
intrinsic value of options exercised
|
|
|
490 |
|
|
|
2,854 |
|
|
|
5,383 |
|
|
|
4,381 |
|
Cash
received upon exercise of options
|
|
|
726 |
|
|
|
541 |
|
|
|
4,150 |
|
|
|
2,067 |
|
Tax
benefit realized from exercise of options
|
|
|
163 |
|
|
|
1,055 |
|
|
|
1,939 |
|
|
|
1,606 |
|
Addition
to capital in excess of par value due to exercise of stock
options
|
|
|
857 |
|
|
|
679 |
|
|
|
5,264 |
|
|
|
2,582 |
|
The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions by grant year.
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
Weighted
average fair value per option at the date of grant for options
granted
|
|
$ |
8.72 |
|
|
$ |
7.62 |
|
Risk-free
interest rate
|
|
|
2.76 |
% |
|
|
1.91 |
% |
Expected
dividend yield
|
|
|
1.25 |
% |
|
|
0.96 |
% |
Expected
volatility factor
|
|
|
26.28 |
% |
|
|
24.16 |
% |
Expected
option term in years
|
|
|
5.7 |
|
|
|
6.1 |
|
The
expected life selected for options granted during each year presented represents
the period of time that the options are expected to be outstanding based on
historical data of option holder exercise and termination
behavior. Expected volatilities are based upon historical volatility
of the Company’s monthly stock closing prices over a period equal to the
expected life of each option grant. The risk-free interest rate is
selected based on yields from U.S. Treasury zero-coupon issues with a remaining
term approximately equal to the expected term of the options being
valued. Expected dividend yield is based on historical
information.
Restricted Stock Unit
Awards
The
Company’s restricted stock unit awards are considered nonvested share
awards. The restricted stock unit awards require no payment from the
employee. Compensation cost is recorded based on the market price of
the stock on the grant date and is recorded equally over the vesting period of
four years. During the vesting period, officers and key employees
receive compensation equal to the amount of dividends declared on common shares
they would have been entitled to receive had the shares been
issued. Upon vesting, employees may elect to defer receipt of their
shares. There were 101,629 and 99,265 vested and deferred shares at
August 28, 2010 and November 28, 2009, respectively.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
following table summarizes compensation expense related to restricted stock unit
awards during the quarter and nine months ended August 28, 2010 and August 29,
2009.
|
|
Quarter Ended
|
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Pre-tax
compensation expense
|
|
$ |
39 |
|
|
$ |
111 |
|
|
$ |
871 |
|
|
$ |
976 |
|
Tax
benefits
|
|
|
(5 |
) |
|
|
(35 |
) |
|
|
(285 |
) |
|
|
(310 |
) |
Excess
tax expense associated with tax deductions under the amount of
compensation expense recognized in the Consolidated Condensed Financial
Statements
|
|
|
(14 |
) |
|
|
(24 |
) |
|
|
(75 |
) |
|
|
(159 |
) |
The
following table summarizes the restricted stock unit awards.
|
|
Shares Granted
under Incentive
Plans
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
Nonvested
at beginning of year
|
|
|
67,476 |
|
|
$ |
34.01 |
|
Granted
|
|
|
34,128 |
|
|
$ |
32.30 |
|
Vested
|
|
|
(21,727 |
) |
|
$ |
34.15 |
|
Surrendered
|
|
|
(1,812 |
) |
|
$ |
32.30 |
|
Nonvested
at August 28, 2010
|
|
|
78,065 |
|
|
$ |
33.26 |
|
The total
fair value of shares vested during the nine months ended August 28, 2010 and
August 29, 2009 was $742 and $614, respectively.
The
Company has recognized $1,585 of compensation cost prior to August 28, 2010
related to nonvested restricted stock unit awards. As of August 28,
2010, there was $772 of total unrecognized compensation cost related to
nonvested restricted stock unit awards that the Company expects to recognize
during fiscal years 2010 through 2013.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
4.
|
COMPREHENSIVE
EARNINGS
|
Total
comprehensive earnings and its components are as follows:
|
|
|
|
|
Other Comprehensive Earnings, Net of Tax:
|
|
|
|
|
|
|
Net Earnings
(Loss)
|
|
|
Foreign Currency
and Other
Adjustments
|
|
|
Pension Liability
Adjustments
|
|
|
Comprehensive
Earnings
|
|
Quarter Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
August
28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
CLARCOR
Inc.
|
|
$ |
28,326 |
|
|
$ |
3,548 |
|
|
$ |
657 |
|
|
$ |
32,531 |
|
Non-redeemable
noncontrolling interests
|
|
|
46 |
|
|
|
(1 |
) |
|
|
- |
|
|
|
45 |
|
Redeemable
noncontrolling interests
|
|
|
199 |
|
|
|
8 |
|
|
|
- |
|
|
|
207 |
|
|
|
$ |
28,571 |
|
|
$ |
3,555 |
|
|
$ |
657 |
|
|
$ |
32,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLARCOR
Inc.
|
|
$ |
21,282 |
|
|
$ |
3,011 |
|
|
$ |
216 |
|
|
$ |
24,509 |
|
Non-redeemable
noncontrolling interests
|
|
|
40 |
|
|
|
10 |
|
|
|
- |
|
|
|
50 |
|
Redeemable
noncontrolling interests
|
|
|
2 |
|
|
|
300 |
|
|
|
- |
|
|
|
302 |
|
|
|
$ |
21,324 |
|
|
$ |
3,321 |
|
|
$ |
216 |
|
|
$ |
24,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
28, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLARCOR
Inc.
|
|
$ |
67,077 |
|
|
$ |
(10,379 |
) |
|
$ |
1,936 |
|
|
$ |
58,634 |
|
Non-redeemable
noncontrolling interests
|
|
|
139 |
|
|
|
(4 |
) |
|
|
- |
|
|
|
135 |
|
Redeemable
noncontrolling interests
|
|
|
97 |
|
|
|
61 |
|
|
|
- |
|
|
|
158 |
|
|
|
$ |
67,313 |
|
|
$ |
(10,322 |
) |
|
$ |
1,936 |
|
|
$ |
58,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
29, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLARCOR
Inc.
|
|
$ |
46,865 |
|
|
$ |
11,143 |
|
|
$ |
649 |
|
|
$ |
58,657 |
|
Non-redeemable
noncontrolling interests
|
|
|
337 |
|
|
|
(57 |
) |
|
|
- |
|
|
|
280 |
|
Redeemable
noncontrolling interests
|
|
|
(35 |
) |
|
|
303 |
|
|
|
- |
|
|
|
268 |
|
|
|
$ |
47,167 |
|
|
$ |
11,389 |
|
|
$ |
649 |
|
|
$ |
59,205 |
|
The
components of the ending balances of accumulated other comprehensive loss are as
follows:
|
|
August 28,
|
|
|
November 28,
|
|
|
|
2010
|
|
|
2009
|
|
Pension
liability, net of tax of $23,975 and $22,796
|
|
$ |
(37,276 |
) |
|
$ |
(39,212 |
) |
Translation
adjustments, net of tax of $155 and $155
|
|
|
(4,046 |
) |
|
|
6,333 |
|
Accumulated
other comprehensive loss
|
|
$ |
(41,322 |
) |
|
$ |
(32,879 |
) |
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
5.
|
GOODWILL AND ACQUIRED
INTANGIBLES ASSETS
|
The
following table reconciles the activity for goodwill by segment for the nine
months ended August 28, 2010. All goodwill is stated on a gross
basis, as the Company has not recorded any impairment charges against
goodwill.
|
|
Engine/Mobile
Filtration
|
|
|
Industrial/
Environmental
Filtration
|
|
|
Packaging
|
|
|
Total
|
|
Balance
at November 28, 2009
|
|
$ |
22,551 |
|
|
$ |
205,631 |
|
|
$ |
- |
|
|
$ |
228,182 |
|
Currency
translation adjustments
|
|
|
(1,275 |
) |
|
|
13 |
|
|
|
- |
|
|
|
(1,262 |
) |
Balance
at August 28, 2010
|
|
$ |
21,276 |
|
|
$ |
205,644 |
|
|
$ |
- |
|
|
$ |
226,920 |
|
The
following table summarizes acquired intangibles by segment. Other acquired
intangibles include parts manufacturer regulatory approvals, developed
technology, patents and non-compete agreements.
|
|
Engine/Mobile
Filtration
|
|
|
Industrial/
Environmental
Filtration
|
|
|
Packaging
|
|
|
Total
|
|
Balance
at August 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks,
gross - indefinite lived
|
|
$ |
603 |
|
|
$ |
41,022 |
|
|
$ |
- |
|
|
$ |
41,625 |
|
Trademarks,
gross - finite lived
|
|
|
294 |
|
|
|
488 |
|
|
|
- |
|
|
|
782 |
|
Accumulated
amortization
|
|
|
(55 |
) |
|
|
(285 |
) |
|
|
- |
|
|
|
(340 |
) |
Trademarks,
net
|
|
|
842 |
|
|
|
41,225 |
|
|
|
- |
|
|
|
42,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
relationships, gross
|
|
|
4,127 |
|
|
|
34,125 |
|
|
|
- |
|
|
|
38,252 |
|
Accumulated
amortization
|
|
|
(1,331 |
) |
|
|
(9,987 |
) |
|
|
- |
|
|
|
(11,318 |
) |
Customer
relationships, net
|
|
|
2,796 |
|
|
|
24,138 |
|
|
|
- |
|
|
|
26,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
acquired intangibles, gross
|
|
|
243 |
|
|
|
35,815 |
|
|
|
- |
|
|
|
36,058 |
|
Accumulated
amortization
|
|
|
(243 |
) |
|
|
(12,621 |
) |
|
|
- |
|
|
|
(12,864 |
) |
Other
acquired intangibles, net
|
|
|
- |
|
|
|
23,194 |
|
|
|
- |
|
|
|
23,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,638 |
|
|
$ |
88,557 |
|
|
$ |
- |
|
|
$ |
92,195 |
|
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
following table summarizes estimated amortization expense for the next five
fiscal years.
