-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VxrMnGEChVLqywDaClbOEnx1Ud7G3hMB4UrJba1uCJzlfhaUd5Iie1ulrK71nS92 8uSmZS8o71c5ekvk2wckog== 0000912057-94-000655.txt : 19940225 0000912057-94-000655.hdr.sgml : 19940225 ACCESSION NUMBER: 0000912057-94-000655 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19931127 FILED AS OF DATE: 19940224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLARCOR INC CENTRAL INDEX KEY: 0000020740 STANDARD INDUSTRIAL CLASSIFICATION: 3714 IRS NUMBER: 360922490 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-11024 FILM NUMBER: 94512274 BUSINESS ADDRESS: STREET 1: 2323 SIXTH ST STREET 2: PO BOX 7007 CITY: ROCKFORD STATE: IL ZIP: 61125 BUSINESS PHONE: 8159628867 FORMER COMPANY: FORMER CONFORMED NAME: CLARK J L MANUFACTURING CO /DE/ DATE OF NAME CHANGE: 19871001 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 27, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ------------------------------------ COMMISSION FILE NUMBER 0-3801 CLARCOR Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 36-0922490 - ------------------------------ ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125 - ----------------------------------------------- --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 815-962-8867 ------------ Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED - --------------------------------------------------------------------- Common Stock, par value $1.00 per share New York Stock Exchange Preferred Stock Purchase Rights Securities registered pursuant to Section 12(g) of the Act: None ------------------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value (based on the closing price of registrant's Common Stock on February 1, 1994 as reported on the New York Stock Exchange Composite Transactions) of the voting stock held by non-affiliates of the registrant as at February 1, 1994 is $307,443,549. The number of outstanding shares of common stock, as of February 1, 1994 is 14,828,169 shares. Certain portions of the registrant's 1993 Annual Report to Shareholders are incorporated by reference in Parts I, II and IV. Certain portions of the registrant's Proxy Statement dated February 24, 1994 for the Annual Meeting of Shareholders to be held on March 31, 1994 are incorporated by reference in Part III. PART I ITEM 1. DESCRIPTION OF BUSINESS. (A) GENERAL DEVELOPMENT OF BUSINESS CLARCOR Inc. ("CLARCOR") was organized in 1904 as an Illinois corporation and in 1969 was reincorporated in the State of Delaware. As used herein, the "Company" refers to CLARCOR and its subsidiaries unless the context otherwise requires. In fiscal 1991, CLARCOR converted from a fiscal year ending on November 30 to a fiscal year ending on the Saturday closest to November 30. For fiscal year 1993, the year ended on November 27, 1993 and for fiscal year 1992 the year ended on November 28, 1992. In this Form 10-K, all references to fiscal year ends will be stated as November 30 for consistency of presentation. (I) CERTAIN SIGNIFICANT EVENTS. On December 31, 1992, CLARCOR completed the sale of its Precision Products Group to a privately held company. The sale was deemed to be effective as of November 30, 1992. The Precision Products Group manufactured and sold springs and tubular products for original equipment markets. On April 30, 1993 the Company purchased all of the outstanding shares of Airguard Industries, Inc. for cash. Airguard is a leading international producer and distributor of air filtration products. With five manufacturing plants, Airguard makes a broad line of air filters and markets them through a network of more than 500 distributors throughout the world. Airguard primarily serves the commercial, industrial and institutional markets by providing air filters for heating, ventilation and environmental control systems. Airguard's principal manufacturing facility is in New Albany, Indiana, with other manufacturing and assembly plants located in Louisville, Kentucky; Corona, California; Garland, Texas; and Tijuana, Mexico. Airguard also has seven factory-owned distribution centers located in key major markets. Annual sales approximate $40 million. On June 25, 1993, the Company purchased substantially all of the assets and business of Guardian Filter Company, a manufacturer of filters for liquids based in Louisville, Kentucky, for cash. The purchase was deemed to be effective as of June 1, 1993. Guardian Filter's filtration products serve the automotive, railroad and industrial markets. Annual sales approximate $8 million. Effective January 31, 1994, the Company sold the assets and ongoing business of OilpureSystems for cash. OilpureSystems is engaged in manufacturing and purification of industrial process oils. The transaction will have no material effect on the Company's results of operations for fiscal 1994. (II) SUMMARY OF BUSINESS OPERATIONS. During 1993, the Company conducted business in two principal industry groups: (1) Filtration Products and (2) Consumer Products. FILTRATION PRODUCTS. Filtration Products include filters used primarily in the replacement market in the trucking, construction, industrial, farm equipment, diesel locomotive, automotive and environmental industries. It also includes filters used in clean room applications in the medical, pharmaceutical and food and beverage processing industries. The Company's Filtration Products include filters for oil, air, fuel, coolants and hydraulic fluids for trucks, automobiles, construction and industrial equipment, locomotives, marine and farm equipment. The Company distributes filters and filtration products throughout Europe through its Baldwin Filters N.V. and Baldwin Filters Limited subsidiaries. The Company also owns 20% of the outstanding 2 Common Stock of G.U.D. Holdings Limited ("GUD") and has a 50-50 joint venture with GUD named Baldwin Filters (Aust.) Pty. Ltd. to market heavy duty liquid and air filters in Australia and New Zealand. CONSUMER PRODUCTS. Consumer Products include a wide variety of custom styled containers and packaging items used primarily by the food, spice, drug, toiletries, tobacco and chemical specialties industries. The Company's Consumer Products consist of lithographed metal containers, flat sheet decorating, combination metal and plastic containers, plastic closures, collapsible metal tubes, composite containers and various specialties, such as spools for wire and cable, dispensers for razor blades and outer shells for dry cell batteries. (B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Business segment information for the fiscal years 1991 through 1993 is included on page 45 of the Company's 1993 Annual Report to Shareholders (the "Annual Report"), is incorporated herein by reference and is filed as part of Exhibit 13(a)(vi) to this 1993 Annual Report on Form 10-K ("1993 Form 10-K"). (C) NARRATIVE DESCRIPTION OF THE BUSINESS FILTRATION PRODUCTS The Company's filtration products business is conducted by the Filtration Products Group which includes the following wholly-owned subsidiaries: Baldwin Filters, Inc.; Airguard Industries, Inc.; Clark Filter, Inc.; CLARCOR Air Filtration, Inc.; Guardian Filter Company; MicroPure Filtration, Inc.; Baldwin Filters N.V.; and Baldwin Filters Limited. In addition, the Company owns (i) 20% of GUD, and (ii) 50% of Baldwin Filters (Aust.) Pty. Ltd., and (iii) 60% of PleaTech Co. PleaTech is a technology and manufacturing joint venture for extended life, high-efficiency filters. The Company markets a line of over 4,000 types of oil, air, fuel, coolant and hydraulic fluid filters. The Company's filters are used in a wide variety of applications including engines, equipment, environmentally controlled areas and processes where effectiveness, reliability and durability are essential. Impure air or fluid impinge upon a paper, cotton, synthetic, chemical or membrane filter media which collects the impurities which are disposed of when the filter is changed. Paper filters have pleated paper elements held in specially treated paper or metal containers and the cotton and synthetic filters use wound or compressed fibers with high absorption characteristics. The Company's filters are sold throughout the United States and Canada and world-wide, primarily in the replacement market for truck, automobile, marine, construction, industrial and farm equipment and food and beverage processing. In addition, some filters are sold to the original equipment market. CONSUMER PRODUCTS The Company's consumer products business is conducted by the Consumer Products Group which includes the Company's wholly-owned subsidiary, J. L. Clark, Inc. ("J. L. Clark"). In fiscal 1993 over 1,500 different types and sizes of containers and metal packaging specialties were manufactured for the Company's customers. Flat sheet decorating is provided by use of state-of-the-art lithography equipment. Metal, plastic and paper containers and plastic closures manufactured by the Company are used in marketing a wide variety of dry and paste form products, such as food specialties (tea, spices, dry bakery products, potato chips, pretzels, candy and other confections); cosmetics and toiletries; drugs and pharmaceuticals; chemical specialties (hand cleaners, soaps and special cleaning compounds); and tobacco products. Metal packaging specialties include shells for dry batteries, dispensers for razor blades, spools for insulated and fine wire, and custom decorated flat steel sheets. Containers and metal packaging specialties are manufactured only upon orders received from customers and individualized containers and packaging specialties are designed and manufactured, usually with distinctive decoration, to meet each customer's marketing and packaging requirements and specifications. 3 Through the Tube Division of J. L. Clark, the Company manufactures collapsible metal tubes for packaging ointments, artists' supplies, adhesives, cosmetic creams and other viscous materials. Over 150 types and sizes of collapsible metal tubes are manufactured. Tubes are custom manufactured from aluminum to the customer's specifications as to size, shape, neck design and decoration. Both coating and lithographic tube printing decoration techniques are used. DISTRIBUTION Filtration Products are sold primarily through a combination of independent distributors and dealers for original equipment manufacturers. The Australian joint venture markets heavy duty filtration products through the distributors of GUD, the Company's joint venture partner. Baldwin filters are distributed in Canada by the largest Canadian distributor of heavy duty filters. Consumer Products Group salespersons call directly on customers and prospective customers for containers and packaging specialties. Each salesperson is trained in all aspects of the Company's manufacturing processes with respect to the products sold and as a result is qualified to consult with customers and prospective customers concerning the details of their particular requirements. CLASS OF PRODUCTS The percentage of the Company's sales volume contributed by each class of similar products within the Company's Consumer Products Group which contributed 10% or more of sales is as follows:
1993 1992 1991 ---- ---- ---- Containers.................... 24% 24% 26%
No class of products within the Company's Filtration Products Group accounted for as much as 10% of the total sales of the Company. RAW MATERIAL Steel (black plate and tin plate), filter media, aluminum sheet and coil, stainless steel, MB hard drawn and oil tempered wire, chrome vanadium, chrome silicon, resins and aluminum slugs for tubes, roll paper, bulk and roll plastic materials and cotton, wood and synthetic fibers are the most important raw materials used in the manufacture of the Company's products. All of these are purchased or are available from a variety of sources. The Company has no long-term purchase commitments. The Company did not experience shortages in the supply of raw materials during 1993. PATENTS Certain features of some of the Company's Filtration and Consumer products are covered by domestic and, in some cases, foreign patents or patent applications. While these patents are valuable and important for certain products, the Company does not believe that its competitive position is dependent upon patent protection. CUSTOMERS The largest 10 customers of the Filtration Products Group accounted for 14.9% of the $156,165,000 of fiscal year 1993 sales of such Group. The largest 10 customers of the Consumer Products Group accounted for 42.7% of the $69,154,000 of fiscal year 1993 sales of such Group. No single customer accounted for 10% or more of the Company's consolidated 1993 sales. BACKLOG At November 30, 1993, the Company had a backlog of firm orders for products amounting to approximately $25,100,000. The comparable backlog figure for 1992 was approximately $20,100,000. All of the orders on hand at November 30, 1993 are expected to be filled during fiscal 1994. The Company's backlog is not subject to significant seasonal fluctuations. COMPETITION The Company encounters strong competition in the sale of all of its products. 