SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
QUARTERLY REPORT
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Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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For the quarter ended May 31, 2003
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REGISTRANT: CLARCOR Inc. (Delaware)
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 31, 2003 Commission File Number 1-11024
CLARCOR Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-0922490
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 815-962-8867
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No Change
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(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 is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
25,045,892 common shares outstanding
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Page 1
Part I - Item 1
CLARCOR Inc.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
--------
May 31, November 30,
ASSETS 2003 2002
----------- ------------
(unaudited)
Current assets:
Cash and short-term cash investments $ 10,326 $ 13,747
Accounts receivable, less allowance for losses
of $7,859 for 2003 and $7,020 for 2002 117,621 121,482
Inventories:
Raw materials 38,397 34,313
Work in process 14,771 10,897
Finished products 59,512 56,636
--------- ---------
Total inventories 112,680 101,846
--------- ---------
Prepaid expenses and other current assets 4,025 5,576
Deferred income taxes 17,985 17,095
--------- ---------
Total current assets 262,637 259,746
--------- ---------
Plant assets at cost, 296,790 290,302
less accumulated depreciation (167,573) (157,410)
--------- ---------
129,217 132,892
--------- ---------
Goodwill 82,474 81,658
Trademarks 29,476 29,483
Other acquired intangibles, less accumulated amortization 10,609 11,388
Pension assets 21,267 21,771
Other noncurrent assets 10,192 9,181
--------- ---------
$ 545,872 $ 546,119
========= =========
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 5,699 $ 68,456
Accounts payable 47,316 50,350
Income taxes 9,556 8,061
Accrued employee compensation 17,740 20,688
Other accrued liabilities 29,988 26,700
--------- ---------
Total current liabilities 110,299 174,255
--------- ---------
Long-term debt, less current portion 62,968 22,648
Pension liabilities 9,257 7,823
Deferred income taxes 19,493 19,045
Other long-term liabilities 7,125 6,351
Minority interests 669 536
Contingencies
SHAREHOLDERS' EQUITY
Capital stock 25,046 24,919
Capital in excess of par value 13,595 12,854
Accumulated other comprehensive earnings (2,978) (6,187)
Retained earnings 300,398 283,875
--------- ---------
336,061 315,461
--------- ---------
$ 545,872 $ 546,119
========= =========
See Notes to Consolidated Financial Statements
Page 2
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
(Unaudited)
---------
Quarter Ended Six Months Ended
--------------------------------- ---------------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Net sales $ 185,775 $ 176,510 $ 357,269 $ 334,772
Cost of sales 129,176 125,210 252,321 238,762
------------ ------------ ------------ ------------
Gross profit 56,599 51,300 104,948 96,010
Selling and administrative expenses 36,061 32,504 68,923 62,808
------------ ------------ ------------ ------------
Operating profit 20,538 18,796 36,025 33,202
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (450) (1,828) (974) (3,794)
Interest income 20 91 130 285
Other, net 469 (432) 515 (536)
------------ ------------ ------------ ------------
39 (2,169) (329) (4,045)
------------ ------------ ------------ ------------
Earnings before income taxes
and minority interests 20,577 16,627 35,696 29,157
Provision for income taxes 7,499 6,017 13,015 10,535
------------ ------------ ------------ ------------
Earnings before minority interests 13,078 10,610 22,681 18,622
Minority interests in earnings of subsidiaries (31) (3) (38) (17)
------------ ------------ ------------ ------------
Net earnings $ 13,047 $ 10,607 $ 22,643 $ 18,605
============ ============ ============ ============
Net earnings per common share:
Basic $ 0.52 $ 0.43 $ 0.91 $ 0.75
============ ============ ============ ============
Diluted $ 0.51 $ 0.42 $ 0.89 $ 0.74
============ ============ ============ ============
Average number of common shares outstanding:
Basic 25,015,289 24,856,731 24,973,997 24,782,349
============ ============ ============ ============
Diluted 25,435,452 25,310,296 25,326,543 25,142,081
============ ============ ============ ============
Dividends paid per share $ 0.1225 $ 0.1200 $ 0.2450 $ 0.2400
============ ============ ============ ============
See Notes to Consolidated Condensed Financial Statements
Page 3
CLARCOR Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
--------
Six Months Ended
---------------------------
May 31, June 1,
2003 2002
--------- ---------
Cash flows from operating activities:
Net earnings $ 22,643 $ 18,605
Depreciation 9,860 10,067
Amortization 453 365
Changes in assets and liabilities (2,534) 11,627
Other, net 45 72
--------- ---------
Net cash provided by operating activities 30,467 40,736
--------- ---------
Cash flows from investing activities:
Additions to plant assets (6,041) (6,078)
Business acquisitions, net of cash acquired -- 3,694
Other, net 26 (1)
--------- ---------
Net cash used in investing activities (6,015) (2,385)
--------- ---------
Cash flows from financing activities:
Proceeds from line of credit 94,111 9,500
Payments on line of credit (116,083) (39,500)
Payments on long-term debt (465) (219)
Cash dividends paid (6,120) (5,937)
Other, net 440 1,786
--------- ---------
Net cash used in financing activities (28,117) (34,370)
--------- ---------
Net effect of exchange rate changes on cash 244 25
--------- ---------
Net change in cash and short-term cash investments (3,421) 4,006
Cash and short-term cash investments,
beginning of period 13,747 7,418
--------- ---------
Cash and short-term cash investments,
end of period $ 10,326 $ 11,424
========= =========
Cash paid during the period for:
Interest $ 999 $ 4,076
========= =========
Income taxes $ 9,066 $ 1,946
========= =========
See Notes to Consolidated Condensed Financial Statements
Page 4
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
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1. CONSOLIDATED FINANCIAL STATEMENTS
The November 30, 2002 consolidated balance sheet data was derived from
CLARCOR's year-end audited financial statements, but does not include
all disclosures required by accounting principles generally accepted
in the United States of America. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed or omitted.