Fiscal
year 2010
|
|
$ |
4,709 |
|
Fiscal
year 2011
|
|
|
4,534 |
|
Fiscal
year 2012
|
|
|
4,534 |
|
Fiscal
year 2013
|
|
|
4,496 |
|
Fiscal
year 2014
|
|
|
4,323 |
|
6.
|
FAIR VALUE
MEASUREMENTS
|
Fair Value
Measurements
The
Company measures certain assets and liabilities at fair value as discussed
throughout the notes to its quarterly and annual financial statements. Fair
value is the exchange price that would be received for an asset or paid to
transfer a liability, an exit price, in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants. Fair value measurements are categorized in a hierarchy
based upon the observability of inputs used in valuation
techniques. Observable inputs are the highest level and reflect
market data obtained from independent sources, while unobservable inputs are the
lowest level and reflect internally developed market assumptions. The
Company classifies fair value measurements by the following
hierarchy:
|
·
|
Level
1 – Quoted active market prices for identical
assets
|
|
·
|
Level
2 – Significant other observable inputs, such as quoted prices for similar
(but not identical) instruments in active markets, quoted prices for
identical or similar instruments in markets which are not active and model
determined valuations in which all significant inputs or significant
value-drivers are observable in active
markets
|
|
·
|
Level
3 – Significant unobservable inputs, such as model determined valuations
in which one or more significant inputs or significant value-drivers are
unobservable
|
The
Company’s short-term investments consisted of tax-exempt municipal money market
funds. The restricted trust, which is used to fund certain payments
for the Company’s U.S. combined nonqualified pension plans, consists of actively
traded equity and bond funds. The fair value of the interest rate
agreement (see Note 8) was determined using the present value of expected future
cash flows using forward rates as of November 28, 2009 and discount rates
commensurate with the risks associated with those cash flows. There
were no changes in fair value determination methods or significant assumptions
used in those methods during the nine months ended August 28,
2010.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
Assets or
liabilities that have recurring measurements are shown below:
|
|
Fair Value Measurements at Reporting Date
|
|
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at August 28, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
trust: (part of other
noncurrent assets)
|
|
|
|
|
|
|
|
|
|
|
Mutual
fund investments - equities
|
|
$ |
802 |
|
|
$ |
802 |
|
|
$ |
- |
|
|
$ |
- |
|
Mutual
fund investments - bonds
|
|
|
258 |
|
|
|
258 |
|
|
|
- |
|
|
|
- |
|
Cash
and equivalents
|
|
|
210 |
|
|
|
210 |
|
|
|
- |
|
|
|
- |
|
Total
restricted trust
|
|
$ |
1,270 |
|
|
$ |
1,270 |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at November 28, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
investments
|
|
$ |
32,171 |
|
|
$ |
32,171 |
|
|
$ |
- |
|
|
$ |
- |
|
Restricted
trust (part of other
noncurrent assets)
|
|
$ |
1,419 |
|
|
$ |
1,419 |
|
|
$ |
- |
|
|
$ |
- |
|
Interest
rate agreement (part of
current liabilities)
|
|
$ |
(961 |
) |
|
$ |
- |
|
|
$ |
(961 |
) |
|
$ |
- |
|
There
were no transfers between Level 1 and Level 2 during the nine months ended
August 28, 2010. The interest rate agreement (Level 2) expired
January 1, 2010. The Company liquidated the short-term investments
(Level 1) during May 2010.
Fair Values of Financial
Instruments
The fair
values of the Company’s financial instruments, which are cash and cash
equivalents, restricted cash, accounts receivable, short-term investments (only
at November 28, 2009), the restricted trust and the interest rate agreement
(only at November 28, 2009), approximated the carrying values of those financial
instruments at both August 28, 2010 and November 28, 2009. An
expected present value technique is used to estimate the fair value of long-term
debt. A fair value estimate of $16,681 and $49,513 for long-term debt
at August 28, 2010 and November 28, 2009, respectively, is based on the current
interest rates available to the Company for debt with similar remaining
maturities. The carrying value for the long-term debt at August 28,
2010 and November 28, 2009 is $17,426 and $52,195,
respectively.
7.
|
GUARANTEES AND
WARRANTIES
|
The
Company has letters of credit totaling $23,154 and $23,395 as of August 28, 2010
and November 28, 2009, respectively, issued to various government agencies,
primarily related to industrial revenue bonds, and to insurance companies and
other commercial entities in support of its obligations. The Company believes
that no payments will be required resulting from these obligations.
In the
ordinary course of business, the Company also provides routine indemnifications
and other guarantees whose terms range in duration and are often not explicitly
defined. The Company does not believe these will have a material impact on the
results of operations or financial condition of the Company.
Warranties
are recorded as a liability on the balance sheet and as charges to current
expense for estimated normal warranty costs and, if applicable, for specific
performance issues known to exist on products already sold. The expenses
estimated to be incurred are provided at the time of sale and adjusted as
needed, based primarily upon experience.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
Changes
in the Company’s warranty accrual, which is included in other accrued
liabilities are as follows:
|
|
Nine Months Ended
|
|
|
|
August 28,
|
|
|
August 29,
|
|
|
|
2010
|
|
|
2009
|
|
Balance
at beginning of period
|
|
$ |
3,989 |
|
|
$ |
2,494 |
|
Accruals
for warranties issued during the period
|
|
|
799 |
|
|
|
1,910 |
|
Adjustments
related to pre-existing warranties
|
|
|
(125 |
) |
|
|
91 |
|
Settlements
made during the period
|
|
|
(745 |
) |
|
|
(788 |
) |
Other
adjustments, including currency translation
|
|
|
(215 |
) |
|
|
78 |
|
Balance
at end of period
|
|
$ |
3,703 |
|
|
$ |
3,785 |
|
8.
|
LONG-TERM DEBT AND
INTEREST RATE AGREEMENT
|
On
December 18, 2007, the Company entered into a five-year multicurrency revolving
credit agreement (“Credit Facility”) with a group of financial institutions
under which it may borrow up to $250,000 under a selection of currencies and
rate formulas. The Credit Facility interest rate is based upon, at
the Company’s election, either a defined Base Rate or the London Interbank
Offered Rate (“LIBOR”) plus or minus applicable margins. Commitment
fees, letter of credit fees and other fees are also payable as provided in the
credit agreement. At August 28, 2010, there were no borrowings
outstanding on the Credit Facility. The Credit Facility includes a
$75,000 letter of credit subline, against which $16,031 and $8,491 in letters of
credit had been issued at August 28, 2010 and November 28, 2009,
respectively.
The
Company’s significant accounting policies for derivative instruments are
described in Note A of the 2009 Form 10-K. On January 2, 2008, the
Company entered into a fixed rate interest swap agreement to manage its interest
rate exposure on certain amounts outstanding under the Credit
Facility. The interest rate agreement expired January 1,
2010. The interest rate agreement provided for the Company to receive
interest at floating rates based on LIBOR and pay a 3.93% fixed interest rate
plus an applicable margin on a notional amount of $100,000. Payments
pursuant to the interest rate agreement were settled on a net basis quarterly.
Hedge accounting was not applied to the fixed rate interest swap agreement and
therefore, unrealized gains or losses were recorded in interest expense in the
Consolidated Condensed Statements of Earnings. Periodic settlement
payments or receipts were recorded as a component of cash flows from operating
activities in the Consolidated Condensed Statements of Cash
Flows.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
At
November 28, 2009, the Company had the following derivative in a liability
position.
|
|
Derivatives
In Liability Position
|
|
Derivatives
Not Designated
as
Hedging Instruments
|
|
Consolidated
Balance
Sheet
Location
|
|
Fair
Value
|
|
|
|
|
|
|
|
November 28, 2009
|
|
|
|
|
|
Fixed
rate interest swap agreement
|
|
Current
liabilities
|
|
$ |
961 |
|
|
|
|
|
$ |
961 |
|
The
following table reflects the gain (loss) and net settlement payments on the
fixed rate interest swap agreement for the quarter and nine months ended August
28, 2010 and August 29, 2009, respectively.
Derivatives
Not Designated
as
Hedging Instruments
|
|
Location
|
|
Amount
|
|
|
|
|
|
Quarter
Ended
|
|
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Fixed
rate interest swap agreement unrealized losses
|
|
Interest
expense
|
|
$ |
- |
|
|
$ |
(132 |
) |
Fixed
rate interest swap agreement net settlement payments
|
|
Cash
flows from operating activities
|
|
|
- |
|
|
|
688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine
Months Ended
|
|
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
|
|
2010
|
|
|
2009
|
|
Fixed
rate interest swap agreement unrealized losses
|
|
Interest
expense
|
|
$ |
- |
|
|
$ |
(1,110 |
) |
Fixed
rate interest swap agreement net settlement payments
|
|
Cash
flows from operating activities
|
|
|
961 |
|
|
|
1,318 |
|
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
9.