4 In the Filtration Products Group, the Company competes in a number of markets against a variety of competitors. The Company is unable to state its relative competitive position in all of these markets due to a lack of available industry-wide data. However in the replacement market for heavy duty liquid and air filters used in internal combustion engines the Company believes that it is among the top five measured by annual sales with a market share of approximately 13%. In addition, the Company believes that it is the largest manufacturer of liquid and air filters for diesel locomotives. In the Consumer Products Group, its principal competitors are approximately 10 manufacturers whose sales and product lines are smaller than the Company's and who often compete on a regional basis only. In the Consumer Products market, strong competition is also presented by manufacturers of paper, plastic and glass containers. The Company's competitors generally manufacture and sell a wide variety of products in addition to packaging products of the type produced by the Company and do not publish separate sales figures relative to these competitive products. Consequently, the Company is unable to state its relative competitive position in those markets. The Company believes that it is able to maintain its competitive position because of the quality of its products and services. PRODUCT DEVELOPMENT The Company's laboratories test filters, containers, filter components, paints, inks, varnishes, adhesives and sealing compounds to insure high quality manufacturing results, aid suppliers in the development of special finishes and conduct controlled tests of finishes and newly designed filters and containers being perfected for particular uses. Product development departments are concerned with the improvement of existing filters, consumer products and the creation of new and individualized filters, containers and consumer products, in order to broaden the uses of these items, counteract obsolescence and evaluate other products available in the marketplace. During fiscal 1993, construction was completed on a new 25,000 square foot technical center in Kearney, Nebraska to enhance the technology in the heavy duty filter industry. In fiscal 1993, the Company employed 45 professional employees on a full-time basis on research activities relating to the development of new products or the improvement or redesign of its existing products. During this period the Company spent approximately $2,824,000 on such activities as compared with $2,248,000 for 1992 and $2,159,000 for 1991. ENVIRONMENTAL FACTORS The Company is not aware of any facts which would cause it to believe that it is in material violation of existing applicable standards respecting emissions to the atmosphere, discharges to waters, or treatment, storage and disposal of solid or hazardous wastes. There are no pending material claims or actions against the Company alleging violations of such standards. The Company does anticipate, however, that it may be required to install additional pollution control equipment to augment existing equipment in the future in order to meet applicable environmental standards. The Company is presently unable to predict the timing or the cost of such equipment and cannot give any assurance that the cost of such equipment may not have an adverse effect on earnings. EMPLOYEES As of November 30, 1993, the Company had approximately 2,062 employees. (D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES Foreign sales were not material in any of the fiscal years ended November 30, 1993, 1992 or 1991. Export sales for the fiscal years ended November 30, 1993, 1992 and 1991 were $18,008,000, $10,882,000 and $10,175,000, respectively. 5 ITEM 2. PROPERTIES. (I) LOCATION The corporate office building located in Rockford, Illinois, houses the Corporate offices and the Group offices for the Filtration and Consumer Products headquarters in 32,000 square feet of office space. FILTRATION PRODUCTS. The following is a description of the principal properties owned and utilized by the Company in conducting its Filtration Products business: The Baldwin Filters' Kearney, Nebraska plant contains 410,000 square feet of manufacturing and warehousing space, 25,000 square feet of research and development space, and 40,000 square feet of office space. It is located on a site of approximately 40 acres. Airguard Industries has five manufacturing locations. It leases 167,000 square feet in New Albany, Indiana on a 8.5 acre tract of land, 20,000 square feet in Louisville, Kentucky on a 2.5 acre tract of land, 15,000 square feet in Garland, Texas on a .7 acre tract of land, and 15,000 square feet in Tijuana, Mexico on a .7 tract of land. Airguard owns a 38,000 square foot manufacturing facility on a 1.8 acre tract of land in Corona, California. Airguard sales outlets with warehousing are located in Louisville, Kentucky; Cincinnati, Ohio; Nashville, Tennessee; Atlanta, Georgia; Birmingham, Alabama; Dallas, Texas; and Corona, California. The Company also manufactures Clark and HEFCO brand filters at the Hempfield Division plant located in Lancaster, Pennsylvania on an 11.4-acre tract of land. The building, constructed about 1968, contains 168,000 square feet of manufacturing and office space. The Guardian Filter plant, located in Louisville, Kentucky on a 7.5 acre tract of land, contains 73,000 square feet of manufacturing and office facilities. The Company assembles MicroPure products in 5,000 square feet of manufacturing and laboratory space in its Rockford, Illinois facilities. The Company has a capital lease for a 100,000 square foot manufacturing facility on a site of 20 acres in Gothenburg, Nebraska. CONSUMER PRODUCTS. The following is a description of the principal properties owned and utilized by the Company in conducting its Consumer Products business: The Company's J. L. Clark, Rockford, Illinois plant, located on 34 acres, consists of one-story manufacturing buildings, the first of which was constructed in 1910. Since then a number of major additions have been constructed and an injection molding plant was constructed in 1972. Approximately 429,000 square feet of floor area are devoted to manufacturing, warehouse and office use. Of the 34 acres, approximately 12 are vacant. A J. L. Clark plant is located in Lancaster, Pennsylvania on approximately 11 acres. It consists of a two-story office building containing approximately 7,500 square feet of floor space and a manufacturing plant and warehouse containing 236,000 square feet of floor space, most of which is on one level. These buildings were constructed between 1924 and 1964. The J. L. Clark Tube Division's manufacturing plant is located in Downers Grove, Illinois on a 5-acre tract of land. The one-story building, constructed in 1963, currently contains 58,000 square feet of floor space and can be expanded by an additional 100,000 square feet under present zoning ordinances. The various properties owned by the Company are considered by it to be in good repair and well maintained. All of the manufacturing facilities are adequate for the current sales volume of the Company's products and can accommodate significant expansion of production levels before plant additions are required. 6 (II) FUNCTION FILTRATION PRODUCTS. Oil, air, fuel, hydraulic fluid and coolant filters are produced at Baldwin in Kearney, and Gothenburg, Nebraska. Much of the Baldwin plant equipment has been built or modified by Baldwin. The various processes of pleating paper, winding cotton and synthetic fibers, placing the filter element in a metal or fiber container and painting the containers are mechanized but require manual assistance. The plant also maintains an inventory of special dies and molds for filter manufacture. Air filters for the environmental market are produced in the Airguard and Guardian facilities. Oil, air and fuel filters primarily for use in the railroad industry are produced at Clark Filter in Lancaster, Pennsylvania. This facility also produces ASHRAE rated and HEPA filters for HEFCO which are used in medical, pharmaceutical and clean room applications. This plant supplies some of the Company's filter customers in the United States as well as foreign markets. The Company serves the food and beverage markets through its MicroPure brand. CONSUMER PRODUCTS. The Company's metal, combination metal and plastic packaging products are produced in J. L. Clark plants located in Rockford, Illinois, and Lancaster, Pennsylvania. The Rockford and Lancaster metal container plants are completely integrated facilities which include creative and mechanical art departments and photographic facilities for color separation, preparation of multiple-design negatives and lithographing plates. Metal sheets are decorated on high speed coating machines and lithographing presses connected with conveyor ovens. Decorated sheets are then cut to working sizes on shearing equipment, following which fabrication is completed by punch presses, can-forming and can-closing equipment and other specialized machinery for supplementary operations. Most tooling for fabricating equipment is designed and engineered by the Company's engineering staffs, and much of it is produced in the Company's tool rooms. Plastic packaging capabilities include printing and molding of irregular shaped plastic containers and customized plastic closures. J. L. Clark is the only company in the packaging industry to mold and offset lithograph a one-piece irregular shaped semi-rigid plastic container with a living hinge cover. A growing area of specialty is custom-designed plastic closures for products which have tamper-evidency as well as convenience features. Collapsible metal tubes are produced at the J. L. Clark Tube Division plant in Downers Grove, Illinois from aluminum slugs on fully-automated production lines which consist of extrusion presses, trimming machines, annealing ovens, coating machines, printing presses and capping machines. When necessary for customer specifications, tubes can be internally waxed or lined in order to achieve chemical compatibility with products to be packed. Composite containers of both spiral and convolute construction, as well as some specialty items, are produced at J. L. Clark divisions in Rockford, Illinois and Lancaster, Pennsylvania. ITEM 3. LEGAL PROCEEDINGS. In December, 1992, a jury trial resulted in a judgment against the Company in the amount of $4,900,000. GERALD D. FLOWERS MFG. REP., INC. AND GERALD D. FLOWERS v. J.A. BALDWIN MFG. CO., BALDWIN FILTERS, INC., CLARCOR FILTRATION PRODUCTS INC. AND CLARCOR INC., Case No. 30,323, District Court of Harden County Texas, 88th Judicial District. In November 1993, the district court in Texas ordered that a joint motion filed by the two parties to dismiss the judgment be granted, that the judgment of the trial court be vacated, and that the cause be remanded to the trial court for entry of a take-nothing judgment pursuant to a settlement agreement by the two parties. Two additional lawsuits have been filed by former distributors of Baldwin filters. F.W. MORRIS AGENCY, INC. AND F.W. MORRIS v. BALDWIN FILTERS, INC., Civil Action No. 93-108-ATH(DF) United States District Court for the Middle District of Georgia, Athens Division; JOHN NIEMEYER v. J.A. BALDWIN MFG. CO., ET AL., Case No. CV 93-21818, Circuit Court of Jackson County, Missouri. Generally, the plaintiffs in these actions seek damages for alleged breach of oral contracts pursuant to which they acted as 7 independent sales representatives for Baldwin filters. The Company intends to vigorously defend each of these actions and believes that it has fully discharged any and all obligations to these plaintiffs. In management's opinion these cases, when concluded, will not have any material adverse effect on the consolidated financial position of the Company. There are no other material pending legal proceedings (other than ordinary routine litigation incidental to the Company's business) to which the Company is a party or of which any of its property is the subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AT YEAR ELECTED NAME 11/30/93 TO OFFICE - ------------------------------------------------------------------------------------------- ------------- ------------- Lawrence E. Gloyd.......................................................................... 61 1991 Chairman, President and Chief Executive Officer. Mr. Gloyd was elected President and Chief Operating Officer in 1986, President and Chief Executive Officer in 1988 and Chairman, President and Chief Executive Officer in 1991. L. Paul Harnois............................................................................ 62 1991 Senior Vice President and Chief Financial Officer. Mr. Harnois was elected Vice President and Chief Financial Officer in 1987 and Senior Vice President and Chief Financial Officer in 1991. Ronald A. Moreau........................................................................... 46 1989 Group Vice President-CLARCOR Consumer Products Group and President of J. L. Clark, Inc. Mr. Moreau has been employed by the Company since 1986. He was Vice President of Operations for the J. L. Clark subsidiary from 1986 to 1989. He was elected Group Vice President-Consumer Products Group and President of J. L. Clark, Inc. in 1989. Norman E. Johnson.......................................................................... 45 1992 Group Vice President-CLARCOR Filtration Products Group and President-Baldwin Filters, Inc. Mr. Johnson has been employed by the Company since 1990. He was elected President-Baldwin Filters, Inc. in 1990, Vice President-CLARCOR in 1992, and Group Vice President-Filtration Products Group in 1993. William F. Knese........................................................................... 45 1991 Vice President, Treasurer and Controller. Mr. Knese has been employed by the Company since 1979. He was elected Vice President, Treasurer and Controller in 1991. Marshall C. Arne........................................................................... 63 1991 Vice President-Secretary. Mr. Arne has been employed by the Company in various administrative positions since 1955. He was elected Vice President-Secretary in 1991. David J. Lindsay........................................................................... 38 1991 Vice President-Group Services. Mr. Lindsay has been employed by the Company in various administrative positions since 1987. He was elected Vice President-Group Services in 1991. David J. Anderson.......................................................................... 53 1993 Vice President-Corporate Development. Mr. Anderson has been employed by the Company since 1990. He was elected Vice President Marketing & Business Development for the CLARCOR Filtration Products subsidiary in 1991 and Vice President-Corporate Development in 1993.