The consolidated condensed balance sheet as of May 31, 2003, the
consolidated condensed statements of earnings and the consolidated
condensed statements of cash flows for the periods ended May 31, 2003,
and June 1, 2002, have been prepared by the Company without audit. The
financial statements have been prepared on the same basis as those in
the Company's November 30, 2002 annual report on Form 10-K. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations, and cash flows have been made. The
results of operations for the period ended May 31, 2003 are not
necessarily indicative of the operating results for the full year.
Certain reclassifications have been made to conform prior years' data
to the current presentation. These reclassifications had no effect on
reported earnings.
2. ACQUISITIONS
On June 5, 2002, the Company acquired Locker Filtration Limited
(Locker), a Warrington, England manufacturer of heavy-duty air
filters, diesel and gas turbine air intake system filters and
specialty filters. During the fourth quarter 2002, the Company
acquired Total Filter Technology (TFT), a process liquid filtration
manufacturer based in North Chelmsford, Massachusetts and
FilterSource, an air filtration distributor based in California. The
three acquisitions were purchased for approximately $10,371 in cash
and their results were included in the Company's consolidated results
of operations from the dates of acquisition. Locker is included in the
Engine/Mobile Filtration segment. TFT and FilterSource are included in
the Industrial/Environmental Filtration segment. An allocation of the
purchase price has been made to major categories of assets and
liabilities for each acquisition. The acquisitions are not material to
the results of the Company. During first quarter 2003, the appraisal
and other purchase accounting adjustments for TFT and FilterSource
were finalized resulting in an increase to goodwill of $417, a
decrease to trademarks of $7, and a decrease to other identifiable
definite-lived intangibles of $326. No additional purchase accounting
entries associated with the 2002 acquisitions are expected other than
entries to finalize deferred income taxes.
On June 4, 2001, the Company acquired the stock of several filtration
management companies. As a result of the acquisition, the companies
were combined into one company, Total Filtration Services, Inc. (TFS),
and included in the Industrial/Environmental Filtration segment from
the date of acquisition. The initial purchase price was based on the
net assets of the businesses acquired as shown on a June 4, 2001
balance sheet subject to a final adjustment. During first quarter
2002, the purchase price was finalized resulting in a $3,694 payment
by the seller to the Company. A decrease to goodwill of $3,954 was
recorded primarily as a result of the net settlement payment and
entries associated with deferred income taxes, the valuation of
inventory acquired, and preacquisition contingencies related to
contract matters. No additional purchase accounting entries associated
with the TFS acquisition are expected other than entries to finalize
deferred income taxes.
Page 5
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
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3. RECENT ACCOUNTING PRONOUNCEMENT
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires that certain guarantees be
recognized as liabilities at fair value at their inception date and
requires certain disclosures by the guarantor in its financial
statements about its obligations. The Company has reviewed the
provisions of FIN 45 relating to initial recognition and measurement
of guarantor liabilities, which are effective for qualifying
guarantees entered into or modified after December 31, 2002, and does
not expect it to have a material impact on the Company's financial
statements. The disclosure requirements which were effective for the
quarter ended March 1, 2003 are described below.
The Company has provided letters of credit totaling approximately
$24,624 to various government agencies, primarily related to
industrial revenue bonds and to insurance companies and other entities
in support of its obligations. The Company believes that no payments
will be required resulting from these accommodation obligations.
In the ordinary course of business, the Company also provides routine
indemnifications and other guarantees whose terms range in duration
and often are 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.
The Company has certain majority ownership interests in a consolidated
affiliate in which the Company has agreed, under certain conditions,
to buy out the minority owners' interest for an amount estimated to be
less than $500.
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.
Changes in the Company's warranty accrual during the six months ended
May 31, 2003 are as follows:
Balance at November 30, 2002 $1,873
Accruals for warranties issued during the period 282
Accruals related to pre-existing warranties 69
Settlements made during the period (189)
Other adjustments, including currency translation (11)
------
Balance at May 31, 2003, included in other current liabilities $2,024
======
Page 6
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
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4. GOODWILL AND INTANGIBLES
The following table summarizes the activity for acquired intangibles
by reporting unit for the six months ended May 31, 2003. The
acquisitions are discussed in Note 2.