|
PENSION AND OTHER
POSTRETIREMENT PLANS
|
The
Company provides various retirement benefits, including defined benefit plans
and postretirement healthcare plans covering certain current and retired
employees in the U.S. and abroad. Components of net periodic benefit
cost and Company contributions for these plans were as follows:
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Pension Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Components
of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$ |
527 |
|
|
$ |
451 |
|
|
$ |
1,582 |
|
|
$ |
1,352 |
|
Interest
cost
|
|
|
2,033 |
|
|
|
2,309 |
|
|
|
6,103 |
|
|
|
6,904 |
|
Expected
return on plan assets
|
|
|
(1,778 |
) |
|
|
(1,726 |
) |
|
|
(5,340 |
) |
|
|
(5,154 |
) |
Amortization
of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service cost
|
|
|
(98 |
) |
|
|
32 |
|
|
|
(296 |
) |
|
|
97 |
|
Net
actuarial loss
|
|
|
1,200 |
|
|
|
389 |
|
|
|
3,600 |
|
|
|
1,168 |
|
Net
periodic benefit cost
|
|
$ |
1,884 |
|
|
$ |
1,455 |
|
|
$ |
5,649 |
|
|
$ |
4,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
contributions
|
|
$ |
2,935 |
|
|
$ |
212 |
|
|
$ |
3,121 |
|
|
$ |
1,019 |
|
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Postretirement Healthcare
Benefits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Components
of net periodic benefit income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
cost
|
|
$ |
8 |
|
|
$ |
15 |
|
|
$ |
24 |
|
|
$ |
45 |
|
Amortization
of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior
service cost
|
|
|
(31 |
) |
|
|
(31 |
) |
|
|
(93 |
) |
|
|
(93 |
) |
Net
actuarial gain
|
|
|
(32 |
) |
|
|
(46 |
) |
|
|
(96 |
) |
|
|
(138 |
) |
Net
periodic benefit income
|
|
$ |
(55 |
) |
|
$ |
(62 |
) |
|
$ |
(165 |
) |
|
$ |
(186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
contributions
|
|
$ |
39 |
|
|
$ |
50 |
|
|
$ |
117 |
|
|
$ |
150 |
|
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
Company’s policy is to contribute to its qualified U.S. and non-U.S. pension
plans at least the minimum amount required by applicable laws and regulations,
to contribute to the U.S. combined nonqualified plans when required for benefit
payments, and to contribute to the postretirement healthcare benefit plan an
amount equal to the benefit payments. The Company, from time to time,
makes voluntary contributions in excess of the minimum amount required as
economic conditions warrant. The Company expects to contribute up to
$2,500 to its U.S. qualified plans, $3,200 to its U.S. combined nonqualified
plans, $100 to its non-U.S. plan and $154 to its postretirement healthcare
benefit plan to pay benefits during 2010.
In
addition to the plan assets related to its qualified plans, the Company has also
funded $1,270 and $1,419 at August 28, 2010 and November 28, 2009, respectively,
into a restricted trust for its U.S. combined nonqualified
plans. This trust is included in other noncurrent assets in the
Consolidated Condensed Balance Sheets.
The
following is a reconciliation of the beginning and ending amount of gross
unrecognized tax benefits for uncertain tax positions, including positions which
impact only the timing of tax benefits.
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
Balance
at beginning of period
|
|
$ |
2,161 |
|
|
$ |
1,970 |
|
Changes
for current period tax positions
|
|
|
108 |
|
|
|
182 |
|
Changes
for prior period tax positions
|
|
|
39 |
|
|
|
2 |
|
Changes
in interest and penalties
|
|
|
42 |
|
|
|
337 |
|
Balance
at end of period
|
|
$ |
2,350 |
|
|
$ |
2,491 |
|
At August
28, 2010, the amount of unrecognized tax benefit, that would impact the
effective tax rate if recognized, was $2,160. The Company recognizes
interest and penalties related to unrecognized benefits in income tax
expense. As of August 28, 2010, the Company had $526 accrued for the
payment of interest and penalties. Due to the various jurisdictions
in which the Company files tax returns and the uncertainty regarding the timing
of settlements it is possible that there could be other significant changes in
the amount of unrecognized tax benefits in the next twelve months; however, the
amount cannot be estimated.
The
Company is regularly audited by federal, state and foreign tax
authorities. The Internal Revenue Service has completed its audits of
the Company’s U.S. income tax returns through fiscal year 2004 and is currently
auditing 2005 through 2008. With few exceptions, the Company is no
longer subject to income tax examinations by state or foreign tax jurisdictions
for years prior to 2004.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
11.
|
RESTRUCTURING
CHARGES
|
As
discussed more fully in the 2009 Form 10-K, in July 2006, the Company began a
restructuring program focused on the heating, ventilating and air conditioning
(“HVAC”) filter manufacturing operations within its Industrial/Environmental
Filtration segment. The HVAC restructuring program was substantially
complete in fiscal year 2009. At November 28, 2009, accrued severance
of $28 related to Kentucky facilities, was included in other accrued
liabilities. At August 28, 2010, all restructuring expenses were
paid. At August 28, 2010, land of $398 and building and building
fixtures of $1,602 related to one Kentucky plant and land of $230 and building
and building fixtures of $1,539 related to the North Carolina plant are
classified as assets held for sale and reported at their carrying
value.
Current Year Restructuring
Charges
The
Company did not incur any restructuring expenses during the quarter and nine
months ended August 28, 2010.
Prior Year Restructuring
Charges
During
the first and second quarters of fiscal 2009, the Company consolidated four
Louisville, Kentucky area facilities into one location in Jeffersonville,
Indiana to realize cost savings and efficiency benefits. Severance
costs of $0 and $133 were expensed during the quarter and nine months ended
August 29, 2009, respectively, and were included in cost of sales in the
Consolidated Condensed Statements of Earnings.
During
May 2009, the Company closed a small facility in Clover, South
Carolina. The Company did not incur any material expenses related to
this closure.
During
the quarter and nine months ended August 29, 2009, the Company recorded
restructuring expenses of $0 and $47, respectively, related to the Henderson,
North Carolina location mainly for facility consolidation and employee
termination costs. These expenses were included in cost of sales in
the Consolidated Condensed Statements of Earnings. Minimal additional
restructuring charges related to facility consolidation costs will be recognized
when the Company exits that facility. In addition to costs classified
as restructuring expenses, the Company has incurred and will continue to incur
other non-restructuring costs related to this facility until it is
sold.
During
the second quarter of fiscal year 2008, the Company discontinued production at
an HVAC filter manufacturing plant in Davenport, Iowa. The Company
did not incur any restructuring expenses related to the Davenport, Iowa location
during the quarter and nine months ended August 29, 2009. Minimal
additional restructuring charges related to contract termination costs and
facility consolidation costs will be recognized when the Company exits a lease
related to that facility in 2012. In addition to costs
classified as restructuring expenses, the Company has incurred and will continue
to incur other non-restructuring costs related to this facility until the
expiration of the lease.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
During
June 2009, an Industrial/Environmental Filtration segment warehouse that the
Company leases was damaged by fire. A loss of $250, representing the
Company’s deductible, was recorded in cost of sales for the quarter ended August
29, 2009. During September 2009, the Company received $500 from the
insurance company. During February 2010, the Company received
additional insurance proceeds of $557. The Company does not expect to
collect any further amounts related to this claim.
Legal
Contingencies
From time
to time, the Company is subject to lawsuits, investigations and disputes (some
of which involve substantial claimed amounts) arising out of the conduct of its
business, including matters relating to commercial transactions, product
liability, intellectual property and other matters. Items included in
these other matters are discussed below. The Company believes
recorded reserves in its Consolidated Condensed Financial Statements are
adequate in light of the probable and estimable outcomes of the items discussed
below. These recorded liabilities were not material to the Company’s
financial position, results of operation or liquidity and the Company does not
currently believe that any pending claims or litigation, including those
identified below, will materially affect its financial position, results of
operation or liquidity.
Donaldson
On May
15, 2009, Donaldson Company, Inc. (“Donaldson”) filed a lawsuit in the U.S.
Federal District Court for the District of Minnesota alleging that certain
“ChannelFlow®” engine/mobile filters manufactured and sold by a subsidiary of
the Company infringe one or more patents held by
Donaldson. Through this lawsuit Donaldson seeks various
remedies, including injunctive relief and monetary damages of an unspecified
amount. Management believes that the products in question do not
infringe the asserted patents and that such patents are invalid. The
Company is vigorously defending the action.
Antitrust
On March
31, 2008, S&E Quick Lube, a filter distributor, filed suit in U.S. District
Court for the District of Connecticut alleging that virtually every major North
American engine filter manufacturer, including the Company's subsidiary, Baldwin
Filters, Inc., engaged in a conspiracy to fix prices, rig bids and allocate U.S.
customers for aftermarket filters. This suit is a purported class action
on behalf of direct purchasers of filters from the defendants. Parallel
purported class actions, including on behalf of indirect purchasers of filters,
have been filed by other plaintiffs in a variety of jurisdictions in the United
States and Canada. In addition, the Attorney General of the State of
Florida and the County of Suffolk, New York have filed complaints based on these
same allegations, and the Attorney General of the State of Washington has
requested various documents, information and cooperation, which the Company is
working to provide. The U.S cases have been consolidated into a single
multi-district litigation in the Northern District of Illinois. The
Company believes all of these lawsuits and the claims made therein to be without
merit and is vigorously defending them.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
Company understands that the Antitrust Division of the Department of Justice
(“DOJ”) was investigating the allegations raised in these suits and issued
subpoenas in connection with that investigation. The Company was not contacted
by the DOJ in connection with the DOJ investigation and was not the subject of
any subpoena. Public reports indicate that the DOJ officially closed its
investigation in January 2010 and took no action against any filter
manufacturer.
Other
Additionally,
the Company is party to various proceedings relating to environmental
issues. The U.S. Environmental Protection Agency and/or other
responsible state agencies have designated the Company as a potentially
responsible party, along with other companies, in remedial activities for the
cleanup of waste sites under the federal Superfund statute. Although
it is not certain what future environmental claims, if any, may be asserted, the
Company currently believes that its potential liability for known environmental
matters does not exceed its present accrual of $50. However,
environmental and related remediation costs are difficult to quantify for a
number of reasons, including the number of parties involved, the difficulty in
determining the nature and extent of the contamination at issue, the length of
time remediation may require, the complexity of the environmental regulation and
the continuing advancement of remediation technology. Applicable
federal law may impose joint and several liability on each potentially
responsible party for the cleanup.