8 Each executive officer of the Company is elected for a term of one year which begins at the Board of Directors Meeting at which he is elected, held following the Annual Meeting of Shareholders, and ends on the date of the next Annual Meeting of Shareholders or upon the due election and qualification of his successor. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS. On March 18, 1992, the Company's Common Stock was listed on the New York Stock Exchange; it is traded under the symbol CLC. Prior to that date the stock was traded on the NASDAQ National Market System. The following table sets forth the high and low market prices as quoted during the relevant periods by NASDAQ and the New York Stock Exchange and dividends paid for each quarter of the last two fiscal years.
MARKET PRICE ------------------ QUARTER ENDED HIGH LOW DIVIDEND - ----------------------------------- ------- ------- -------- February 27, 1993.................. $19 1/4 $16 1/2 $ .150 May 29, 1993....................... 19 1/2 16 .150 August 28, 1993.................... 19 3/4 17 .155 November 27, 1993.................. 20 16 1/2 .155 -------- Total Dividend..................... $ .610 -------- -------- MARKET PRICE ------------------ QUARTER ENDED HIGH LOW DIVIDEND - ----------------------------------- ------- ------- -------- February 29, 1992.................. $22 1/2 $17 $ .150 May 30, 1992....................... 21 3/4 15 .150 August 29, 1992.................... 20 16 3/4 .150 November 28, 1992.................. 19 1/8 15 5/8 .150 -------- Total Dividend..................... $ .600 -------- --------
The approximate number of holders of common stock of the Company as at February 1, 1994 is 1,960. ITEM 6. SELECTED FINANCIAL DATA. The information required hereunder is set forth on pages 28 and 29 of the Annual Report under the caption "13-Year Financial Summary", is incorporated herein by reference and is filed as Exhibit 13a(ix) to this 1993 Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required hereunder is set forth on pages 18, 20, 22, 24, 25 and 26 of the Annual Report under the caption "Market-Focused Strategy: 1991-Present", is incorporated herein by reference and is filed as Exhibit 13a(x) to this 1993 Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements, the Notes thereto and the report thereon of Coopers & Lybrand, independent accountants, required hereunder with respect to the Company and its consolidated subsidiaries are set forth on pages 30 through 46, inclusive, of the Annual Report, are incorporated herein by reference and is filed as Exhibits 13(a)(ii) through 13(a)(vii) to this 1993 Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 9 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Certain information required hereunder is set forth on pages 1 and 2 of the Company's Proxy Statement dated February 24, 1994 (the "Proxy Statement") for the Annual Meeting of Shareholders to be held on March 31, 1994 under the caption "Election of Directors -- Nominees for Election to the Board" and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required hereunder is set forth on pages 6 through 14 inclusive, of the Proxy Statement under the caption "Compensation of Executive Officers and Other Information" and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required hereunder is set forth on pages 4 through 6 of the Proxy Statement under the caption "Beneficial Ownership of the Company's Common Stock" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K. (A) FINANCIAL STATEMENTS The following financial information is incorporated herein by reference to the Company's Annual Report to Shareholder's for the fiscal year ended November 30, 1993: *Consolidated Balance Sheets at November 30, 1993 and 1992 *Consolidated Statements of Earnings for the years ended November 30, 1993, 1992 and 1991 *Consolidated Statements of Shareholders' Equity for the years ended November 30, 1993, 1992 and 1991 *Consolidated Statements of Cash Flows for the years ended November 30, 1993, 1992 and 1991 *Notes to Consolidated Financial Statements *Report of Independent Accountants *Management's Report on Responsibility for Financial Reporting *Filed herewith as part of Exhibit 13(a) to this 1993 Form 10-K The following items are set forth herein on the pages indicated: Report of Independent Accountants................................................................. F-1 Financial Statement Schedules: V. Property, Plant and Equipment............................................... F-2 VI. Accumulated Depreciation and Amortization of Property, Plant and Equipment.. F-3 VIII. Valuation and Qualifying Accounts and Reserve............................... F-4 X. Supplementary Income Statement Information.................................. F-5
10 Financial statements and schedules other than those listed above are omitted for the reason that they are not applicable, are not required, or the information is included in the financial statements or the footnotes therein. (B) There were no Reports on Form 8-K filed during the fourth quarter of the fiscal year ended November 30, 1993. (C) EXHIBITS 3.1 The registrant's Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1983. 3.1(a) Amendment to ARTICLE NINTH of Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1(a) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1988 (the "1988 10-K"). 3.1(b) Amendment changing name of Registrant to CLARCOR Inc. Incorporated by reference to Exhibit 3.1(b) to the 1988 10-K. 3.1(c) Amendment to ARTICLE FOURTH of the Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1(c) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1990 (the "1990 10-K"). 3.2 The registrant's By-laws, as amended. 4 Rights Agreement dated as of April 14, 1987 between the registrant and The First National Bank of Chicago. Incorporated by reference to Exhibit 1 to the Registrant's Current Report on Form 8-K dated April 20, 1986. 4.1 Amendment to Rights Agreement dated as of June 27, 1989. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed on August 14, 1989. 10.1* The registrant's Deferred Compensation Plan for Directors. 10.2* The registrant's Supplemental Retirement Plan. 10.3 The registrant's 1984 Stock Option Plan. Incorporated by reference to Exhibit A of the Company's Proxy Statement dated March 2, 1984 for the Annual Meeting of Stockholders held on March 31, 1984. 10.4 Employment Agreements with certain officers. Incorporated by reference to Exhibit 5 to the Company's Current Report on Form 8-K filed July 25, 1989. 10.5 The registrant's Directors' Restricted Stock Compensation Plan. Incorporated by reference to Exhibit 10.5 to the 1990 10-K. 10.6 The registrant's Monthly Investment Plan. Incorporated by reference to Exhibit 10.6 to the 1990 10-K. 10.7 The registrant's Amended and Restated 1988 Long Range Performance Share Plan. Incorporated by reference to Exhibit 10.7 to the 1990 10-K. 11 Computation of Per Share Earnings.
11 13 (a) The following items incorporated by reference herein from the Company's 1993 Annual Report to Shareholder ("1993 Annual Report"), are filed as Exhibits to this 1993 Form 10-K: (i) Business segment information for the fiscal years 1991 through 1993 set forth on page 45 of the 1993 Annual Report (included in Exhibit 13(a)(vi)-Note N to Notes to Consolidated Financial Statements); (ii) Consolidated Balance Sheets of the Company and its Subsidiaries at November 30, 1993 and 1992 set forth on page 30 of the 1993 Annual Report; (iii) Consolidated Statements of Earnings of the Company and its Subsidiaries for the years ended November 30, 1993, 1992 and 1991 set forth on page 31 of the 1993 Annual Report; (iv) Consolidated Statement of Shareholders' Equity for the Company and its Subsidiaries for the years ended November 30, 1993, 1992 and 1991 set forth on page 32 of the 1993 Annual Report; (v) Consolidated Statements of Cash Flows of the Company and its Subsidiaries for the years ended November 30, 1993, 1992 and 1991 set forth on page 33 of the 1993 Annual Report; (vi) Notes to Consolidated Financial Statements set forth on pages 34 through 45 of the 1993 Annual Report; (vii) Report of Independent Accountants set forth on page 46 of the 1993 Annual Report; (viii) Management's Report on Responsibility for Financial Reporting set forth on page 47 of the 1993 Annual Report; (ix) Information under the caption "13-Year Financial Summary" set forth on pages 28 and 29 of the 1993 Annual Report; and (x) Management's Discussion and Analysis of Financial Condition and Results of Operation set forth under the caption "Market-Focused Strategy: 1991-Present" on pages 18, 20, 22, 24, 25 and 26 of the 1993 Annual Report. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. - ------------------------ * Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1984, in which each Exhibit had the same number as herein.