2003
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Currency
Beginning Translation End of
of Year Acquisitions Adjustments Amortization Quarter
--------- ------------ ----------- ------------ --------
Goodwill:
Engine/Mobile Filtration $ 11,528 $ -- $ 401 $ -- $ 11,929
Industrial/Environmental Filtration 70,130 417 (2) -- 70,545
Packaging -- -- -- -- --
-------- -------- -------- -------- --------
$ 81,658 $ 417 $ 399 $ -- $ 82,474
======== ======== ======== ======== ========
Trademarks:
Engine/Mobile Filtration $ 603 $ -- $ -- $ -- $ 603
Industrial/Environmental Filtration 28,880 (7) -- -- 28,873
Packaging -- -- -- -- --
-------- -------- -------- -------- --------
$ 29,483 $ (7) $ -- $ -- $ 29,476
======== ======== ======== ======== ========
Other acquired intangibles, gross:
Engine/Mobile Filtration $ 1,040 $ -- $ -- $ -- $ 1,040
Industrial/Environmental Filtration 13,430 (326) -- -- 13,104
Packaging -- -- -- -- --
-------- -------- -------- -------- --------
14,470 (326) -- -- 14,144
Less accumulated amortization 3,082 -- -- 453 3,535
-------- -------- -------- -------- --------
Other acquired intangibles, net $ 11,388 $ (326) $ -- $ 453 $ 10,609
======== ======== ======== ======== ========
Amortization expense is estimated to be $900 in 2003, $781 in 2004,
$777 in 2005, $752 in 2006, and $739 in 2007.
5. CREDIT AGREEMENT
In April 2003, the Company entered into a five-year multicurrency
revolving credit agreement with a group of participating financial
institutions under which it may borrow up to $165,000. This credit
facility replaced a $185,000 agreement that was to expire in September
2003. The replacement agreement provides that loans may be made under
a selection of currencies and rate formulas. The interest rate is
based upon either a defined Base Rate or the London Interbank Offered
Rate (LIBOR) plus or minus applicable margins. Facility fees and other
fees on the entire loan commitment are payable for the duration of
this facility. At May 31, 2003, $40,680 was outstanding under this
agreement and the average interest rate during the quarter was 1.81%.
Borrowings under the credit facility are unsecured but are guaranteed
by subsidiaries of the Company. The agreement related to this
borrowing includes certain restrictive covenants that include
maintaining minimum consolidated net worth, limiting new borrowings,
maintaining a minimum interest coverage and restricting certain
changes in ownership. This agreement also includes a $40,000 letter of
credit line subline, against which $14,950 in letters of credit had
been issued at May 31, 2003. The Company is in compliance with all
covenants related to debt agreements.
Page 7
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
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6. STOCK-BASED COMPENSATION
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation," the Company
accounts for stock-based compensation using the intrinsic value method
as prescribed under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
Interpretations and provides the disclosure-only provisions of SFAS
No. 123. In December 2002, the Financial Accounting Standards Board
issued SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," which amends SFAS No. 123, providing
alternative methods of accounting and requiring more prominent and
frequent disclosures of the effects of stock-based compensation under
the fair value-based method. The Company has adopted the interim
disclosure provisions effective for the interim period ending May 31,
2003.
If the Company had determined compensation expense for its stock-based
compensation plans based on the fair value at the grant dates
consistent with the method of SFAS No. 123 and SFAS No. 148, the
Company's pro forma net earnings and basic and diluted earnings per
share (EPS) would have been as follows:
Quarter Ended Six Months Ended
---------------------------- ----------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Net earnings, as reported $ 13,047 $ 10,607 $ 22,643 $ 18,605
Less total stock-based compensation
expense under the fair value-based
method, net of tax 1,100 543 1,501 852
---------- ---------- ---------- ----------
Pro forma net earnings $ 11,947 $ 10,064 $ 21,142 $ 17,753
========== ========== ========== ==========
Basic EPS, as reported $ 0.52 $ 0.43 $ 0.91 $ 0.75
Pro forma basic EPS $ 0.48 $ 0.40 $ 0.85 $ 0.72
Diluted EPS, as reported $ 0.51 $ 0.42 $ 0.89 $ 0.74
Pro forma diluted EPS $ 0.47 $ 0.40 $ 0.83 $ 0.71
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 for the quarter and six months ended May
31, 2003 and June 1, 2002, respectively. Adjustments for forfeitures
are made as they occur.