In
addition to the matters cited above, the Company is involved in legal actions
arising in the normal course of business. The Company records
provisions with respect to identified claims or lawsuits when it is probable
that a liability has been incurred and the amount of the loss can be reasonably
estimated. Claims and lawsuits are reviewed quarterly and provisions
are taken or adjusted to reflect the status of a particular
matter. No such provisions have been taken in respect of the
Donaldson or antitrust legal proceeding referred to above.
Other
Contingencies
In the
event of a change in control of the Company, termination benefits are likely to
be required for certain executive officers and other employees.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
14.
|
EARNINGS PER SHARE AND
TREASURY STOCK TRANSACTIONS
|
Diluted
earnings per share reflect 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.
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding
|
|
|
50,796,393 |
|
|
|
50,733,251 |
|
|
|
50,700,066 |
|
|
|
50,941,354 |
|
Dilutive
effect of stock-based arrangements
|
|
|
452,564 |
|
|
|
285,809 |
|
|
|
445,005 |
|
|
|
267,132 |
|
Weighted
average number of diluted shares outstanding
|
|
|
51,248,957 |
|
|
|
51,019,060 |
|
|
|
51,145,071 |
|
|
|
51,208,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to CLARCOR
|
|
$ |
28,326 |
|
|
$ |
21,282 |
|
|
$ |
67,077 |
|
|
$ |
46,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share attributable to CLARCOR
|
|
$ |
0.56 |
|
|
$ |
0.42 |
|
|
$ |
1.32 |
|
|
$ |
0.92 |
|
Diluted
earnings per share attributable to CLARCOR
|
|
$ |
0.55 |
|
|
$ |
0.42 |
|
|
$ |
1.31 |
|
|
$ |
0.92 |
|
The
following table provides additional information regarding the calculation of
earnings per share and treasury stock transactions.
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average exercise price per share of antidilutive options
|
|
$ |
36.51 |
|
|
$ |
34.28 |
|
|
$ |
35.80 |
|
|
$ |
34.28 |
|
Options
with exercises prices greater than the average market price excluded from
the computation of dilutive earnings per share because the effect would
have been antidilutive
|
|
|
347,350 |
|
|
|
1,299,688 |
|
|
|
646,349 |
|
|
|
1,299,688 |
|
Common
stock repurchased pursuant to the Company's $250,000 stock repurchase
program
|
|
$ |
10,009 |
|
|
$ |
19,768 |
|
|
$ |
10,009 |
|
|
$ |
19,768 |
|
Number
of shares repurchased pursuant to the Company's $250,000 stock repurchase
program
|
|
|
288,842 |
|
|
|
688,200 |
|
|
|
288,842 |
|
|
|
688,200 |
|
As of
August 28, 2010, there was approximately $239,991 available under the Company’s
$250,000 stock repurchase program for future purchases.
CLARCOR
Inc.
|
NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|
(Dollars
in thousands, except per share data)
|
(Unaudited)
|
The
Company operates in three principal product segments: Engine/Mobile Filtration,
Industrial/Environmental Filtration and Packaging. Net sales represent sales to
unaffiliated customers as reported in the Consolidated Condensed Statements of
Earnings. Intersegment sales were not
material. Unallocated amounts consist of interest expense, interest
income and other non-operating income and expense items. Assets are
those assets used in each business segment. Corporate assets consist
of cash, deferred income taxes, corporate facility and equipment and various
other assets that are not specific to an operating segment. The
Company operates as a consolidated entity, including cooperation between
segments, cost allocating and sharing of certain assets. As such, the
Company makes no representation, that if operated on a standalone basis, these
segments would report net sales, operating profit and other financial data
reflected below.
|
|
Quarter
Ended
|
|
|
Nine
Months Ended
|
|
|
|
August
28,
|
|
|
August
29,
|
|
|
August
28,
|
|
|
August
29,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
$ |
118,753 |
|
|
$ |
96,445 |
|
|
$ |
328,615 |
|
|
$ |
274,102 |
|
Industrial/Environmental
Filtration
|
|
|
119,589 |
|
|
|
114,630 |
|
|
|
339,182 |
|
|
|
347,977 |
|
Packaging
|
|
|
24,428 |
|
|
|
19,196 |
|
|
|
67,973 |
|
|
|
51,277 |
|
|
|
$ |
262,770 |
|
|
$ |
230,271 |
|
|
$ |
735,770 |
|
|
$ |
673,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
$ |
25,937 |
|
|
$ |
21,904 |
|
|
$ |
67,442 |
|
|
$ |
53,662 |
|
Industrial/Environmental
Filtration
|
|
|
12,887 |
|
|
|
7,944 |
|
|
|
27,541 |
|
|
|
14,471 |
|
Packaging
|
|
|
2,868 |
|
|
|
2,232 |
|
|
|
5,817 |
|
|
|
2,864 |
|
|
|
|
41,692 |
|
|
|
32,080 |
|
|
|
100,800 |
|
|
|
70,997 |
|
Other
expense
|
|
|
(18 |
) |
|
|
(87 |
) |
|
|
(736 |
) |
|
|
(944 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
before income taxes
|
|
$ |
41,674 |
|
|
$ |
31,993 |
|
|
$ |
100,064 |
|
|
$ |
70,053 |
|
|
|
August
28,
|
|
|
November
28,
|
|
|
|
2010
|
|
|
2009
|
|
Identifiable
assets:
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
$ |
287,228 |
|
|
$ |
252,747 |
|
Industrial/Environmental
Filtration
|
|
|
641,269 |
|
|
|
629,488 |
|
Packaging
|
|
|
43,551 |
|
|
|
36,456 |
|
Corporate
|
|
|
38,207 |
|
|
|
55,199 |
|
|
|
$ |
1,010,255 |
|
|
$ |
973,890 |
|
Part I
- Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The
information presented in this discussion should be read in conjunction with
other financial information provided in the Consolidated Condensed Financial
Statements and Notes thereto. Except as otherwise set forth herein, references
to particular years refer to our applicable fiscal year. The analysis
of operating results focuses on our three reportable business
segments: Engine/Mobile Filtration, Industrial/Environmental
Filtration and Packaging.
EXECUTIVE
SUMMARY
Management
Discussion Snapshot
(In
millions except per share data)
|
|
Third
Quarter
|
|
|
First
Nine Months
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
262.8 |
|
|
$ |
230.3 |
|
|
$ |
32.5 |
|
|
|
14 |
% |
|
$ |
735.8 |
|
|
$ |
673.4 |
|
|
$ |
62.4 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
171.2 |
|
|
|
156.3 |
|
|
|
14.9 |
|
|
|
10 |
% |
|
|
489.6 |
|
|
|
468.9 |
|
|
|
20.7 |
|
|
|
4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
91.6 |
|
|
|
74.0 |
|
|
|
17.6 |
|
|
|
24 |
% |
|
|
246.2 |
|
|
|
204.5 |
|
|
|
41.7 |
|
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and administrative expenses
|
|
|
49.9 |
|
|
|
41.9 |
|
|
|
8.0 |
|
|
|
19 |
% |
|
|
145.4 |
|
|
|
133.5 |
|
|
|
11.9 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
41.7 |
|
|
|
32.1 |
|
|
|
9.6 |
|
|
|
30 |
% |
|
|
100.8 |
|
|
|
71.0 |
|
|
|
29.8 |
|
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
- |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
|
|
|
|
|
|
(0.7 |
) |
|
|
(0.9 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
13.1 |
|
|
|
10.7 |
|
|
|
2.4 |
|
|
|
23 |
% |
|
|
32.8 |
|
|
|
22.9 |
|
|
|
9.9 |
|
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings attributable to CLARCOR
|
|
|
28.3 |
|
|
|
21.3 |
|
|
|
7.0 |
|
|
|
33 |
% |
|
|
67.1 |
|
|
|
46.9 |
|
|
|
20.2 |
|
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
diluted shares
|
|
|
51.2 |
|
|
|
51.0 |
|
|
|
0.2 |
|
|
|
0 |
% |
|
|
51.1 |
|
|
|
51.2 |
|
|
|
(0.1 |
) |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$ |
0.55 |
|
|
$ |
0.42 |
|
|
$ |
0.13 |
|
|
|
31 |
% |
|
$ |
1.31 |
|
|
$ |
0.92 |
|
|
$ |
0.39 |
|
|
|
42 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentages:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
|
34.8 |
% |
|
|
32.1 |
% |
|
|
|
|
|
2.7
|
pt |
|
|
33.5 |
% |
|
|
30.4 |
% |
|
|
|
|
|
3.1
|
pt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
and administrative percentage
|
|
|
19.0 |
% |
|
|
18.2 |
% |
|
|
|
|
|
0.8
|
pt |
|
|
19.8 |
% |
|
|
19.8 |
% |
|
|
|
|
|
0.0
|
pt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
15.9 |
% |
|
|
13.9 |
% |
|
|
|
|
|
2.0
|
pt |
|
|
13.7 |
% |
|
|
10.5 |
% |
|
|
|
|
|
3.2
|
pt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
tax rate
|
|
|
31.4 |
% |
|
|
33.3 |
% |
|
|
|
|
|
-1.9
|
pt |
|
|
32.7 |
% |
|
|
32.7 |
% |
|
|
|
|
|
0.0
|
pt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings margin
|
|
|
10.8 |
% |
|
|
9.2 |
% |
|
|
|
|
|
1.6
|
pt |
|
|
9.1 |
% |
|
|
7.0 |
% |
|
|
|
|
|
2.1
|
pt |
Third
Quarter
Our strong operating performance in the
third quarter of 2010 compared with the third quarter of 2009 was primarily the
result of the $32.5 million increase in net sales. These incremental
net sales allowed us to leverage our fixed manufacturing costs and increase our
gross margin percentage to 34.8% from 32.1% in the third quarter of
2009. This gross margin percentage is our highest quarterly gross
margin percentage in over ten years. Net sales increased at all of
our operating segments. However, our Engine/Mobile Filtration segment
increased the most significantly, contributing $22.3 million additional net
sales in the third quarter of 2010 compared with the third quarter of
2009. Heavy-duty engine sales in this segment were strong at most of
our end-markets both domestically and internationally. The remaining
$10.2 million increase in net sales was equally split between our
Industrial/Environmental Filtration and Packaging segments. The
Industrial/Environmental Filtration segment increase in net sales compared with
the third quarter of 2009 despite a $3.6 million reduction in heating,
ventilating and air conditioning (“HVAC”) filter sales to the 3M Company
(“3M”).