12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CLARCOR Inc. (Registrant) By: LAWRENCE E. GLOYD -------------------------------- Lawrence E. Gloyd CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER Date: February 23, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 23, 1994 By: LAWRENCE E. GLOYD --------------------------------------- Lawrence E. Gloyd CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER AND DIRECTOR Date: February 23, 1994 By: L. PAUL HARNOIS --------------------------------------- L. Paul Harnois SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER Date: February 23, 1994 By: WILLIAM F. KNESE --------------------------------------- William F. Knese VICE PRESIDENT, TREASURER, CONTROLLER & CHIEF ACCOUNTING OFFICER Date: February 23, 1994 By: J. MARC ADAM --------------------------------------- J. Marc Adam DIRECTOR Date: February 23, 1994 By: MILTON R. BROWN --------------------------------------- Milton R. Brown DIRECTOR Date: February 23, 1994 By: CARL J. DARGENE --------------------------------------- Carl J. Dargene DIRECTOR
13 Date: February 23, 1994 By: FRANK A. FIORENZA --------------------------------------- Frank A. Fiorenza DIRECTOR Date: February 23, 1994 By: DUDLEY J. GODFREY, JR. --------------------------------------- Dudley J. Godfrey, Jr. DIRECTOR Date: February 23, 1994 By: STANTON K. SMITH, JR. --------------------------------------- Stanton K. Smith, Jr. DIRECTOR Date: February 23, 1994 By: RICHARD A. SNELL --------------------------------------- Richard A. Snell DIRECTOR Date: February 23, 1994 By: DON A. WOLF --------------------------------------- Don A. Wolf DIRECTOR
14 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois Our report on the consolidated financial statements of CLARCOR Inc. has been incorporated by reference in this Form 10-K from page 46 of the 1993 Annual Report to Shareholders of CLARCOR Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed on pages F-2 through F-5 of this Form 10-K. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND Rockford, Illinois January 7, 1994 F-1 CLARCOR INC. SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
COLUMN E ----------- COLUMN B OTHER COLUMN F ----------- COLUMN C CHANGES ----------- COLUMN A BALANCE AT ------------- COLUMN D ADD BALANCE AT - ---------------------------------------------- BEGINNING ADDITIONS ----------- (DEDUCT) END OF CLASSIFICATION OF PERIOD AT COST RETIREMENTS DESCRIBE PERIOD - ---------------------------------------------- ----------- ------------- ----------- ----------- ----------- 1993: Land.......................................... $ 1,113 $ 818 $ -- $ -- $ 1,931 Buildings and building fixtures............... 33,545 4,436 17 -- 37,964 Machinery and equipment....................... 56,590 11,875 799 -- 67,666 Assets in process............................. 3,934 759 -- -- 4,693 ----------- ------------- ----------- ----------- ----------- $ 95,182 $ 17,888 (A) $ 816 -- $ 112,254 ----------- ------------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- 1992: Land.......................................... $ 1,458 $ -- $ 345 $ -- $ 1,113 Buildings and building fixtures............... 37,616 1,754 5,825 -- 33,545 Machinery and equipment....................... 69,664 6,602 19,676 -- 56,590 Assets in process............................. 5,185 (906 ) 345 -- 3,934 ----------- ------------- ----------- ----------- ----------- $ 113,923 $ 7,450 $ 26,191 (B) -- $ 95,182 ----------- ------------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- 1991: Land.......................................... $ 1,458 $ -- $ -- $ -- $ 1,458 Buildings and building fixtures............... 35,661 2,011 56 -- 37,616 Machinery and equipment....................... 64,217 6,026 579 -- 69,664 Assets in process............................. 3,378 1,807 -- -- 5,185 ----------- ------------- ----------- ----------- ----------- $ 104,714 $ 9,844 (C) $ 635 -- $ 113,923 ----------- ------------- ----------- ----------- ----------- ----------- ------------- ----------- ----------- ----------- NOTES: (A) Includes additions of $7,670 relating to the acquisitions of Airguard Industries and Guardian Filter in 1993. (B) Includes $23,673 due to the sale of the Precision Products Group in 1992. (C) Includes $1,716 relating to capitalized leases.
F-2 CLARCOR INC. SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
COLUMN E COLUMN C ----------- COLUMN B ----------- OTHER COLUMN F ----------- ADDITIONS COLUMN D CHANGES ----------- COLUMN A BALANCE AT CHARGED TO ----------- ADD BALANCE AT - ---------------------------------------------------- BEGINNING COSTS AND RETIRE- (DEDUCT) END OF DESCRIPTION OF PERIOD EXPENSES MENTS DESCRIBE PERIOD - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- 1993: Buildings and building fixtures $ 19,490 $ 1,479 $ 11 $ -- $ 20,958 Machinery and Equipment 40,108 4,337 785 -- 43,660 ----------- ----------- ----------- ----------- ----------- $ 59,598 $ 5,816 796 -- $ 64,618 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1992: Buildings and building fixtures $ 20,302 $ 1,501 $ 2,313 -- $ 19,490 Machinery and Equipment 47,909 5,543 13,344 -- 40,108 ----------- ----------- ----------- ----------- ----------- $ 68,211 $ 7,044 $ 15,657 (A) -- $ 59,598 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- 1991: Buildings and building fixtures $ 18,743 $ 1,602 43 -- $ 20,302 Machinery and Equipment 43,223 5,105 419 -- 47,909 ----------- ----------- ----------- ----------- ----------- $ 61,966 $ 6,707 462 -- $ 68,211 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- NOTES: (A) Includes $13,380 due to the sale of the Precision Products Group in 1992.
F-3 CLARCOR INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
COLUMN C ---------------------------- ADDITIONS ---------------------------- COLUMN B COLUMN E ----------- (1) (2) ----------- COLUMN A BALANCE AT CHARGED TO CHARGED TO COLUMN D BALANCE AT - ---------------------------------------------------- BEGINNING COSTS AND OTHER ------------- END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - ---------------------------------------------------- ----------- ------------- ------------- ------------- ----------- 1993: Allowance for losses on accounts receivable $ 788 $ 610 $ 650(B) $ 504(A) $ 1,544 1992: Allowance for losses on accounts receivable $ 838 $ 647 $ (283)(C) $ 414(A) $ 788 1991: Allowance for losses on accounts receivable $ 650 $ 403 $ -- $ 215(A) $ 838 NOTES: (A) Bad debts written off during year, net of recoveries. (B) Due to the acquisitions of Airguard Industries and Guardian Filter in 1993. (C) Due to the sale of Precision Products Group in 1992.
F-4 CLARCOR INC. SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
COLUMN B CHARGED TO COSTS AND EXPENSES ------------------------------------- COLUMN A 1993 1991 - --------------------------------------------------------------------------------------- ----------- ----------- 1992 ----------- 1. Maintenance and repairs..................................................... $ 4,035 $ 3,834 $ 4,154 2. a. Depreciation..................................................... $ 5,816 $ 7,044 $ 6,707 b. Amortization of intangible asset................................. $ 479 $ 643 $ 645
NOTE: Includes amounts in 1992 and 1991 related to Precision Products Group which was sold effective November 30, 1992. Items 3, 4 and 5 omitted as the amounts did not exceed one percent of total sales and revenues in the related consolidated statements of earnings. F-5 EX-3 2 EXHIBIT 3.2 EXHIBIT 3.2 BY-LAWS OF CLARCOR INC. --------------------- ARTICLE I OFFICES Section 1.1. REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the name of the resident agent in charge thereof is The Corporation Trust Company. Section 1.2. OTHER OFFICES. The corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF SHAREHOLDERS Section 2.1. ANNUAL MEETING. The annual meeting of the shareholders shall be held in March each year on such day during that month as shall be determined by the Board of Directors, which day and the time of such meeting shall be stated in the Notice of such meeting. The purpose of the annual meeting shall be to elect directors and to transact such other business as may come before the meeting. If the election of directors shall not be held on the day designated for the annual meeting, or at any adjournment thereof, the Board of Directors shall cause such election to be held at a special meeting of the shareholders as soon thereafter as convenient. Section 2.2. SPECIAL MEETINGS. Any action required or permitted to be taken by the shareholders of the corporation must be effected at a duly called annual or special meeting of shareholders of the corporation and may not be effected by any consent in writing by such shareholders. Special meetings of shareholders of the corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors, upon not less than 10 nor more than 50 days' written notice. Notwithstanding anything contained in these By-Laws to the contrary, the affirmative vote of the holders of at least 75% of the shares of the corporation entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Section 2.2. Section 2.3. PLACE OF MEETINGS. The Board of Directors may designate any place, either within or without the State of Delaware, as a place of meeting for any annual or special meeting of shareholders. If no designation is made, the place of meeting shall be the principal office of the corporation in Illinois. Section 2.4. NOTICE OF MEETINGS. Written or printed Notice stating the place, date and hour of each annual or special meeting of the shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10 or more than 50 days before the date of the meeting. (See also Article IV). Section 2.5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors may provide that the stock transfer books shall be closed for at least ten days, or in the case of any meeting of shareholders, at least thirty days, and for not more than sixty days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance, a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty days and, in the case of a meeting of shareholders, not less than thirty days, prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the close of business on the day next preceding the day on which notice is given, or the close of business on the day on which the Board of Directors adopts the resolution declaring such dividend, as the case may be, shall be the record date for the determination of shareholders. Section 2.6. SHAREHOLDER LIST. The officer or agent having charge of the transfer books for shares of the corporation shall make, at least ten day before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and number of shares held by each. Such list shall be open to examination by any shareholder of the corporation during ordinary business hours, for any purpose germane to the meeting, for a period of at least ten days prior to the meeting, at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of meeting during the whole time thereof, and subject to the inspection of any such shareholder who may be present. Section 2.7. QUORUM. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite for, and shall constitute, a quorum at all meetings of the shareholders of the corporation for the transaction of business, except as otherwise provided by statute or these By-Laws. If a quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting if the adjournment is for thirty days or less or unless after the adjournment a new record date is fixed, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 2.8. PROXIES. At every meeting of the shareholders, each shareholder having the right to vote thereat shall be entitled to vote in person or by proxy. Such proxy shall be appointed by an instrument in writing subscribed by such shareholder and bearing a date not more than three years prior to such meeting, unless such proxy provides for a longer period, and shall be filed with the Secretary of the corporation before, or at the time of the meeting. Section 2.9. VOTING. At every meeting of the shareholders, each shareholder shall be entitled to one vote for each share of stock entitled to vote thereat which is registered in the name of such shareholder on the books of the corporation. When a quorum is present at any meeting of the shareholders, the vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be sufficient for the transaction of any business, unless otherwise provided by statute, the Certificate of Incorporation or these By-Laws. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. At any meeting of shareholders, the Chairman of the meeting may, or upon the request of any shareholder, shall appoint one or more persons as inspectors for such meeting to ascertain and report the number of shares represented at the meeting based upon their determination of validity and effect of proxies, count all votes and report the results and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all shareholders. Each report of an inspector shall be in writing and signed by him or by a majority of them, if there be more than one inspector acting at such meeting, such majority report being the report of the inspectors in such case. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be a prima facie evidence thereof and shall be accepted by the Chairman of the meeting for the conduct thereof unless he shall be otherwise advised by counsel for the corporation. Section 2.10. VOTING OF CERTAIN SHARES. Shares standing in the name of another corporation, domestic or foreign, and entitled to vote may be voted by such officer, agent, or proxy as the By-Laws of 2 such corporation may prescribe or, in the absence of such provision, as the Board of Directors of such corporation may determine. Shares standing in the name of a deceased person, a minor or an incompetent and entitled to vote may be voted by his administrator, executor, guardian or conservator as the case may be, either in person or by proxy. Shares standing in the name of a trustee and entitled to vote may be voted by such trustee, either in person or by proxy to the full extent provided by Delaware law. Shares standing in the name of a receiver and entitled to vote may be voted by such receiver. A shareholder some or all of whose shares, otherwise entitled to vote, are pledged shall be entitled to vote such shares unless, in the transfer of such pledged shares on the books of the corporation, such shareholder as pledgor has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or the pledgee's proxy, may represent such stock and bote thereon. Shares standing in the name of two or more persons and shares with two or more persons having the same fiduciary relationship respecting such shares shall be voted in accordance with the provisions of Section 217(b) of the Delaware General Corporation Law. Section 2.11. TREASURY STOCK. Shares of its own stock belonging to this corporaton or to another corporation, if a majority of the shares entitled to vote in the election of directors of such corporation is held by this corporation, shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares. Nothing in this section shall be construed as limiting the right of this corporation to vote shares of its own stock held by it in a fiduciary capacity. Section 2.12. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance with the procedures set forth in this Section 2.12 shall be eligible for election as Directors at any meeting of shareholders. Nominations of persons for election to the Board of Directors of the corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of the corporation entitled to vote for the election of Directors at the meeting who complies with the notice procedures set forth in this Section 2.12. Such nominations, other than those made by or at the direction of the Board of Directors shall be made pursuant to timely notice in proper written form to the Secretary of the corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the corporation not less than 60 days nor more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper written form, shareholder's notice shall set forth in writing (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of stock of the corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including, without limitation, such person's written consent to being nominated as a Director and to serving as a Director if elected); and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the corporation's books, of such shareholder and (ii) the class and number of shares of stock of the corporation which are beneficially owned by such shareholder. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 2.12. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the By- Laws; and in that event the defective nomination shall be disregarded. Section 2.13. NOTICE OF SHAREHOLDER PROPOSALS. At any meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly 3 brought before a meeting, business must be (a) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before a meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days' notice or prior public disclosure of the date of the meeting is given or made to shareholders, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (a) brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the corporation's books. of the shareholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the shareholder, and (d) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at any meeting of shareholders except in accordance with the procedures set forth in this Section 2.13. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.13, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. ARTICLE III DIRECTORS Section 3.1. NUMBER AND ELECTION. The number of directors which shall constitute the whole Board shall be not less than nine. The exact number of directors shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. The Directors shall be divided into three classes, as nearly equal in number as possible, with respect to the time for which they shall severally hold office. Directors of the First Class first chosen shall hold office for one year or until the first annual election; Directors of the Second Class first chosen shall hold office until the second annual election; and Directors of the Third Class shall hold office until the third annual election. In each annual election or adjournment thereof, the successors to the Class of Directors whose terms shall expire at that time shall be elected to hold office for terms of three years so that the term of office of one class of Directors shall expire in each year. Each Director elected shall hold office until his successor shall be elected and shall qualify. Notwithstanding anything contained in these By-Laws to the contrary, the affirmative vote of the holders of at least 75% of the shares of this corporation entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Section 3.1. Section 3.2. REGISTRATION AND VACANCIES. (a) RESIGNATIONS. Any Director may resign at any time by giving written notice to the Board of Directors or to the President. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. (b) NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Subject to the rights of the holders of any series of Preferred Stock, then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, 4 resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the Directors then in office, and Directors so chosen shall hold office for a term expiring at the Annual Meeting of Shareholders at which the term of the class to which they have been elected expires. (c) REMOVAL. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any Director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75% of the shares of this corporation entitled to vote for the election of directors. (d) AMENDMENT, REPEAL, ETC. Notwithstanding anything contained in these By-Laws to the contrary, the affirmative vote of the holders of at least 75% of all of the shares of this corporation entitled to vote for the election of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Section 3.2. Section 3.3. MANAGEMENT OF AFFAIRS OF CORPORATION. The property and business of the corporation shall be managed by its Board of Directors, which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done by the shareholders. In case the corporation shall transact any business or enter into any contract with a director, or with any firm of which one or more of its directors are members, or with any trust, firm, corporation or association in which any director is a shareholder, director or officer or otherwise interested, such directors shall be severally under the duty of disclosing all material facts as to their interest to the remaining directors promptly if and when such interested directors shall become advised of the circumstances; and no such contract or transaction shall be void or voidable solely by reason of such disclosed interest or solely because such interested director was present at or participated in the meeting of the board or committee thereof which authorized the contract or transaction, or solely because his or their votes are counted for such purpose, if the board or committee thereof in good faith authorizes such contract or transaction by a vote sufficient for such purpose without counting the vote of such interested director or directors. In the case of continuing relationships in the normal course of business, such disclosure shall be deemed effective, when once given, as to all transactions and contracts subsequently entered into. Section 3.4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held without other notice than this By-Law immediately after the Annual Meeting of Shareholders, and on the last Tuesday of June, September, and December at the principal office of the corporation in the State of Illinois or at such other place within or without the State of Delaware as the Chairman of the Board or the President may designate and which shall be set forth in a notice of said meeting. In the event the date of any regular meeting is a holiday, such meeting shall be held the next succeeding business day. Section 3.5. SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or by a majority of the Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Delaware, as the place for holding any special meeting of the Board of Directors called by them. Section 3.6. NOTICE OF SPECIAL MEETINGS. Except as otherwise prescribed by statute, written notice of the time and place of each special meeting of the Board of Directors shall be given at least one day prior to the time of holding the meetings. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except when a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise provided by statute neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in any notice, or waiver of notice of such meeting. (See also Articles IV and X.) 5 Section 3.7. QUORUM. At each meeting of the Board of Directors, the presence of not less than a majority of the Directors then in office shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute. If a quorum shall not be present at any meeting of Directors, the Directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. In determining the presence of a quorum at a meeting of the Directors or a committee thereof for the purpose of authorizing a contract or transaction between the corporation and one or more of its Directors, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its Directors are directors or officers, or have a financial interest, such interested Directors may be counted in determining a quorum. Section 3.8. PRESUMPTION OF ASSENT. Unless otherwise provided by statute, a director of the corporation who is present at a meeting of the Board of Directors at which action is taken on any corporate matter shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. Section 3.9. ACTION WITHOUT MEETING. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if all members of the Board or of such committee, as the case may be, consent thereto in writing and such writing or writings are filed with the minutes of proceedings of the Board or such committee. Section 3.10. PRESIDING OFFICER. The presiding officer of any meeting of the Board of Directors shall be the Chairman of the Board, or in his absence, the President. Section 3.11. COMMITTEE OF DIRECTORS. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate three or more Directors to constitute an Executive Committee, which committee, when the Board of Directors is not in session shall have and exercise all of the authority of the Board of Directors in the management of the corporation except to the extent, if any, that such authority shall be limited by resolution appointing the Executive Committee and except also that the Executive Committee shall not have the authority of the Board of Directors which cannot be delegated under the law, or: a. to amend the Certificate of Incorporation; b. to adopt a plan of merger or consolidation with another corporation or corporations; c. to recommend to shareholders the sale, lease, exchange, mortgage, pledge or other disposition of all or substantially all of the property and assets of the corporation if not made in the ordinary course of its business; d. to recommend to shareholders a voluntary dissolution of the corporation or a revocation thereof; e. to amend, alter or repeal the By-Laws of the corporation; f. to elect or remove officers of the corporation or members of the Executive Committee; g. to fix the compensation of any member of the Executive Committee; h. to declare dividends; or i. to amend, alter or repeal any resolution of the Board of Directors which by its terms provides that it shall not be amended, altered or repealed by the Executive Committee. 6 The Chairman of the Executive Committee shall be appointed by the Board of Directors at the time its members are designated. Regular meetings of the Executive Committee may be held without notice at such times and places as the Executive Committee may from time to time by resolution fix. Special meetings of the Executive Committee may be called by any member thereof upon not less than one day's notice stating the place, date and hour of the meeting which notice may be written or oral, and if mailed, shall be deemed to be delivered when deposited in the United States mail addressed to the member of the Executive Committee at his business address. Any member of the Executive Committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the Executive Committee need not state the business proposed to be transacted at the meeting. A majority of the members of the Executive Committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the Executive Committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. Any vacancy in the Executive Committee may be filled by a resolution adopted by a majority of the whole Board of Directors. Any member of the Executive Committee may be removed at any time with or without cause by resolution adopted by a majority of the whole Board of Directors. Any member of the Executive Committee may resign from the Executive Committee at any time by giving written notice to the President or Secretary of the corporation, and unless otherwise specified, therein, the acceptance of such resignation shall not be necessary to make it effective. The Executive Committee may fix its own rules of procedure which shall not be inconsistent with these By-Laws. It shall keep regular minutes of its proceedings and report the same to the Board of Directors for its information only at the meeting thereof held next after the proceedings shall have been taken. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more additional committees, each committee to consist of two or more Directors of the corporation, to perform specific functions on behalf of the Board of Directors. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The Board of Directors may designate one or more Directors as alternate members of any such committee, who may replace any absent or disqualified member thereof. Section 3.12. FEES AND COMPENSATION OF DIRECTORS. The Board of Directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers, or otherwise. The Board of Directors may allow by resolution a fixed monthly or annual sum payable to such director or directors as are not officers or employees of the corporation as compensation to such director or directors for extended consideration of corporation matters implicit in the office of such director. By resolution of the Board of Directors, the directors may be paid their expenses, if any, of attendance at each meeting of the Board, and may be paid a fixed sum for attendance at meetings or a stated salary as directors. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 3.13. RELIANCE UPON RECORDS. Every director of the corporation, or member of any committee designated by the Board of Directors pursuant to authority conferred by Section 3.11. of these By-Laws, shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the corporation by any of its officials, or by an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the corporation including, without limiting the generality of the foregoing, those as to the value and amount of assets, liabilities and/or net profits of the corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which the corporation's stock might properly be purchased or redeemed. 7 ARTICLE IV NOTICES Section 4.1. MANNER OF NOTICE. Whenever under the provisions of the statutes of these By-Laws notice is required to be given to any director, member of any committee designated by the Board of Directors pursuant to authority conferred by Section 3.11. of these By-Laws or shareholder, it shall not be construed to require personal delivery, and such notice may be given in writing by depositing it, in a sealed envelope, in the United States mails, air mail or first class, postage prepaid, addressed to (or by delivering it to a telegraph company, charges prepaid, for transmission to) such director, member or shareholder either at the address of such director, member or shareholder as it appears on the books of the corporation or, in the case of such a director or member, at his business address; and such notice shall be deemed to be given at the time when it is thus deposited in the United States mails (or delivered to the telegraph company). Section 4.2. WAIVER OF NOTICE. Whenever any notice is required to be given under the provisions of the statutes, the Certificate of Incorporation, or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 5.1. OFFICES AND OFFICIAL POSITIONS. The officers of the corporation shall be a Chairman of the Board, a President, a Chief Executive Officer, and Executive Vice President, A Vice President -- Finance, one or more additional Vice Presidents, the number thereof to be determined by the Board of Directors, a Treasurer, a Controller, a Secretary, and such Assistant Secretaries, Assistant Treasurers, and other officers as the Board of Directors may determine. Any two or more offices may be held by the same person, except the offices of President and Secretary. None of the officers need be a director, a shareholder of the corporation or a resident of the State of Delaware. The Board of Directors may from time to time establish, and abolish official positions within such divisions into which the business and operations of the corporation may be divided pursuant to Section 6.1. of these By-Laws, and assign titles and duties to such positions. Those appointed to official positions within divisions may, but need not, be officers of the corporation. The Board of Directors shall appoint officers to official positions within a division and may with or without cause remove from such a position any person appointed to it. In any event, the authority incident to an official position within a division shall be limited to acts and transactions within the scope of the business and operations of such division. Section 5.2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the Board of Directors at their first meeting held after each regular annual meeting of the shareholders. If the election of officers shall not be held at such meeting of the Board, such election shall be held at a regular or special meeting of the Board of Directors as soon thereafter as may be convenient. Each officer shall hold office for such term as the Board of Directors shall specify, or until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Election or appointment of an officer or agent shall not in itself create contract rights. Section 5.3. REMOVAL AND RESIGNATION. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office at any regular or special meeting of the Board; but such removal shall be without prejudice to the contract rights, if any, of such person so removed. Any officer may resign at any time by giving written notice to the Board of Directors, to the President or to the Secretary of the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 8 Section 5.4. VACANCIES. A vacancy in any office because of death, resignation, removal, or any other cause may be filled for the unexpired portion of the term by the Board of Directors. Section 5.5. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all meetings of the shareholders and the Board of Directors and shall consult and advise with the other officers of the corporation in connection with its operation. Section 5.6. PRESIDENT. The President shall preside at all meetings of the shareholders and of the Board of Directors in the absence of the Chairman of the Board, and of committees of directors of the corporation of which he is a member. He shall direct the activities of the corporation in accordance with policies and objectives established by the Board of Directors. He shall execute any deeds, mortgages, bonds, contracts or other instruments of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors or the President to some other officer or agent of the corporation. He may sign, with the Secretary or any Assistant Secretary, certificates for shares of stock of the corporation the issuance of which shall have been authorized by the Board of Directors, shall vote, or give a proxy to any other person to vote, all shares of the stock of any other corporation standing in the name of the corporation, shall have the general powers and duties of management usually vested in the office of a President of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these By-Laws. Section 5.7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the corporation shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the corporation. He shall have authority to designate the duties and powers of officers and delegate special powers and duties to specified officers, so long as such designation shall not be inconsistent with the statutes, these By-Laws, or action of the Board of Directors. He shall do and perform such other duties as from time to time may be assigned to him by the Board of Directors. The authority and responsibilities of the Chief Executive Officer shall be assigned by the Board of Directors to either the Chairman of the Board or the President. His actions shall be executed through the office of the President. Section 5.8. EXECUTIVE VICE PRESIDENT. The Executive Vice President shall be vested with all of the powers and shall perform all of the duties of the President in the absence of the President. He shall familiarize himself with the overall operations of the business under the direction of the President and shall do and perform such duties as from time to time may be assigned to him by the President and the Board of Directors. Section 5.9. VICE PRESIDENT -- FINANCE. The Vice President-Finance, as the chief financial officer of the corporation, shall: (a) be responsible to the President, the Executive Vice President and the Board of Directors for all the property of the corporation, tangible and intangible, and for the receipt, custody and disbursement of all funds and securities of the corporation; (b) receive and give receipts for moneys due and payable to the corporation from any source whatsoever and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositories as shall from time to time be selected in accordance with the provisions of Section 7.4 of these By-Laws; (c) disburse the funds of the corporation as ordered by the President or as required in the ordinary conduct of the business of the corporation; (d) render to the President or Board of Directors, upon request, an account of all his transactions as Vice President-Finance and such other duties as from time to time may be assigned to him by the President, by the Board of Directors or these By-Laws. He may delegate such details of the performance of duties of his office as may be appropriate in the exercise of reasonable care to one or more persons in his stead. Section 5.10. VICE PRESIDENTS. In the absence or inability to act of the President, the Executive Vice President, the Vice Presidents in order of their ranking by the Board of Directors or, if not ranked, the Vice President designated by the Board of Directors, or the President, shall perform all duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such 9 other duties, not inconsistent with the statutes, these By-Laws, or action of the Board of Directors, as from time to time may be prescribed for them, respectively, by the President. Any Vice President may sign, with the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, certificates for shares of stock of the corporation the issuance of which shall have been authorized by the Board of Directors. Section 5.11. SECRETARY. The Secretary shall: (a) keep the minutes of the meetings of the shareholders and the Board of Directors in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law; (c) have charge of the corporate records and of the seal of the corporation; (d) affix the seal of the corporation, or cause it to be affixed, to all certificates for shares prior to the issue thereof and to all documents the execution of which on behalf of the corporation under its seal is duly authorized by the Board of Directors or otherwise in accordance with the provisions of the By-Laws; (e) keep a register of the post office address of each shareholder, director and committee member, which shall from time to time be furnished to the Secretary by such shareholder, director or member; (f) sign with the President, the Executive Vice President, or a Vice President, certificates for shares of stock of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (g) have general charge of the stock transfer books of the corporation; and (h) in general, perform all duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President, the Executive Vice President or by the Board of Directors. He may delegate such details of the performance of duties of his office as may be appropriate in the exercise of reasonable care to one or more persons in his stead. Section 5.12. TREASURER. In the absence or inability to act of the Vice President -- Finance, the Treasurer shall perform all duties of the Vice President -- Finance and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the Vice President -- Finance. The Treasurer shall have such other powers and perform such other duties, not inconsistent with the statutes, these By-Laws, or action of the Board of Directors, as from time to time may be prescribed for him by the Vice President - -Finance. The Treasurer may delegate such details of the performance of his office as may be appropriate in the exercise of reasonable care to one or more persons in his stead. Section 5.13. CONTROLLER. The Controller shall be the Chief Accounting Officer of the corporation and shall have the responsibility for the accounts and accounting practices of the corporation; maintain records of assets, liabilities, and transactions thereof, and provide for regular audits; initiate and execute measures calculated to provide the maximum safety, clarity and efficiency in the recording and reporting of transactions; prepare and direct all budgets; and verify all authorizations. He shall do and perform such duties as from time to time may be assigned to him by the Vice President -- Finance or the Board of Directors. Section 5.14. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant Treasurers and Assistant Secretaries shall, in the absence of the Treasurer or Secretary, respectively, perform all functions and duties which such absent officer may delegate; but such delegation shall in nowise relieve the absent officer from the responsibilities and liabilities of his office. In addition, an Assistant Secretary, as thereto authorized by the Board of Directors, may sign with the President, the Executive Vice President or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by a resolution of the Board of Directors; and the Assistant Secretaries and Assistant Treasurers shall, in general, perform such duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the President or Board of Directors. Section 5.15. DELEGATION OF DUTIES. In case of the absence of an officer of the corporation or for any other reason that may seem sufficient to the Board of Directors, said Board may delegate for the time being the powers and duties of such officer to any other officer or to any Director except where otherwise provided by law. Section 5.16. COMPENSATION. The salaries of the officers shall be fixed from time to time by the Board of Directors or a Committee of the Board of Directors designated by the Board with the 10 exception of the salaries of such Committee, which shall be established by the Board of Directors, and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Director of the corporation. Section 5.17. PERFORMANCE BOND. The Board of Directors may request any officer, agent or employee of the corporation to furnish a bond of such sum and with such sureties as it may deem advisable for the faithful performance of the duties of such officer, agent or employee. ARTICLE VI DIVISIONS Section 6.1. DIVISIONS OF THE CORPORATION. The Board of Directors shall have the power to create and establish such operating divisions of the corporation as they may from time to time deem advisable. Section 6.2. OFFICIAL POSITIONS WITHIN A DIVISION. The President may appoint individuals who are not officers of the corporation to, and may, with or without cause, remove them from, official positions established with a division, but not filled by the Board of Directors. (See also Section 5.1 of these By-Laws.) ARTICLE VII CONTRACT, LOANS, CHECKS AND DEPOSITS Section 7.1. CONTRACTS AND OTHER INSTRUMENTS. The Board of Directors may authorize any officer of officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, or of any division thereof, and such authority may be general or confined to specific instances. Section 7.2. LOANS. No loans shall be contracted on behalf of the corporation or any division thereof, and no evidence of indebtedness shall be issued in the name of the corporation, or any division thereof, unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 7.3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, or any division thereof, shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as shall from time to time be determined by resolution of the Board of Directors. Section 7.4. DEPOSITS. All funds of the corporation, or any divisions thereof, not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VIII CERTIFICATES OF STOCK AND THEIR TRANSFER Section 8.1. CERTIFICATES OF STOCK. The certificates of stock of the corporation shall be in such form as may be determined by the Board of Directors, shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the President, the Executive Vice President, or a Vice President and the Secretary or an Assistant Secretary. If any stock certificate is signed (a) by a transfer agent or an assistant transfer agent or (b) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such officer may be facsimile. In case any such officer whose facsimile signature has thus been used on any such certificate shall cease to be such officer, whether because of death, resignation or otherwise, before such certificate has been delivered by the corporation, such certificate may nevertheless be delivered by the corporation, as though the person whose facsimile signature has 11 been used thereon had not ceased to be such officer. All certificates properly surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued to evidence transferred shares until the former certificate for at least a like number of shares shall have been surrendered and canceled and the corporation reimbursed for any applicable taxes on the transfer, except that in the case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms, and with such indemnity (if any) to the corporation, as the Board of Directors may prescribe specifically or in general terms or by delegation to the transfer agent. (See Section 8.2.) Section 8.2. LOST OR DESTROYED CERTIFICATES. The Board of Directors in individual cases, or by general resolution or by delegation to the transfer agent, may direct a new certificate or certificates to be issued by the corporation in place of the certificate or certificates alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. Section 8.3. TRANSFER OF STOCK. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and upon payment of applicable taxes with respect to such transfer, it shall be the duty of the corporation, subject to such rules and regulations as the Board of Directors may from time to time deem advisable concerning the transfer and registration of certificates for shares of capital stock of the corporation, to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Transfers of shares shall be made only on the books of the corporation by the registered holder thereof or by his attorney or successor duly authorized as evidenced by documents filed with the Secretary or transfer agent of the corporation. Section 8.4. RESTRICTIONS ON TRANSFER. Any shareholder may enter into an agreement with other shareholders or with the corporation providing any reasonable limitation or restriction on the right of such shareholder to transfer shares of common stock of the corporation held by him, including, without limiting the generality of the foregoing, agreements granting to such other shareholders or to the corporation the right to purchase for a given period of time any of such shares on terms equal to terms offered such shareholders by any third party. Any such limitation or restriction on the transfer of shares of this corporation may be set forth on certificates representing shares of common stock or notice thereof may be otherwise given to the corporation or the transfer agent, in which case the corporation or the transfer agent shall not transfer such shares upon the books of the corporation without receipt of satisfactory evidence of compliance with the terms of such limitation or restriction; provided, however, no such restriction, unless noted conspicuously on the security, shall be effective against anyone found by a court of competent jurisdiction to be other than a person with actual knowledge of the restriction. Section 8.5. NO FRACTIONAL SHARE CERTIFICATES. Certificates shall not be issued representing fractional shares of stock. Section 8.6. SHAREHOLDERS OF RECORD. The corporation shall be entitled to treat the holder of record of any shares or shares of stock as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. 12 ARTICLE IX GENERAL PROVISIONS Section 9.1. FISCAL YEAR. The fiscal year of the corporation shall begin on December 1 of each year and end on November 30 of the next succeeding calendar year. Section 9.2. SEAL. The corporate seal shall have inscribed thereon the name of the corporation and the words "CORPORATE SEAL" and "DELAWARE"; and it shall otherwise be in the form approved by the Board of Directors. Such seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or reproduced, or otherwise. ARTICLE X AMENDMENTS Section 10.1. Except as provided in Sections 2.2, 3.1, and 3.2 of these By-Laws, any provision of these By-Laws may be altered, amended or repealed from time to time by the affirmative vote of a majority of the directors then qualified and acting at any regular meeting of the Board at which a quorum is present, or at any special meeting of the Board at which a quorum is present if notice of the proposed alteration, amendment or repeal be contained in the notice of such special meeting; provided, however, that no reduction in the number of directors shall have the effect of removing any director prior to the expiration of his term in office. March 29, 1969 Amended and Restated June 30, 1969 Amended January 3, 1980 Amended January 31, 1981 Amended February 11, 1983 Amended March 26, 1983 Amended June 25, 1985 Amended October 8, 1985 Amended December 1, 1988 Amended January 20, 1992 Amended January 27, 1994 13 EX-11 3 EXHIBIT 11 CLARCOR INC. EXHIBIT 11 -- COMPUTATIONS OF PER SHARE EARNINGS (A) FOR THE FIVE YEARS ENDED NOVEMBER 30, 1993
FISCAL YEARS ENDED NOVEMBER 30, ------------------------------------------------------------------------- AVERAGE SHARES OUTSTANDING 1993 1992 1991 1990 1989 - ---------------------------------------------- ------------- ------------- ------------- ------------- ------------- 1. Average number of shares outstanding....................... 14,837,741 14,972,639 14,873,282 14,843,279 17,040,024 2. Net additional shares resulting from assumed exercise of stock options*.......................... 213,725 230,202 253,518 123,549 109,173 ------------- ------------- ------------- ------------- ------------- 3. Adjusted average shares outstanding for fully diluted computation (1 plus 2)........................... 15,051,466 15,202,841 15,126,800 14,966,828 17,149,197 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Earnings per share of common stock: Primary............................ $1.16 $.94 $1.26 $1.37 $.42 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Assuming full dilution............. $1.15 $.93 $1.24 $1.36 $.41 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- - ------------------------ * Assumes proceeds from exercise of stock options used to purchase treasury shares at the greater of the year-end or the average market price during the period. (A) Adjusted to reflect 3-for-2 stock split payable February 14, 1992.
EX-13 4 EXHIBIT 13(A) EXHIBIT 13(A)(II) CLARCOR INC. CONSOLIDATED BALANCE SHEETS NOVEMBER 30, 1993 AND 1992 (DOLLARS IN THOUSANDS) ASSETS
1993 1992 ----------- ----------- Current assets: Cash and short-term cash investments.................................................. $ 13,838 $ 15,051 Due on sale of Precision Products Group............................................... -- 20,700 Accounts receivable, less allowance for losses of $1,544 for 1993 and $788 for 1992... 40,911 27,892 Inventories........................................................................... 26,996 25,007 Prepaid expenses...................................................................... 1,175 1,550 Deferred income taxes................................................................. 3,241 3,427 ----------- ----------- Total current assets................................................................ 86,161 93,627 Investment in affiliates................................................................ 8,002 7,281 Plant assets, at cost less accumulated depreciation..................................... 47,636 35,584 Excess of cost over fair value of assets acquired, less accumulated amortization........ 15,701 12,768 Pension assets.......................................................................... 5,385 4,729 Other assets............................................................................ 7,011 7,266 ----------- ----------- $ 169,896 $ 161,255 ----------- ----------- ----------- ----------- LIABILITIES Current liabilities: Current portion of long-term debt..................................................... $ 7,921 $ 6,825 Accounts payable and accrued liabilities.............................................. 23,775 15,969 Income taxes.......................................................................... 1,592 2,478 ----------- ----------- Total current liabilities........................................................... 33,288 25,272 Long-term debt, less current portion.................................................... 24,617 29,325 Postretirement healthcare benefits...................................................... 3,111 3,535 Deferred income taxes................................................................... 4,239 3,572 Contingencies SHAREHOLDERS' EQUITY Capital stock: Preferred, par value $1, authorized 1,300,000 shares, issuable in series, none issued............................................................................... -- -- Common, par value $1, authorized 30,000,000 shares, issued 14,819,199 in 1993 and 14,985,831 in 1992................................................................... 14,819 14,986 Capital in excess of par value.......................................................... 328 272 Foreign currency translation adjustments................................................ (1,465) (1,534) Retained earnings....................................................................... 90,959 85,827 ----------- ----------- 104,641 99,551 ----------- ----------- $ 169,896 $ 161,255 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial statements. EXHIBIT 13(A)(III) CLARCOR INC. CONSOLIDATED STATEMENTS OF EARNINGS FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1993 1992 1991 ----------- ----------- ----------- Net sales.................................................................. $ 225,319 $ 188,625 $ 179,538 Cost of sales.............................................................. 155,615 129,287 120,370 ----------- ----------- ----------- Gross profit........................................................... 69,704 59,338 59,168 Selling and administrative expenses........................................ 40,637 31,708 28,315 ----------- ----------- ----------- Operating profit....................................................... 29,067 27,630 30,853 ----------- ----------- ----------- Other income (deductions): Interest expense......................................................... (3,525) (3,803) (3,682) Interest income.......................................................... 875 298 1,122 Equity in net earnings of affiliates..................................... 745 873 332 Other.................................................................... (84) 307 (82) ----------- ----------- ----------- (1,989) (2,325) (2,310) ----------- ----------- ----------- Earnings from continuing operations before income taxes and cumulative effect of change in accounting method................................. 27,078 25,305 28,543 Provision for income taxes................................................. 9,827 8,796 10,068 ----------- ----------- ----------- Earnings from continuing operations before cumulative effect of change in accounting method.................................................. 17,251 16,509 18,475 Discontinued operations: Earnings from operations, net of income taxes of $925 in 1991............ -- -- 297 Gain on disposition, net of income taxes of $1,342 in 1992............... -- -- -- ----------- ----------- ----------- Earnings before cumulative effect of change in accounting method....... 17,251 16,509 18,772 Cumulative effect of change in accounting method, net of income tax benefit of $1,477................................................................. -- (2,370) -- ----------- ----------- ----------- Net earnings............................................................... $ 17,251 $ 14,139 $ 18,772 ----------- ----------- ----------- ----------- ----------- ----------- Net earnings (loss) per common share: Continuing operations.................................................... $ 1.16 $ 1.10 $ 1.24 Discontinued operations.................................................. -- -- .02 Cumulative effect of accounting change................................... -- (.16) -- ----------- ----------- ----------- $ 1.16 $ .94 $ 1.26 ----------- ----------- ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial statements. EXHIBIT 13(A)(IV) CLARCOR INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS EXCEPT SHARE DATA)
COMMON STOCK -------------------------------------------- ISSUED IN TREASURY FOREIGN --------------------- --------------------- CAPITAL IN CURRENCY NUMBER OF NUMBER OF EXCESS OF TRANSLATION RETAINED SHARES AMOUNT SHARES AMOUNT PAR VALUE ADJUSTMENTS EARNINGS ---------- --------- ---------- --------- ----------- ------------- --------- Balance, November 30, 1990..... 22,379,030 $ 14,920 7,533,842 $ 71,480 $ 3,102 $ -- $ 136,147 Net earnings................... -- -- -- -- -- -- 18,772 Stock options exercised........ -- -- (50,881) 800 978 -- -- Issuance of stock under award plans......................... -- -- (11,213) (20) 243 -- -- Cash dividends -- $.42 per common share.................. -- -- -- -- -- -- (6,240) ---------- --------- ---------- --------- ----------- ------------- --------- Balance, November 30, 1991..... 22,379,030 14,920 7,471,748 72,260 4,323 -- 148,679 Net earnings................... -- -- -- -- -- -- 14,139 Retirement of treasury stock... (7,413,671) (7,414) (7,413,671) (72,974) (4,986) -- (60,574) Stock split.................... -- 7,459 -- -- -- -- (7,459) Stock options exercised........ 25,678 26 (18,145) 785 635 -- -- Issuance of stock under award plans......................... (5,206) (5) (39,932) (71) 300 -- -- Cash dividends -- $.60 per common share.................. -- -- -- -- -- -- (8,958) Translation adjustments........ -- -- -- -- -- (1,534) -- ---------- --------- ---------- --------- ----------- ------------- --------- Balance, November 30, 1992..... 14,985,831 14,986 -- -- 272 (1,534) 85,827 Net earnings................... -- -- -- -- -- -- 17,251 Purchase of treasury stock..... -- -- 202,359 3,369 -- -- -- Retirement of treasury stock... (202,359) (202) (202,359) (3,369) (84) -- (3,083) Stock options exercised........ 27,223 27 -- -- 66 -- -- Issuance of stock under award plans......................... 8,504 8 -- -- 74 -- -- Cash dividends -- $.61 per common share.................. -- -- -- -- -- -- (9,036) Translation adjustments........ -- -- -- -- -- 69 -- ---------- --------- ---------- --------- ----------- ------------- --------- Balance, November 30, 1993..... 14,819,199 $ 14,819 -- $ -- $ 328 ($ 1,465) $ 90,959 ---------- --------- ---------- --------- ----------- ------------- --------- ---------- --------- ---------- --------- ----------- ------------- ---------