Quarter Ended Six Months Ended
--------------------- ---------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
------- ------- ------- -------
Risk-free interest rate 3.87% 4.70% 3.87% 4.70%
Expected dividend yield 1.58% 1.91% 1.58% 1.91%
Expected volatility factor 24.60% 25.50% 24.60% 25.50%
Expected option term (in years) 7.0 7.0 7.0 7.0
Page 8
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
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7. EARNINGS PER SHARE
The Company calculates earnings per share according to Statement of
Financial Accounting Standards No. 128, "Earnings per Share." Diluted
earnings per share reflects the impact of outstanding stock options
and restricted stock 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 Six Months Ended
------------------------------ ------------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net Earnings $ 13,047 $ 10,607 $ 22,643 $ 18,605
Basic EPS:
Weighted average number of common
shares outstanding 25,015,289 24,856,731 24,973,997 24,782,349
Basic per share amount $ 0.52 $ 0.43 $ 0.91 $ 0.75
=========== =========== =========== ===========
Diluted EPS:
Weighted average number of common
shares outstanding 25,015,289 24,856,731 24,973,997 24,782,349
Dilutive effect of stock options 420,163 453,565 352,546 359,732
----------- ----------- ----------- -----------
Diluted weighted average number of
common shares outstanding 25,435,452 25,310,296 25,326,543 25,142,081
Diluted per share amount $ 0.51 $ 0.42 $ 0.89 $ 0.74
=========== =========== =========== ===========
The following options were not included in the computation of diluted
earnings per share as the options' exercise prices were greater than
the average market price of the common shares during the respective
quarter:
Quarter Ended Six Months Ended
------------------------- --------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
------- ------- -------- -------
Options 77,398 41,366 189,906 41,366
Weighted Average Exercise Price $ 36.38 $ 31.97 $ 35.68 $ 31.97
For the six months ended May 31, 2003, exercises of stock options
added $226 to capital in excess of par value.
Page 9
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
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8. COMPREHENSIVE EARNINGS
The Company's total comprehensive earnings and its components are as
follows:
Quarter Ended Six Months Ended
---------------------- ----------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
------- ------- ------- -------
Net earnings $13,047 $10,607 $22,643 $18,605
Other comprehensive earnings, net of tax:
Cash flow hedges:
Unrealized gain on derivative instrument -- 479 -- 828
Foreign currency translation adjustments 1,754 1,520 3,209 546
------- ------- ------- -------
Total comprehensive earnings $14,801 $12,606 $25,852 $19,979
======= ======= ======= =======
9. CONTINGENCIES
The Company is involved in legal actions arising in the normal course
of business. Additionally, the Company is party to various proceedings
relating to environmental issues. The U.S. Environmental Protection
Agency (EPA) and/or other responsible state agencies have designated
the Company as a potentially responsible party (PRP), 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 extent
of the contamination, 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 PRP for the cleanup.
It is the opinion of management, after consultation with legal counsel
that additional liabilities, if any, resulting from these legal or
environmental issues, are not expected to have a material adverse
effect on the Company's financial condition or consolidated results of
operations.
10. SEGMENT DATA
The Company operates in three principal product segments:
Engine/Mobile Filtration, Industrial/Environmental Filtration, and
Packaging. The segment data for the quarter and six months ended May
31, 2003 and June 1, 2002, respectively, are shown below. Net sales
represent sales to unaffiliated customers as reported in the
consolidated condensed statements of earnings. Intersegment sales were
not material.
Page 10
CLARCOR Inc.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited) Continued
- -------------------------------------------------------------------------------
10. SEGMENT DATA, Continued
Quarter Ended Six Months Ended
--------------------------- --------------------------
May 31, June 1, May 31, June 1,
2003 2002 2003 2002
--------- --------- --------- ---------
Net sales:
Engine/Mobile Filtration $ 73,066 $ 64,760 $ 139,842 $ 122,599
Industrial/Environmental Filtration 95,852 94,377 186,221 180,327
Packaging 16,857 17,373 31,206 31,846
--------- --------- --------- ---------
$ 185,775 $ 176,510 $ 357,269 $ 334,772
========= ========= ========= =========
Operating profit:
Engine/Mobile Filtration $ 14,253 $ 13,169 $ 26,939 $ 24,427
Industrial/Environmental Filtration 5,417 4,672 7,790 7,202
Packaging 868 955 1,296 1,573
--------- --------- --------- ---------
20,538 18,796 36,025 33,202
Other income (expense) 39 (2,169) (329) (4,045)
--------- --------- --------- ---------
Earnings before income taxes and
minority earnings $ 20,577 $ 16,627 $ 35,696 $ 29,157
========= ========= ========= =========
Identifiable assets:
Engine/Mobile Filtration $ 150,162 $ 143,060
Industrial/Environmental Filtration 301,314 298,570
Packaging 43,161 43,885
Corporate 51,235 41,641
--------- ---------
$ 545,872 $ 527,156
========= =========
Page 11
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: SECOND QUARTER OF 2003 COMPARED WITH SECOND QUARTER OF
2002.
CLARCOR reported increased sales, operating profit and net earnings for the
2003 second quarter compared to the same quarter in 2002. Included in the 2003
quarter are the results from Locker Filtration (Locker), which the Company
acquired at the beginning of the third quarter 2002. Locker added approximately
$4,700,000 in Engine/Mobile Filtration segment sales for the 2003 quarter and
reduced diluted earnings per share by approximately $0.01.
Net sales of $185,775,000 increased 5.2% from $176,510,000 reported for the
second quarter of 2002. Compared to last year's second quarter, approximately
three points of the increase resulted from Locker for the 2003 quarter and the
impact of favorable currency translation rates.
The Engine/Mobile Filtration segment reported increased sales of 12.8% to
$73,066,000 from $64,760,000 in 2002. Sales increased approximately seven
points due to sales from Locker for the 2003 quarter and six points due
primarily from sales growth in the heavy-duty and railroad filter markets. Of
the six points in sales growth for the quarter, selective price changes
accounted for less than two points of the change in sales and favorable
currency translation due to the weaker U.S. dollar resulted in less than one
point of the change.