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
The increase in operating margin to
15.9% from 13.9% in the third quarter of 2009 was a result of the 2.7 point
improvement in gross margin percentage offset by a 0.8 point increase in selling
and administrative expenses as a percentage of net sales. Selling and
administrative expenses increased $8.0 million from the third quarter of 2009 as
a result of incremental employee compensation associated with our
company-wide profit sharing program and additional legal expenses partially
offset by a reduction in bad debt expense.
The 15.9% operating margin in the third
quarter of 2010 not only was 2.0 points greater than the third quarter of 2009,
but it was 1.1 points higher than the third quarter of 2008 despite $13.5
million lower net sales. This improvement from 2008 despite lower net
sales is due to cost efficiencies implemented in 2009 including the benefits of
the restructuring program at our HVAC filter operations. As a result
of this improved operating performance, diluted earnings per share of $0.55 in
the third quarter of 2010 was greater than the $0.42 from the third quarter of
2009 and the $0.50 from the third quarter of 2008.
First
Nine Months
Our operating performance improved from
the first nine months of 2009 due to $62.4 million incremental net sales and
improved cost efficiencies. The incremental net sales allowed us to
leverage our fixed manufacturing costs and increase our gross margin percentage
to 33.5% from 30.4% in the first nine months of 2009. The $62.4
million increase in net sales was the result of a $54.5 million increase at our
Engine/Mobile Filtration segment and a $16.7 million increase at our Packaging
segment. The increase at our Packaging segment includes a no-margin
$4.6 million tooling and equipment sale to one of our customers. Net
sales at our Industrial/Environmental Filtration segment decreased $8.8 million
compared with the first nine months of 2009 including a $12.7 million decline in
HVAC filter sales to 3M.
The increase in operating margin to
13.7% from 10.5% in the first nine months of 2009 was a result of the
improvement in gross margin percentage. Selling and administrative
expenses as a percentage of net sales were consistent with 2009 but increased
$11.9 million as a result of incremental employee compensation associated
with our company-wide profit sharing program and additional legal expenses
partially offset by a reduction in bad debt expense.
The 13.7% operating margin in the first
nine months of 2010 not only was 3.2 points greater than the first nine months
of 2009, but it was 0.3 points higher than the operating margin in the first
nine months of 2008 despite $57.9 million lower net sales. This
improvement in operating margin from 2008 despite lower net sales is due to cost
efficiencies implemented in 2009 including the benefits of the restructuring
program at our HVAC filter operations. As a result of this improved
operating performance, diluted earnings per share of $1.31 in the first nine
months of 2010 was greater than the $0.92 from the first nine months of 2009 and
the $1.30 from the first nine months of 2008.
There
were no acquisitions in the first nine months of 2010. We completed
six acquisitions during fiscal year 2009. The net sales and operating
profit impact of these acquisitions in the third quarter and the first nine
months of 2010 compared to 2009 was not significant.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
The
average exchange rate for foreign currencies versus the U.S. dollar was weaker
in the third quarter of 2010 compared to the third quarter of
2009. As a result, weaker foreign currencies negatively impacted our
translated U.S. dollar value of net sales by $1.7 million and operating profit
by $0.2 million in the third quarter of 2010 versus the third quarter of
2009. For the first nine months of 2010 compared to 2009, foreign
exchange rates positively influenced net sales by $6.9 million and operating
profit by $1.5 million.
Interest
expense
Interest
expense declined $0.2 million in the third quarter of 2010 compared to the third
quarter of 2009. $0.1 million of this decrease was due to the impact
of a mark-to-market adjustment on an interest rate swap agreement in the third
quarter of 2009. The remaining $0.1 million decline resulted from
lower interest expense on our line of credit driven by lower average outstanding
balances ($0 in 2010 and $60.0 million in 2009).
Interest
expense declined $1.5 million in the first nine months of 2010 compared to the
first nine months of 2009. $1.1 million of this decrease was due to
the impact of a mark-to-market adjustment on an interest rate swap agreement in
the first nine months of 2009. The remaining $0.4 million decline
resulted from lower interest expense on our line of credit driven by a lower
average interest rate (0.6% in 2010 and 1.3% in 2009) and lower average
outstanding balances ($15.8 million in 2010 and $70.0 million in
2009).
Foreign currency gains and
losses
Changes
in foreign currency gains and losses negatively impacted other income (expense)
by $0.3 million in the third quarter of 2010 versus the third quarter of 2009
and $1.3 million in the first nine months of 2010 versus the first nine months
of 2009. Much of the foreign currency gain or loss is caused by the
translation of cash accounts at foreign subsidiaries denominated in a currency
other than their functional currency.
·
|
Provisions for income
taxes
|
The lower
effective tax rate in the third quarter of 2010 compared with the same period in
2009 was primarily the result of a non-recurring, discrete adjustment recognized
in the third quarter.
Average
diluted shares outstanding increased 0.2 million in the third quarter of 2010
compared with the same period in 2009. This increase resulted from an
increase in the dilutive effects of outstanding stock options due to a higher
average stock price offset by the impact of stock repurchases.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
SEGMENT
ANALYSIS
|
|
Third
Quarter
|
|
|
First
Nine Months
|
|
(Dollars
in millions)
|
|
2010
|
|
|
%
Total
|
|
|
2009
|
|
|
%
Total
|
|
|
2010
|
|
|
%
Total
|
|
|
2009
|
|
|
%
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
$ |
118.8 |
|
|
|
45 |
% |
|
$ |
96.5 |
|
|
|
42 |
% |
|
$ |
328.6 |
|
|
|
45 |
% |
|
$ |
274.1 |
|
|
|
41 |
% |
Industrial/Environmental
Filtration
|
|
|
119.6 |
|
|
|
46 |
% |
|
|
114.6 |
|
|
|
50 |
% |
|
|
339.2 |
|
|
|
46 |
% |
|
|
348.0 |
|
|
|
52 |
% |
Packaging
|
|
|
24.4 |
|
|
|
9 |
% |
|
|
19.2 |
|
|
|
8 |
% |
|
|
68.0 |
|
|
|
9 |
% |
|
|
51.3 |
|
|
|
7 |
% |
|
|
$ |
262.8 |
|
|
|
100 |
% |
|
$ |
230.3 |
|
|
|
100 |
% |
|
$ |
735.8 |
|
|
|
100 |
% |
|
$ |
673.4 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
$ |
25.9 |
|
|
|
62 |
% |
|
$ |
22.0 |
|
|
|
69 |
% |
|
$ |
67.5 |
|
|
|
67 |
% |
|
$ |
53.6 |
|
|
|
75 |
% |
Industrial/Environmental
Filtration
|
|
|
12.9 |
|
|
|
31 |
% |
|
|
7.9 |
|
|
|
25 |
% |
|
|
27.5 |
|
|
|
27 |
% |
|
|
14.5 |
|
|
|
20 |
% |
Packaging
|
|
|
2.9 |
|
|
|
7 |
% |
|
|
2.2 |
|
|
|
6 |
% |
|
|
5.8 |
|
|
|
6 |
% |
|
|
2.9 |
|
|
|
5 |
% |
|
|
$ |
41.7 |
|
|
|
100 |
% |
|
$ |
32.1 |
|
|
|
100 |
% |
|
$ |
100.8 |
|
|
|
100 |
% |
|
$ |
71.0 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engine/Mobile
Filtration
|
|
|
21.8 |
% |
|
|
|
|
|
|
22.7 |
% |
|
|
|
|
|
|
20.5 |
% |
|
|
|
|
|
|
19.6 |
% |
|
|
|
|
Industrial/Environmental
Filtration
|
|
|
10.8 |
% |
|
|
|
|
|
|
6.9 |
% |
|
|
|
|
|
|
8.1 |
% |
|
|
|
|
|
|
4.2 |
% |
|
|
|
|
Packaging
|
|
|
11.7 |
% |
|
|
|
|
|
|
11.6 |
% |
|
|
|
|
|
|
8.6 |
% |
|
|
|
|
|
|
5.6 |
% |
|
|
|
|
|
|
|
15.9 |
% |
|
|
|
|
|
|
13.9 |
% |
|
|
|
|
|
|
13.7 |
% |
|
|
|
|
|
|
10.5 |
% |
|
|
|
|
Engine/Mobile Filtration
Segment
|
|
Third
Quarter
|
|
|
First
Nine Months
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
(Dollars
in millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
118.8 |
|
|
$ |
96.5 |
|
|
$ |
22.3 |
|
|
|
23 |
% |
|
$ |
328.6 |
|
|
$ |
274.1 |
|
|
$ |
54.5 |
|
|
|
20 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
25.9 |
|
|
|
22.0 |
|
|
|
3.9 |
|
|
|
18 |
% |
|
|
67.5 |
|
|
|
53.6 |
|
|
|
13.9 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
21.8 |
% |
|
|
22.7 |
% |
|
|
|
|
|
-0.9
|
pt |
|
|
20.5 |
% |
|
|
19.6 |
% |
|
|
|
|
|
0.9
|
pt |
Our
Engine/Mobile Filtration segment primarily sells after-market filters for
heavy-duty trucks, heavy-duty off-highway vehicles, locomotives and
automobiles. The largest market included in this segment is engine
filters for heavy-duty trucks produced at our Baldwin
subsidiary.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
The net sales increases for our
Engine/Mobile Filtration segment in the third quarter and first nine months of
2010 as compared to the same prior year periods are detailed in the following
table:
(Dollars
in millions)
|
|
Third
Quarter
|
|
|
First Nine
Months
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
96.5 |
|
|
$ |
274.1 |
|
|
|
|
|
|
|
|
|
|
U.S.
net sales
|
|
|
12.2 |
|
|
|
23.3 |
|
Foreign
net sales (including export)
|
|
|
10.1 |
|
|
|
25.6 |
|
Foreign
exchange
|
|
|
- |
|
|
|
5.6 |
|
Net
increase
|
|
|
22.3 |
|
|
|
54.5 |
|
|
|
|
|
|
|
|
|
|
2010
|
|
$ |
118.8 |
|
|
$ |
328.6 |
|
The net increase in U.S. net sales for
the Engine/Mobile Filtration segment in the third quarter and first nine months
of 2010 as compared to the same prior year periods is detailed as
follows:
(Dollars in millions)
|
|
Third
Quarter
|
|
|
First Nine
Months
|
|
|
|
|
|
|
|
|
Heavy-duty
engine filters
|
|
$ |
12.1 |
|
|
$ |
21.5 |
|
Railroad
filters
|
|
|
0.1 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
Increase
in U.S. net sales
|
|
$ |
12.2 |
|
|
$ |
23.3 |
|
Our sales of heavy-duty engine filters
in the U.S. have been positively influenced by continued strength in the U.S.
trucking industry. Through July 2010, heavy-duty truck tonnage in the
U.S. was approximately 7% higher compared with the same period in
2009. Although U.S. truck tonnage has been relatively flat over the
past several months, it continues to trend higher than last year and remains at
its highest level since the end of 2008. Our U.S. sales of railroad
filtration products have remained relatively flat, but we anticipate activity to
improve going forward. As an indicator of the recovery in U.S. rail
activity, through July 2010 approximately 90,000 freight cars have been removed
from storage since the end of 2009, and additional cars have been removed from
storage for thirteen consecutive months.
Net sales (adjusted for changes in
foreign currency) outside the U.S. increased $10.1 million in the third quarter
of 2010 from the third quarter of 2009 and $25.6 million in the first nine
months of 2010 from the first nine months of 2009. This net sales
increase was spread throughout our diverse international markets. However, $4.6
million of this increase in the third quarter and $9.6 million in the first nine
months were from sales in China which has been positively impacted by continued
market penetration.
The increase in operating profit for
the Engine/Mobile Filtration segment compared to the third quarter and first
nine months of 2009 was driven by the increase in heavy-duty engine filter
sales. However, operating margin in the third quarter of 2010 was 0.9
points lower than the third quarter of 2009 primarily due to a $5.9 million
increase in selling and administrative expenses including employee compensation
associated with our company-wide profit sharing program and legal
expense. We estimate that the change in average foreign exchange
rates from 2009 to 2010 had positively influenced the translated U.S. dollar
value of operating profit by $0.1 million in the third quarter of 2010 and by
$1.4 million in the first nine months of 2010.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Industrial/Environmental
Filtration Segment
|
|
Third
Quarter
|
|
|
First
Nine Months
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
(Dollars
in millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
119.6 |
|
|
$ |
114.6 |
|
|
$ |
5.0 |
|
|
|
4 |
% |
|
$ |
339.2 |
|
|
$ |
348.0 |
|
|
$ |
(8.8 |
) |
|
|
-3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
12.9 |
|
|
|
7.9 |
|
|
|
5.0 |
|
|
|
62 |
% |
|
|
27.5 |
|
|
|
14.5 |
|
|
|
13.0 |
|
|
|
90 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating margin
|
|
|
10.8 |
% |
|
|
6.9 |
% |
|
|
|
|
|
3.9
|
pt |
|
|
8.1 |
% |
|
|
4.2 |
% |
|
|
|
|
|
3.9
|
pt |
Our
Industrial/Environmental Filtration segment sells a large variety of filtration
products to various end-markets. Included in this market are HVAC
filters, natural gas vessels and replacement filters, aviation fuel filters and
filter systems, and other markets including oil drilling, aerospace, fibers and
resins and dust collector systems and replacement cartridges.
The
changes in net sales for our Industrial/Environmental Filtration segment in the
third quarter and first nine months of 2010 as compared to the same prior year
periods are detailed in the following table:
(Dollars in millions)
|
|
Third
Quarter
|
|
|
First Nine
Months
|
|
|
|
|
|
|
|
|
2009
|
|
$ |
114.6 |
|
|
$ |
348.0 |
|
|
|
|
|
|
|
|
|
|
U.S.
net sales
|
|
|
6.4 |
|
|
|
0.1 |
|
Foreign
net sales (including export)
|
|
|
0.2 |
|
|
|
(10.2 |
) |
Foreign
exchange
|
|
|
(1.6 |
) |
|
|
1.3 |
|
Net
increase (decrease)
|
|
|
5.0 |
|
|
|
(8.8 |
) |
|
|
|
|
|
|
|
|
|
2010
|
|
$ |
119.6 |
|
|
$ |
339.2 |
|
The net increase in U.S. net
sales for the Industrial/Environmental Filtration segment in the third quarter
and first nine months of 2010 as compared to the same prior year periods is
detailed as follows:
(Dollars in millions)
|
|
Third
Quarter
|
|
|
First Nine
Months
|
|
|
|
|
|
|
|
|
Commercial
and industrial air filters - other than 3M and Retail
|
|
$ |
3.4 |
|
|
$ |
4.9 |
|
-
3M
|
|
|
(3.6 |
) |
|
|
(12.7 |
) |
-
Retail
|
|
|
(1.3 |
) |
|
|
(2.5 |
) |
Aerospace,
oil drilling and other industrial filters
|
|
|
2.8 |
|
|
|
4.0 |
|
Filter
sales through Total Filtration Services ("TFS")
|
|
|
2.4 |
|
|
|
5.6 |
|
Aviation
- vessels and aftermarket filters
|
|
|
1.6 |
|
|
|
0.7 |
|
Natural
gas - vessels and aftermarket filters
|
|
|
1.4 |
|
|
|
0.3 |
|
Other
|
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
Increase
in U.S. net sales
|
|
$ |
6.4 |
|
|
$ |
0.1 |
|
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
|
·
|
In
the third quarter of 2009, we were informed by 3M that it would no longer
be purchasing HVAC filters from us. Accordingly, we had no HVAC
filter sales to 3M in the third quarter or the first nine months of
2010. In the third quarter and the first nine months of 2009,
we sold $1.3 million and $2.5 million, respectively, of our high-end
Purolator® brand HVAC residential filters to a large retail store chain on
a trial basis. These sales did not repeat in 2010, creating an
offsetting negative variance in our year-over-year
comparisons. We continue to seek additional opportunities to
penetrate the residential HVAC filter retail market. The
remaining increase in HVAC filter sales in the U.S. in the third quarter
and the first nine months of 2010 was due to year-over-year improvement in
general economic conditions driving growth in industrial, commercial and
residential applications.
|
|
·
|
The
increase in the third quarter of 2010 U.S. net sales to the aerospace, oil
drilling and other industrial markets was the result of additional orders
from several industrial customers due to improved economic conditions
compared with the third quarter of 2009. For the first nine
months of 2010, the increase in net sales included a $1.7 million increase
in filter sales to the commercial aerospace market. The
remainder of the net sales increase was the result of improved general
economic conditions which supported net sales increases notably in the
wire mesh filter and other industrial
markets.
|
|
·
|
The
increase in U.S. net sales in the third quarter and the first nine months
of 2010 at TFS is the result of increased filter sales to the automotive
and other industrial markets including chemical, metals and power
generation. Filter sales to the automotive industry increased
$0.8 million in the third quarter and $2.0 million in the first nine
months of 2010 compared with the first nine months of
2009. These filters were primarily air filters used in
automotive manufacturing and other
facilities.
|
|
·
|
The
increase in U.S. aviation net sales in the third quarter and the first
nine months of 2010 was primarily the result of a large military aviation
aftermarket filter sale consummated in the third quarter of
2010.
|
|
·
|
Net
sales in the natural gas market in the U.S. increased in the third quarter
of 2010 compared with the third quarter of 2009 primarily as a result of
much stronger replacement filter sales as we continue to focus on the
growth of the aftermarket filter business. Net sales in the
U.S. natural gas market increased slightly in the first nine months of
2010 compared with the first nine months of 2009 due to an increase in
replacement filter sales offset by a similar reduction in vessel
sales
|
The decline in foreign net sales for
the first nine months of 2010 was partially driven by a reduction in European
vessel and filter sales primarily in Spain and Germany. The reduction
in Spain was caused by a reduction in military aviation orders, and the
reduction in Germany was caused by several large system orders consummated in
the first nine months of 2009 that did not repeat in 2010. In
addition, a decline in natural gas vessel sales both in Malaysia and Canada
contributed to the reduction in foreign net sales in the first nine
months. These foreign net sales reductions were partially offset by
an increase in filter sales to the oil drilling market primarily in
Asia.