The Company's Industrial/Environmental Filtration segment recorded a 1.6%
overall increase in sales to $95,852,000 for the 2003 second quarter. The sales
increase was partially due to increased demand domestically and internationally
for filters sold for aviation and oil drilling applications. A weakness in
filters and filtration equipment sold into capital goods markets and for
automotive manufacturing applications continued during the quarter. HVAC filter
sales, for both residential and commercial markets, were lower than planned,
but sales are expected to improve as the year progresses. Less than one point
of the sales increase was related to favorable currency translation during the
2003 quarter.
The Packaging segment reported sales of $16,857,000 compared to $17,373,000 in
2002, a decrease of 3%. This decrease resulted primarily from lower sales of
plastic products. Sales of metal products increased approximately 9% in the
quarter as a result of the segment's focus on recurring metal lithography
business.
Operating profit for second quarter 2003 was $20,538,000 compared to
$18,796,000 in 2002, a 9.3% increase. This increase came from improved
operating profit from both filtration segments partially offset by slightly
lower packaging segment profits. The overall improvement resulted primarily
from increased sales levels that more than offset cost increases for pensions,
health care, incentive plans and insurance in the quarter. Operating margin
improved to 11.1% compared to 10.6% reported in the prior year. The margin
improvement resulted primarily from cost reduction programs and productivity
improvement plans that continue to be implemented throughout each of the
business segments.
The Engine/Mobile Filtration segment recorded an increase in operating profit
of 8.2% compared to the 2002 second quarter. This increase resulted primarily
from sales growth and productivity improvements. The segment's operating margin
was 19.5% compared to 20.3% recorded in the
Page 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
second quarter of 2002. The segment's 2003 operating margin was reduced by
approximately one point due to lower margins from Locker.
The Industrial/Environmental Filtration segment reported operating profit of
$5,417,000 in 2003 compared to $4,672,000 in 2002. This increase resulted
primarily from higher sales during the quarter of filters used in aviation and
oil drilling applications. This increase in profits more than offset a
reduction in profit resulting from low sales levels of filtration systems and
filters used in automotive manufacturing. In addition, costs were incurred
during the 2003 quarter related to rationalizing product lines and reorganizing
certain distribution and manufacturing facilities that are expected to improve
margins in future periods. Cost increases related to pensions, health care,
incentive plans and insurance also negatively impacted operating profit for the
2003 quarter. The segment's operating margin was 5.7% compared to 5.0% in the
second quarter of 2002.
The Packaging segment's operating profit in the 2003 quarter was $868,000
compared to $955,000 in 2002. The decrease resulted primarily from reduced
plastic product sales and reduced utilization of facilities related to plastic
packaging products in the 2003 quarter. The segment also incurred higher costs
for employee benefit programs and insurance. The segment's operating margin was
5.1% compared to 5.5% in the second quarter of 2002.
Net other income for the quarter of $39,000 was a significant improvement over
net other expense of $2,169,000 reported for the 2002 quarter. The improvement
primarily resulted from reduced interest expense due to reduced interest rates
and significantly lower debt balances during the 2003 quarter. In addition,
currency exchange gains of $568,000 were recorded in the 2003 quarter resulting
primarily from changes in currency rates.
Earnings before income taxes and minority interests for the second quarter of
2003 totaled $20,577,000, compared to $16,627,000 in the comparable quarter
last year. The provision for income taxes in 2003 was $7,499,000 compared to
$6,017,000 in 2002. The effective tax rate was 36.4% in 2003 and 36.2% in 2002.
Net earnings in the second quarter of the current year were $13,047,000, or
$0.51 per share on a diluted basis. Net earnings in the second quarter of 2002
were $10,607,000, or $0.42 per share on a diluted basis. Diluted average shares
outstanding were 25,435,452 at the end of the second quarter of 2003, an
increase of 0.5% from the average of 25,310,296 for the 2002 quarter.
SIX MONTHS OF 2003 COMPARED TO SIX MONTHS OF 2002.
Net sales increased to $357,269,000 from $334,772,000 in 2002, a 6.7% increase.
The sales increase includes approximately $8,800,000 recorded in the 2003
six-month period from the Locker acquisition. Sales increases were recorded in
both of the filtration segments that more than offset a slight decrease in
packaging sales. Approximately one point of the increase in sales is due to
favorable currency exchange rates.
The Engine/Mobile Filtration segment reported sales of $139,842,000 in the 2003
period compared to $122,599,000 in the 2002 six-month period. The sales
increase was primarily from Locker and heavy-duty filter sales growth. The
heavy-duty sales growth resulted from new sales and marketing initiatives begun
early in 2002 focusing on market penetration programs designed to add new
distribution and strengthen current distribution of heavy duty filters.
Selective price changes and favorable currency exchange rates accounted for
approximately three points of the sales increase.
Page 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
The Industrial/Environmental Filtration segment reported sales of $186,221,000,
a 3.3% increase over 2002 six-month sales of $180,327,000. This increase
resulted primarily from strong first quarter sales of HVAC filters and
increased sales of filters used in aviation and oil drilling applications
offset partially by reduced sales of air quality equipment. Less than one point
of the overall sales increase was related to favorable currency translation
during the 2003 six-month period.