The increase in operating profit and
margin at our Industrial/Environmental Filtration segment was the result of the
continued improved operating results at our HVAC filter operations (including
TFS) where operating profit increased in the third quarter and in the first nine
months of 2010 compared with the same periods in the prior year
2009. Despite lower overall HVAC filter sales primarily from the loss
of 3M sales, operating profit increased due to the benefits of our restructuring
program which was substantially completed in 2009, lower material costs driven
by lower commodity prices and improved material efficiency and lower selling and
administrative expenses. Buoyed by strong sales, operating profit in
our aerospace, oil drilling and other industrial markets increased in the third
quarter and in the first nine months of 2010 compared with the same periods in
the prior year 2009. The operating profit of the remaining
Industrial/Environmental Filtration segment markets, including aviation and
natural gas, increased in the third quarter and in the first nine months of 2010
compared with the same periods in the prior year 2009. The operating
margin increase of 3.9 points in the third quarter and the first nine months of
2010 was primarily influenced by the restructuring efforts at our HVAC
operations, lower material costs and a higher mix of aftermarket filters (which
have higher operating margins than vessels) sold in our natural gas, aviation
and marine markets. We estimate that the change in average foreign
exchange rates from 2009 to 2010 negatively impacted the translated U.S. dollar
value of operating profit by $0.2 million in the third quarter of 2010 and
positively impacted operating profit by $0.1 million in the first nine months of
2010.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Packaging
Segment
|
|
Third Quarter
|
|
|
First Nine Months
|
|
|
|
|
|
|
Change
|
|
|
|
|
|
Change
|
|
(Dollars in millions)
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
2010
|
|
|
2009
|
|
|
$
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$ |
24.4 |
|
|
$ |
19.2 |
|
|
$ |
5.2 |
|
|
|
27 |
% |
|
$ |
68.0 |
|
|
$ |
51.3 |
|
|
$ |
16.7 |
|
|
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
2.9 |
|
|
|
2.2 |
|
|
|
0.7 |
|
|
|
28 |
% |
|
|
5.8 |
|
|
|
2.9 |
|
|
|
2.9 |
|
|
|
103 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
margin
|
|
|
11.7 |
% |
|
|
11.6 |
% |
|
|
|
|
|
0.1
pt
|
|
|
|
8.6 |
% |
|
|
5.6 |
% |
|
|
|
|
|
3.0
pt
|
|
Our Packaging segment manufactures and
markets consumer and industrial packaging products.
The increase in net sales at our
Packaging segment in the first nine months of 2010 includes a no-margin $4.6
million equipment and tooling sale to one of our customers in the second
quarter. The remaining net sales increase for both the third quarter
and the first nine months of 2010 was primarily the result of additional sales
from smokeless tobacco packaging and decorated flat sheet
metal. Operating profit in the third quarter and the
first nine months of 2010 increased from the same periods in 2009 primarily due
to the incremental profit from the increase in net sales.
FINANCIAL
CONDITION
Liquidity and Capital
Resources
Our
financial position remains strong with adequate cash resources and sufficient
borrowing capacity under our line of credit. In the first quarter of
2008, we entered into a five-year multicurrency revolving credit agreement
(“Credit Facility”) with a group of financial institutions under which we may
borrow up to $250.0 million under a selection of currencies and rate
formulas. We believe the financial institutions that are party to
this arrangement have adequate capital resources and will be able to fund future
borrowings under the Credit Facility. At our election, the interest
rate is based upon either a defined base rate or the LIBOR interest rate plus or
minus applicable margins. At the end of the third quarter of 2010,
the LIBOR interest rate plus margin was 0.6%. At the end of the third
quarter of 2010, there were no amounts outstanding on the Credit
Facility. However, we had $16.0 million outstanding on a $75.0
million letter of credit subline. Accordingly, we had $234.0 million
available for further borrowing at the end of the third quarter of
2010.
Cash and
cash equivalents, restricted cash and short-term investments decreased $4.2
million to $88.0 million at the end of the third quarter of 2010 from $92.2
million at fiscal year-end 2009. Short-term investments consisted of
tax-exempt municipal money market funds. Cash and cash equivalents
are held by financial institutions throughout the world. We regularly
review the credit worthiness of these institutions and believe our funds at
these institutions are not at significant risk. The current ratio of
3.1 at the end of the third quarter of 2010 was lower than the current ratio of
3.4 at fiscal year-end 2009.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Total
long-term debt of $17.4 million at the end of the third quarter of 2010 included
$15.8 million outstanding on industrial revenue bonds and $1.6 million of other
long-term debt. At the end of the third quarter of 2010 and at fiscal
year-end 2009, we were in compliance with all financial covenants as included in
the Credit Facility. We expect to be in compliance with these
covenants in the foreseeable future. The ratio of total debt to total
capitalization (defined as long-term debt plus total shareholders’ equity) was
2.3% at the end of the third quarter of 2010 compared to 7.0% at fiscal year-end
2009.
We had
50.4 million shares of common stock outstanding at the end of the third quarter
of 2010, the same amount as at fiscal year-end 2009. The issuance of
0.3 million shares under stock incentive plans was offset by 0.3 million shares
repurchased in the third quarter of 2010. Shareholders’ equity
increased to $731.8 million at the end of the third quarter of 2010 compared to
$688.5 million at fiscal year-end 2009. This $43.3 million increase
resulted mainly from additional net earnings of $67.3 million and items related
to stock compensation and option activity pursuant to incentive plans of $10.1
million partially offset by currency translation adjustments of $10.4 million,
stock repurchases of $10.0 million and dividend payments of $14.8
million.
Net cash
provided by operating activities increased $24.5 million to $100.9 million in
the first nine months of 2010 from $76.4 million in the first nine months of
2009. This increase was driven by a $49.0 million increase in cash
flow from changes in short-term investments and additional net earnings of $20.1
million offset by additional cash used for increases in working capital of $44.8
million. The reduction in short-term investments from fiscal year-end
2009 to the end of the third quarter of 2010 was the result of our decision to
convert these short-term investments into cash due to a minimal return
differential. The additional cash outflow for working capital was
driven by incremental working capital requirements to support higher sales
levels notably cash used for an increase in accounts receivables and inventory
in the first nine months of 2010 compared to cash generated from a decrease in
accounts receivable in the first nine months of 2009.
Net cash
used in investing activities decreased $8.9 million to $16.8 million in the
first nine months of 2010 compared with $25.7 million in the first nine months
of 2009. This decrease was primarily caused by a $9.4 million
reduction in cash outflow for business acquisitions. We completed
several smaller acquisitions in the first nine months of 2009, but had no
acquisitions in the first nine months of 2010. Cash outflow for plant
additions was $2.3 million higher in the first nine months of 2010 compared to
the same period in 2009.
Net cash
used in the financing activities increased $14.9 million in the first nine
months of 2010 compared to the first nine months of 2009. This
increase was driven by a $27.7 million increase in net debt payments, including
a $20.0 million increase in payments under the line of credit, offset by a $9.8
million decrease in amounts paid for the repurchase of common stock and $1.7
million decrease in payments for acquisitions of noncontrolling
interests.
We
believe that our current operations will continue to generate cash and that
sufficient borrowings under the Credit Facility remain available to fund current
operating needs, pay dividends, invest in the development of new products and
filter media, fund planned capital expenditures and expansion of current
facilities, provide for interest payments and required principal payments
related to debt agreements, fund pension plan contributions and repurchase
common stock. We also continue to assess acquisition opportunities in
related filtration businesses that would expand our market base, distribution
coverage or product offerings. Any such acquisitions may affect
operating cash flows and may require changes in our debt and
capitalization. In addition, capital market disruptions may
affect the cost or availability of future borrowings. We have no
material long-term purchase commitments. We will also continue to
assess repurchases of our common stock. We repurchased 0.3 million
shares for $10.0 million of our common stock in the third quarter of 2010 at an
average price of $34.65. At the end of the third quarter of 2010,
there was $240.0 million available for future repurchases under the current
authorization of $250.0 million approved by the Board of Director in June
2010. Future repurchases may be made after considering cash flow
requirements for internal growth, capital expenditures, acquisitions, interest
rates and the market price of our common stock.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
At the
end of the third quarter of 2010, our liability for uncertain income tax
provisions was $2.4 million, including interest and penalties. Due to
the high degree of uncertainty regarding the timing of potential future cash
outflows associated with these liabilities, we are unable to make a reasonably
reliable estimate of the amount and period in which these remaining liabilities
might be paid.
In the
first quarter of 2008, we entered into an interest rate swap agreement (“Swap
Agreement”) with a bank to manage our interest rate exposure on certain amounts
outstanding under the Credit Facility. The Swap Agreement provided
for us to pay a 3.93% fixed interest rate plus applicable margins and receive
interest based on a three-month LIBOR on a notional amount of $100.0
million. The Swap Agreement was not designated as a hedge for
financial reporting purposes. Accordingly, unrealized gains and
losses were recorded as interest expense in the Consolidated Statements of
Earnings. Periodic settlement payments or receipts were recorded as a
component of cash flows from operating activities in the Consolidated Statements
of Cash Flows. The fair value of the Swap Agreement at November 30,
2009 was approximately $1.0 million and was recorded as part of other accrued
liabilities. The Swap Agreement expired on January 1, 2010, and the
final $1.0 million settlement was paid in January 2010.
From time
to time, we use derivative financial instruments such as the Swap Agreement to
mitigate our exposure to certain market risks. However, by using
derivative financial instruments, we are exposed to credit
risk. Credit risk is the failure of the counterparty to perform under
the terms of the derivative contract. When the fair value of a
derivative contract is positive, the counterparty owes us, which creates credit
risk. We minimize this credit risk by entering into transactions with
counterparties which we believe have the financial resources to meet their
obligations.
Off-Balance Sheet
Arrangements
Our
off-balance sheet arrangements relate to various operating leases as discussed
in Note H to the Consolidated Financial Statements in our 2009 Form
10-K. We had no variable interest entity or special purpose entity
agreements during the first nine months of 2010 or fiscal 2009.
OTHER
MATTERS
Critical Accounting
Policies
Our
critical accounting policies, including the assumptions and judgments underlying
them, are disclosed in our 2009 Form 10-K in Management’s Discussion and
Analysis of Financial Condition and Results of Operations. There have been no
material changes in our critical accounting policies set forth in our 2009
Form 10-K. These policies have been consistently applied in all material
respects. While the estimates and judgments associated with the application of
these policies may be affected by different assumptions or conditions, we
believe the estimates and judgments associated with the reported amounts are
appropriate in the circumstances.
Environmental Matters and
Climate Change and Energy Legislation and Regulation
Our
operations are subject to U.S. and non-U.S. environmental laws and regulations
governing emissions to air; discharges to water; the generation, handling,
storage, transportation, treatment and disposal of waste materials; and the
cleanup of contaminated properties. Currently, we believe that any
potential environmental liabilities with respect to our former or existing
operations are not material, but there is no assurance that we will not be
adversely impacted by such liabilities, costs or claims in the future, either
under present laws and regulations or those that may be adopted or imposed in
the future.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
Foreign,
federal, state and local regulatory and legislative bodies have proposed various
legislative and regulatory measures relating to climate change, regulating
greenhouse gas emissions and energy policies. Due to the uncertainty
in the regulatory and legislative processes, as well as the scope of such
requirements and initiatives, we cannot currently determine the effect such
legislation and regulation may have on our operations.
The
potential physical impacts of climate change on our operations are also highly
uncertain and would vary depending on type of physical impact and geographic
location. Climate change physical impacts could include changing
temperatures, water shortages, changes in weather and rainfall patterns, and
changing storm patterns and intensities. The occurrence of one or
more natural disasters, whether due to climate change or naturally occurring,
such as tornadoes, hurricanes, earthquakes and other forms of severe weather in
the U.S. or in a country in which we operate or in which our suppliers or
customers are located could adversely impact our operations and financial
performance. Such events could result in:
|
·
|
physical
damage to and complete or partial closure of one or more of our
manufacturing facilities
|
|
·
|
temporary
or long-term disruption in the supply of raw materials from our
suppliers
|
|
·
|
disruption
in the transport of our products to customers and end
users
|
|
·
|
delay
in the delivery of our products to our
customers
|
Recent Relevant Accounting
Pronouncements
A
discussion of recent relevant accounting pronouncements is included in Note 1 to
the Consolidated Condensed Financial Statements.
Outlook
We are
pleased with our strong operating results in the third quarter and the first
nine months of 2010. The continued positive comparisons to last year
and 2008 are a result of our disciplined efforts of focusing on restructuring
and cost reductions while not sacrificing top line growth. We are
particularly proud of our record quarterly gross margin percentage in the third
quarter because this is an indication that all our business segments are
contributing to our positive performance.
We remain
cautious due to global economic uncertainty. However, based upon the
strength of our performance in the third quarter, we are increasing the floor of
our 2010 guidance for diluted earnings per share to $1.80 from the previous
guidance of $1.70. Accordingly, our updated 2010 diluted earnings per
share guidance is $1.80 to $1.85. We expect
our full year consolidated sales growth from 2009 to be in the range of 10.5% to
11.0% and our 2010 full year operating margin to be between 13.8% and
14.3%. We anticipate a full year average tax rate from 32.5%
to 33.5%, 2010 cash flow from operating activities (excluding changes in
short-term investments) from $105.0 million to $110.0 million and 2010 capital
expenditures from $25.0 million to $30.0 million.
MANAGEMENT’S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - CONTINUED
FORWARD-LOOKING
INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
This
Third Quarter 2010 Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements made in
this Form 10-Q, other than statements of historical fact, are forward-looking
statements. You can identify these statements from use of the words “may,”
“should,” “could,” “potential,” “continue,” “plan,” “forecast,” “estimate,”
“project,” “believe,” “intent,” “anticipate,” “expect,” “target,” “is likely,”
“will,” or the negative of these terms, and similar expressions. These
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements may
include, among other things:
|
·
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statements
and assumptions relating to future growth, earnings, earnings per share
and other financial performance measures, as well as management’s
short-term and long-term performance
goals;
|
|
·
|
statements
relating to the anticipated effects on results of operations or financial
condition from recent and expected developments or events, including
acquisitions;
|
|
·
|
statements
relating to our business and growth strategies;
and
|
|
·
|
any
other statements or assumptions that are not historical
facts.
|
We
believe that our expectations are based on reasonable
assumptions. However, these forward-looking statements involve known
and unknown risks, uncertainties and other important factors that could cause
our actual results, performance or achievements, or industry results, to differ
materially from our expectations of future results, performance or achievements
expressed or implied by these forward-looking statements. These
factors include, but are not only limited to, risks associated with: (1) world
economic factors and the ongoing economic uncertainty impacting many regions of
the world, (2) reductions in sales volume and orders, (3) our customers’
financial condition, (4) currency fluctuations, particularly increases or
decreases in the U.S. dollar against other currencies, (5) commodity price
increases and/or limited availability of raw materials and component products,
including steel, (6) compliance costs associated with environmental laws and
regulations, (7) political factors, (8) our international operations, (9) highly
competitive markets, (10) governmental laws and regulations including
the impact of the economic stimulus and financial reform measures being
implemented by governments around the world, (11) the implementation of new
information systems, (12) potential global events resulting in instability and
unpredictability in the world’s markets, including financial bailouts of
sovereign nations, political changes, military and terrorist activities, health
outbreaks and other factors, (13) changes in accounting standards or adoption of
new accounting standards, (14) adverse effects of natural disasters, and (15)
other factors described in more detail in the “Risk Factors” section of our 2009
Form 10-K. In addition, our past results of operations do not
necessarily indicate our future results. Our future results may
fluctuate as a result of these and other risk factors detailed from time to time
in our filings with the Securities and Exchange Commission.
You
should not place undue reliance on any forward-looking statements. These
statements speak only as of the date of this Third Quarter 2010 Form
10-Q. Except as otherwise required by applicable laws, we undertake
no obligation to publicly update or revise any forward-looking statements or the
risks described in this Third Quarter 2010 Form 10-Q, whether as a result of new
information, future events, changed circumstances or any other reason after the
date of this Third Quarter 2010 Form 10-Q.
Part I – Item 3. Quantitative and
Qualitative Disclosures About Market Risk
Our
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. Market risks are also
discussed in our 2009 Form 10-K in “Item 7A. Quantitative and Qualitative
Disclosures about Market Risk”. There have been no material changes
to the disclosure regarding market risk set forth in our 2009 Form
10-K.
Part I - Item 4. Controls and
Procedures
We have
established disclosure controls and procedures which are designed to ensure that
information required to be disclosed in reports filed or submitted under the
Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Our management, with the
participation of Norman E. Johnson, Chairman of the Board and Chief Executive
Officer, and David J. Fallon, Chief Financial Officer and Chief Accounting
Officer, evaluated the effectiveness of our disclosure controls and procedures
as of August 28, 2010. Based on their evaluation, such officers
concluded that our disclosure controls and procedures pursuant to Rules 13a –
15(e) of the Exchange Act were effective as of August 28, 2010, in achieving the
objectives for which they were designed. No change in our internal
control over financial reporting occurred during our most recent fiscal quarter
ended August 28, 2010, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial
reporting.
Part II
-
Other
Information
Part II - Item 1. Legal
Proceedings
The
information required by this Item is incorporated by reference from Note 13
included in Part I, Item 1 of this Third Quarter 2010 Form 10-Q.
Part II
- Item 1A. Risk
Factors
There
have been no material changes to the risk factors disclosed in “Item 1A. Risk
Factors” in our 2009 Form 10-K.
Part II - Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds
On June
22, 2010, our Board of Directors approved a three-year, $250 million stock
repurchase program. Pursuant to the authorization, we may purchase shares from
time to time in the open market or through privately negotiated transactions
through June 22, 2013. We have no obligation to repurchase shares
under the authorization, and the timing, actual number and values of shares to
be purchased will depend on our stock price and market conditions. As
set forth in the table below, we repurchased 288,842 shares of our common stock
during the fiscal quarter ended August 28, 2010. The amount of
$239,991,336 remained available for purchase under such program at the end of
the Third Quarter of 2010.
COMPANY PURCHASES OF EQUITY SECURITIES
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
Period
|
|
Total
number of
shares
purchased
|
|
|
Average
price paid
per share
|
|
|
Total number of
shares purchased as
part of the
Company's publicly
announced plan
|
|
|
Maximum approximate
dollar value of shares
that may yet be
purchased under the
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May
30, 2010 through June 30, 2010
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
250,000,000 |
|
July
1, 2010 through July 31, 2010
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
|
$ |
250,000,000 |
|
August
1, 2010 through August 28, 2010
|
|
|
288,842 |
|
|
$ |
34.65 |
|
|
|
288,842 |
|
|
$ |
239,991,336 |
|
Total
|
|
|
288,842 |
|
|
|
|
|
|
|
288,842 |
|
|
|
|
|
Part II - Item 6.
Exhibits
a.
|
|
Exhibits:
|
|
|
|
|
31(i)
|
|
Certification
of Norman E. Johnson pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
31(ii)
|
|
Certification
of David J. Fallon pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
|
|
|
32(i)
|
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
|
|
101.INS
|
|
XBRL
Instance Document
|
|
|
101.SCH
|
|
XBRL
Taxonomy Extension Schema Document
|
|
|
101.CAL
|
|
XBRL
Taxonomy Extension Calculation Linkbase
|
|
|
101.LAB
|
|
XBRL
Taxonomy Extension Label Linkbase
|
|
|
101.PRE
|
|
XBRL
Taxonomy Extension Presentation Linkbase
|
|
|
101.DEF
|
|
XBRL
Taxonomy Extension Definition
Linkbase
|
SIGNATURES
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)
September 17, 2010
|
|
By
|
/s/ Norman E. Johnson
|
(Date)
|
|
|
Norman
E. Johnson
Chairman
of the Board and Chief
Executive
Officer
|
|
|
|
|
September 17, 2010
|
|
By
|
/s/ David J. Fallon
|
(Date)
|
|
|
David
J. Fallon
Chief
Financial Officer and
Chief
Accounting Officer
|