Packaging segment sales of $31,206,000 were 2.0% lower than sales in the 2002
six-month period. The reduction was primarily due to lower sales of plastic
packaging closures as sales of metal packaging products were higher for the
six-month period.
Operating profit for the 2003 six-month period totaled $36,025,000 compared to
$33,202,000 in 2002, an increase of 8.5%. The improvement in operating profit
resulted from sales growth and productivity improvements that more than offset
cost increases for pensions, health care, employee incentive plans and
insurance. Cost reduction programs and productivity improvement plans continue
to be implemented throughout each of the business segments.
The Engine/Mobile Filtration segment reported operating profit of $26,939,000
for the six-month period, a 10.3% increase over the 2002 period. The
improvement in operating profit resulted primarily from sales growth and
productivity improvements that offset higher costs for insurance and employee
benefit programs. Favorable currency translation fluctuations increased
operating profit approximately $200,000. The segment's operating margin was
19.3% compared to 19.9% reported for the 2002 six-month period. The segment's
operating margin in 2003 was reduced by approximately one point due to Locker.
The Industrial/Environmental Filtration segment reported operating profit of
$7,790,000 compared to $7,202,000 for the 2002 six-month period. This increase
of 8.2% resulted from sales growth and cost reduction and productivity
improvement programs that more than offset increased costs for employee benefit
programs and insurance. Costs continue to be incurred for product line
rationalization and the reorganization of distribution and manufacturing
facilities. These efforts are expected to improve margins in future periods as
a result of greater production efficiencies and the reduction of duplicative
costs.
The Packaging segment reported operating profit of $1,296,000 for the 2003
six-month period compared to $1,573,000 in the 2002 period. The decrease
resulted primarily from reduced plastic product sales and reduced utilization
of facilities related to plastic packaging products in the 2003 period. The
segment also incurred increased costs for employee benefit programs and
insurance.
Net other expense for the six-month 2003 period totaled $329,000 compared to
$4,045,000 for 2002. The reduction was primarily related to reduced interest
expense as a result of significantly reduced interest rates and debt balances.
In addition, due to fluctuations in currency exchange rates, currency gains
related to transactions denominated in currencies other than U.S. dollars were
recorded in the 2003 period compared to losses in 2002.
Earnings before income taxes and minority interests for the 2003 six-month
period totaled $35,696,000, compared to $29,157,000 in the prior year period.
The provision for income taxes in 2003 was $13,015,000 compared to $10,535,000
in 2002. The effective rate was 36.5% in 2003 and 36.1% in 2002. The Company
expects the effective tax rate for fiscal 2003 will be approximately 36.5%.
Page 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
Net earnings in the 2003 six-month period were $22,643,000, or $0.89 per share
on a diluted basis. Net earnings in the 2002 six-month period were $18,605,000,
or $0.74 per share on a diluted basis. Diluted average shares outstanding were
25,326,543 for the 2003 period and 25,142,081 for the 2002 six-month period.
The increase of 0.7% is primarily due to grants of stock-based incentives.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $30,467,000 for the 2003
six-month period compared to $40,736,000 in 2002. The reduction was due to an
increased investment in net assets of $2,534,000 compared to a reduction of
$11,627,000 in net assets in the 2002 period. The most significant change in
working capital investment between the two periods relates to $10,834,000 for
increased inventories in 2003 as a result of expected sales levels for the
remainder of 2003. In 2003, cash flows for investing activities totaled
$6,015,000 and was primarily for additions to plant assets. Cash flows from
investing activities in the 2002 six-month period included $3,694,000 received
from the sellers of a business purchased by CLARCOR in settlement of
adjustments required by the purchase agreement. In the 2002 quarter, $6,078,000
was used for additions to plant assets. Cash flows used in financing activities
of $28,117,000 in 2003 included net repayments on debt agreements of
$22,437,000 and dividend payments of $6,120,000. Included in the net repayments
on debt in 2003 was the final repayment on a credit facility that was to expire
in September 2003 and the proceeds related to a $165,000,000 replacement
facility as described in Note 5 to the consolidated condensed financial
statements. Cash flows used in financing activities were $34,370,000 in 2002
and included net repayments on debt agreements of $30,219,000 and dividend
payments of $5,937,000.
CLARCOR's current operations continue to generate cash and sufficient lines of
credit remain available to fund current operating needs, pay dividends, fund
planned capital expenditures, and provide for interest payments and required
principal payments related to the Company's debt agreements. As mentioned
earlier, a $165,000,000 replacement credit facility with a group of financial
institutions was finalized during the second quarter of 2003. At the end of the
second quarter of 2003, $40,680,000 was the outstanding balance against this
multicurrency revolving credit facility with $14,950,000 outstanding for
letters of credit. At the end of the second quarter of 2003, $109,370,000
remained available to the Company for future borrowings under this agreement
which expires in April 2008. Although no payments are required on the
replacement credit facility, the Company expects to continue to use excess cash
in fiscal 2003 to further reduce outstanding borrowings. Principal payments on
other long-term debt will be approximately $5,600,000 in fiscal 2003. The
Company is in compliance with all covenants related to debt agreements. Capital
expenditures in fiscal year 2003 are expected to be approximately $18,000,000
to $21,000,000 compared to a total of $12,204,000 in 2002. The 2003
expenditures will be used primarily for normal facility improvements,
productivity improvements, health and safety measures, and to support new
products.
Off-Balance Sheet Arrangements - The Company's off-balance sheet arrangements
relate to various operating leases. Commitments for noncancelable leases in
2003 total approximately $8,500,000. The Company had no derivative, swap, hedge
or special purpose entity agreements at the end of the 2003 second quarter.
While changes in customer demand for the Company's products will affect
operating cash flow, the Company is not aware of any known trends, demands or
reasonably likely events, which would materially affect cash flow from
operations in the future. It is possible that business acquisitions or
Page 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
dispositions could be made in the future that may affect operating cash flows
and may require changes in the Company's debt and capitalization.
The Company's financial position at the end of the second quarter reflected
reduced cash as a result of payments made on outstanding debt agreements. Cash
and short-term investments totaled $10,326,000 at the end of the quarter, a
reduction from $13,747,000 at year-end 2002. At the end of the second quarter
2003 compared to year-end 2002, accounts receivable were reduced by $3,861,000
primarily due to lower sales in the second quarter of 2003 compared to the
fourth quarter of 2002. Inventories increased $10,834,000 from the year-end
level due to inventory requirements for increased shipments expected for the
remainder of 2003. The changes in accounts receivable and inventories at the
end of the second quarter were consistent with expected seasonality
requirements and changes in business activity levels between fiscal quarters.
Current liabilities of $110,299,000 do not include the $40,680,000 outstanding
balance on the replacement revolving credit agreement that was finalized in the
second quarter of 2003. The year-end 2002 current liabilities totaled
$174,255,000 and included $62,833,000 for the previous revolving credit
agreement that was to expire in September 2003. The current ratio at the end of
the second quarter was 2.4 compared to 1.5 at the end of fiscal 2002. During
the six-month period of 2003, $22,437,000 was repaid on debt agreements that
reduced total debt to $68,667,000 from $91,104,000 at year-end 2002. The ratio
of total debt to total capitalization (debt plus shareholders' equity) was
17.0% at the end of the 2003 second quarter compared to the year-end 2002 level
of 22.4%. At the end of the second quarter 2003, CLARCOR had 25,045,892 shares
of common stock outstanding.
OTHER MATTERS
Market Risk
The Company's interest expense on long-term debt is sensitive to changes in
interest rates. In addition, changes in foreign currency exchange rates may
affect assets, liabilities and commitments that are to be settled in cash and
are denominated in foreign currencies. Market risks are also discussed in the
Company's Annual Report and Form 10-K for the year ended November 30, 2002 (the
"Annual Report") in the Financial Review on page 10. The replacement credit
facility as described above and in Note 5 to the consolidated condensed
financial statements did not have a material impact on the amounts provided in
the Company's Annual Report and Form 10-K related to changes in interest rates.
Critical Accounting Policies
The Company's accounting policies, including the assumptions and judgments
underlying them, are disclosed in the Company's Annual Report in the Financial
Review on pages 10-11 and in the Notes to the Consolidated Financial Statements
on pages 16-24 and in the Notes to the consolidated condensed financial
statements included herein. These policies have been consistently applied in
all material respects and address such matters as revenue recognition,
depreciation methods, inventory valuation, asset impairment recognition,
business combination accounting and pension and postretirement benefits. While
the estimates and judgments associated with the application of these policies
may be affected by different assumptions or conditions, the Company believes
the estimates and judgments associated with the reported amounts are
appropriate in the circumstances.
Page 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) recently issued Statement of
Financial Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations," SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," and SFAS No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities." These standards will be applied as appropriate
for the Company beginning in fiscal 2003 and they are not expected to have a
material impact on the Company's results of operations or financial condition.
In November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The interpretation requires disclosure
in periodic financial statements of certain guarantee arrangements. The
implementation of this interpretation requires certain disclosures regarding
guarantees of the indebtedness of others as provided in Note 3 to the
consolidated condensed financial statements. The requirements of FIN 45 did not
have a significant impact on the Company's results of operations or financial
condition.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation and amends certain
requirements of SFAS No. 123. The transition provisions are effective for the
Company in fiscal 2003 and the disclosure requirements were effective for the
Company beginning with its second quarter 2003 consolidated financial
statements. The Company currently plans to continue to apply the intrinsic
value method to account for stock-based employee compensation. Diluted earnings
per share would have been reduced by approximately $0.06 for the six-month 2003
period based on the fair value calculation as described in Note 6 in the
consolidated condensed financial statements.
Outlook
As a result of anticipated overall sales growth for the Company combined with
continued cost control efforts for the remainder of the year, it is expected
that diluted earnings per share for 2003 will be in the $1.97 to $2.05 range.
Even though the Company's revenues tend to be stable in difficult economic
times, an economic recession or domestic or international conflicts would
likely impact the Company's business activities and results of operations. The
Total Filtration Program continues to be a major strategic initiative for the
Company. In addition, several organizational initiatives continue that are
expected to reduce duplicative costs within the Industrial/Environmental
Filtration segment. Although some additional costs may be incurred during the
remainder of 2003 and in 2004, improved margins for the
Industrial/Environmental segment are expected as result of greater production
efficiencies and lower operating costs.
Continued emphasis on cost reductions within each business unit is expected to
offset cost increases for employee benefit programs and insurance. Due to
reduced pension asset valuations and lower discount and asset return rates,
pension expense is expected to increase by approximately $2,000,000 in fiscal
2003 from 2002. Costs for energy, property and liability insurance and pensions
are particularly impacted by economic conditions and by interest rates, stock
market valuations and reinsurance availability. These costs for the Company may
change significantly based on future changes in the U.S. and world economies.
Capital investments will continue to be made in each segment's facilities to
improve productivity and to support the Total Filtration Program and new
products. While the Company fully anticipates that sales and profits will
Page 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
improve as a result of sales initiatives and cost reductions, the Company has
developed contingency plans to reduce discretionary spending if recessionary
economic conditions persist. CLARCOR continues to assess acquisition
opportunities, primarily in related filtration businesses. It is expected that
these acquisitions would expand the Company's market base, distribution
coverage and product offerings.
FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
Certain statements quoted in the body of this report, and statements in the
"Outlook" section of this report are forward-looking. These statements involve
risk and uncertainty. Actual future results and trends may differ materially
depending on a variety of factors including: the volume and timing of orders
received during the period; the mix of changes in distribution channels through
which the Company's products are sold; the success of the Company's Total
Filtration Program; the timing and acceptance of new products and product
enhancements by the Company or its competitors; changes in pricing, labor
availability and related costs, product life cycles, raw material costs,
insurance, pension, energy costs, and purchasing patterns of distributors and
customers; competitive conditions in the industry; business cycles affecting
the markets in which the Company's products are sold; the effectiveness of
plant conversions, plant expansions and productivity improvement programs; the
management of both growth and acquisitions; the fluctuation in interest rates,
primarily LIBOR, which affect the cost of borrowing under its revolving credit
facility; the fluctuation in foreign and U.S. currency exchange rates;
extraordinary events such as litigation, acquisitions or divestitures including
related charges; market disruptions caused by domestic or international
conflicts; and economic conditions generally or in various geographic areas.
All of the foregoing matters are difficult to forecast. The future results of
the Company may fluctuate as a result of these and the other risk factors
detailed from time to time in the Company's Securities and Exchange Commission
reports.
Due to the foregoing items it is possible that in some future quarters the
Company's operating results will be below the expectation of some stock market
analysts and investors. In such event, the price of CLARCOR common stock could
be materially adversely affected.
Page 18
Part I - Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The information required hereunder is set forth on Page 13 of the
Quarterly Report under the captions "Management's Discussion and
Analysis - Other Matters - Market Risk."
Part I - Item 4. Controls and Procedures.
The Company has 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
are recorded, processed, summarized, and reported within the time
periods specified in the Securities and Exchange Commission's rules
and forms. Norman E. Johnson, Chairman of the Board, President, and
Chief Executive Officer and Bruce A. Klein, Vice President - Finance
and Chief Financial Officer, evaluated the effectiveness of the
Company's disclosure controls and procedures as of May 31, 2003. Based
on their evaluation, they concluded that the Company's disclosure
controls and procedures were effective in achieving the objectives for
which they were designed. Since their evaluation, there have been no
significant changes in the Company's internal controls or in other
factors that could significantly affect these controls, including any
corrective actions with regard to significant deficient and material
weaknesses.
Page 19
Part II - Other Information
Item 6 Exhibits and Reports on Form 8K
a. Exhibit 4
Credit Agreement
b. Exhibit 99
Certifications Pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code
c. The Company filed two Forms 8-K during the second quarter ended May
31, 2003 announcing the election by the Board of a new director to the
Company's Board of Directors and declaration of a dividend and filing
the press release dated March 24, 2003 disclosing the first quarter's
financial results.
Page 20
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARCOR INC.
(Registrant)
June 27, 2003 By /s/ Bruce A. Klein
- ------------- -------------------------------------
(Date) Bruce A. Klein, Vice President -
Finance and Chief Financial Officer
Page 21
CERTIFICATIONS
I, Norman E. Johnson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CLARCOR Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 27, 2003
/s/ Norman E. Johnson
------------------------------------
Norman E. Johnson
Chairman of the Board, President and
Chief Executive Officer
Page 22
CERTIFICATIONS
I, Bruce A. Klein, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CLARCOR Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: June 27, 2003
/s/ Bruce A. Klein
----------------------------
Bruce A. Klein
Vice President - Finance and
Chief Financial Officer
Page 23
EXHIBIT INDEX
Page No.
Exhibit 4
Credit Agreement, dated as of April 8, 2003 i
Exhibit 99
Certification Pursuant to Section 1350 of Chapter 63 of Title 18 of the
United States Code of:
99.1 Norman E. Johnson ii
99.2 Bruce A. Klein iii
Page 24