The accompanying notes are an integral part of the consolidated financial statements. EXHIBIT 13(A)(V) CLARCOR INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)
1993 1992 1991 ---------- ---------- ---------- Cash flows from continuing operations: Net earnings and cumulative effect of accounting change................... $ 17,251 $ 14,139 $ 18,475 Adjustments to reconcile net earnings to net cash provided by continuing operations: Depreciation............................................................ 5,816 4,952 4,569 Amortization............................................................ 479 428 429 Equity in net earnings of affiliates.................................... (745) (873) (332) Net loss (gain) on disposition of manufacturing operations and plant assets................................................................. 168 (1) 16 Cumulative effect of accounting change, net............................. -- 2,370 -- Changes in assets and liabilities: Accounts receivable................................................... (3,357) (513) (5,373) Inventories........................................................... 2,992 (694) (5,180) Prepaid expenses...................................................... 707 (718) 508 Accounts payable and accrued liabilities.............................. (2,319) 2,032 528 Pension assets........................................................ (1,248) (822) (1,702) Income taxes.......................................................... (605) 23 781 Deferred income taxes................................................. 853 (590) 559 ---------- ---------- ---------- Cash provided by continuing operations.............................. 19,992 19,733 13,278 Cash provided by discontinued operations............................ -- 3,074 5,065 ---------- ---------- ---------- Net cash provided by operating activities........................... 19,992 22,807 18,343 ---------- ---------- ---------- Cash flows from investing activities: Business acquisitions, net of cash acquired............................... (12,824) -- -- Investment in affiliates, net of dividends received....................... 439 92 (6,766) Additions to plant assets................................................. (10,218) (6,557) (6,646) Proceeds from sale of Precision Products Group............................ 20,700 -- -- Disposition of manufacturing operations and plant assets.................. 2 232 28 Other, net................................................................ 708 (118) (343) Cash used by discontinued operations, principally for plant assets........ -- (834) (992) ---------- ---------- ---------- Net cash used in investing activities............................... (1,193) (7,185) (14,719) ---------- ---------- ---------- Cash flows from financing activities: Reduction of long-term debt............................................... (7,614) (1,357) (810) Sale of capital stock, stock option plan.................................. 7 115 178 Purchase of treasury stock................................................ (3,369) -- -- Cash dividends paid....................................................... (9,036) (8,958) (8,165) Cash used by discontinued operations...................................... -- -- (8) ---------- ---------- ---------- Net cash used in financing activities............................... (20,012) (10,200) (8,805) ---------- ---------- ---------- Net change in cash and short-term cash investments.......................... (1,213) 5,422 (5,181) Cash and short-term cash investments, beginning of year..................... 15,051 9,629 14,810 ---------- ---------- ---------- Cash and short-term cash investments, end of year........................... $ 13,838 $ 15,051 $ 9,629 ---------- ---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the consolidated financial statements. EXHIBIT 13(A)(VI) CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) At November 30, 1993, the Company has two principal product segments: Filtration Products and Consumer Products. During 1993, the Company acquired Airguard Industries and Guardian/U.E.L. to be part of Filtration Products. Effective November 30, 1992, the Company sold its Precision Products Group, which had been previously reported as Discontinued Operations. These transactions have resulted in significant changes in the Consolidated Financial Statements and the related footnotes. A. ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include all domestic and foreign subsidiaries which are more than 50% owned and controlled. Investments in nonconsolidated companies which are at least 20% owned are carried at cost plus equity in undistributed earnings since acquisition. FOREIGN CURRENCY TRANSLATION Foreign financial statements are translated into U.S. dollars at current rates, except that revenues, costs and expenses are translated at average current rates during each reporting period. Net exchange gains or losses resulting from the translation of foreign financial statements and the effect of exchange rate changes on intercompany transactions of a long-term investment nature are accumulated and credited or charged directly to a separate component of shareholders' equity. The amounts related to foreign subsidiaries are not significant. PLANT ASSETS Depreciation is provided by the straight-line and accelerated methods for financial statement purposes and by the accelerated method for tax purposes. Provision for depreciation is made over the estimated useful lives of the assets. It is the policy of the Company to capitalize renewals and betterments, and to charge to expense the cost of current maintenance and repairs. EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED Excess of cost over fair value of assets acquired is being amortized over a forty-year period, using the straight-line method. Accumulated amortization was $4,891 and $4,412 at November 30, 1993 and 1992, respectively. STATEMENTS OF CASH FLOWS All highly liquid investments purchased with an original maturity of three months or less are considered to be short-term cash investments. The Company has certain noncash transactions related to a capital lease, stock option and award plans, and the disposition of certain assets and businesses, which are described in Footnotes F, K and L. CONCENTRATIONS OF CREDIT Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and in high grade municipal securities. At November 30, 1993 and 1992, the Company held short-term securities of municipal government agencies with a total cost of $7,680 and $10,250, respectively. Also, at November 30, 1992, the Company had a repurchase agreement with a financial institution for $2,500. Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers and their dispersion across many different industries. 1 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) A. ACCOUNTING POLICIES (CONTINUED) RETIREMENT PLANS AND POSTRETIREMENT HEALTHCARE BENEFITS The Company has defined benefit pension plans covering most of its employees. Plan benefits are principally based upon years of service, compensation, and social security benefits. The Company's funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheet at November 30:
1993 1992 ---------- ---------- Accumulated benefit obligation, including vested benefits of ($48,020) and ($40,778), respectively....................................................... $ (50,543) $ (43,974) ---------- ---------- ---------- ---------- Plan assets at fair value...................................................... $ 59,237 $ 55,543 Projected benefit obligation for service rendered to date...................... (55,672) (47,445) ---------- ---------- Plan assets in excess of projected benefit obligation.......................... 3,565 8,098 Unrecognized net loss from past experience different from that assumed......... 8,117 4,555 Unrecognized net asset being recognized over approximately 15 years............ (7,615) (8,705) ---------- ---------- Accrued pension asset for defined benefit plans, net........................... $ 4,067 $ 3,948 ---------- ---------- ---------- ----------
The net pension expense (credit) includes the following components for the three years ended November 30:
1993 1992 1991 --------- --------- --------- Service cost -- benefits earned during the period..................... $ 2,127 $ 2,379 $ 1,774 Interest cost on projected benefit obligation......................... 3,644 3,760 3,742 Actual return on assets............................................... (6,581) (4,506) (3,158) Net amortization and deferral......................................... 918 (1,382) (3,155) --------- --------- --------- Net pension expense (credit).......................................... $ 108 $ 251 $ (797) --------- --------- --------- --------- --------- ---------
The projected benefit obligation has been determined with a weighted average discount rate of 7.0% and 8.0% in 1993 and 1992, respectively and a rate of increase in future compensation of 5.0% for both years. The expected weighted average long-term rate of return was 8.5 % in 1993 and 1992. The increases in the accumulated and projected benefit obligations in 1993 are related principally to the decrease in the weighted average discount rate. Plan assets consist of group annuity insurance contracts, corporate stocks, bonds and notes, certificates of deposit and U.S. Government securities. The Company also has various defined contribution plans. The Company's contributions to these plans totaled $400, $322 and $400 in 1993, 1992 and 1991, respectively. No accrued liability exists at November 30, 1993 and 1992 for these plans. In addition to providing pension and other supplemental benefits, certain healthcare benefits are provided for certain of the Company's retired employees. Certain employees become eligible for these benefits if they meet minimum age and service requirements, are eligible for retirement benefits and contribute a portion of the cost. The Company has the right to modify or terminate these benefits. 2 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) A. ACCOUNTING POLICIES (CONTINUED) During 1992, the provisions of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" were adopted. The Statement requires companies to accrue the expected cost of providing postretirement benefits other than pensions over the years that employees render service rather than the cash basis previously used. The projected benefit obligation of $2,370, net of income taxes of $1,477, relating to prior service cost was a noncash transaction recognized as a cumulative effect of a change in accounting method, effective December 1, 1991. The following table sets forth the plan's obligation and cost at November 30, 1993 and 1992:
1993 1992 --------- --------- Accumulated postretirement benefit obligation: Retirees......................................................................... $ 3,184 $ 3,371 Fully eligible active plan participants.......................................... -- 11 Other active plan participants................................................... 545 465 --------- --------- Accumulated postretirement benefit obligation...................................... 3,729 3,847 Unrecognized loss.................................................................. (320) -- --------- --------- Accrued postretirement benefit liability........................................... 3,409 3,847 Less current portion, included in accrued liabilities............................ 298 312 --------- --------- $ 3,111 $ 3,535 --------- --------- --------- ---------
The net periodic postretirement benefit cost for the years ended November 30, 1993 and 1992 includes the following components:
1993 1992 --------- --------- Service cost-benefits attributed to service during the period........................... $ 23 $ 26 Interest cost on accumulated postretirement benefit obligations......................... 275 286 --------- --------- Net periodic postretirement benefit cost................................................ $ 298 $ 312 --------- --------- --------- ---------
Substantially all healthcare benefit cost increases will be assumed by the participants, and therefore future increases in the healthcare costs will not increase the postretirement benefit obligation or cost to the Company. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7% in 1993 and 8% in 1992. The expense, recognized on the cash basis, for postretirement healthcare benefits was approximately $589 in 1991. INCOME TAXES Provision is made for income taxes currently payable and for deferred income taxes resulting from timing differences between financial and taxable income. NET EARNINGS PER COMMON SHARE AND STOCK SPLIT Net earnings per common share is based on the weighted average number of common shares outstanding during the respective years. On January 20, 1992, the Company declared a three-for-two stock split effected in the form of a 50% stock dividend. All per common share amounts and number of common shares, option shares, stock appreciation rights, treasury shares and shares under the long range performance share plan have been adjusted to reflect the stock split. 3 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) A. ACCOUNTING POLICIES (CONTINUED) ACCOUNTING PERIOD In fiscal 1991, the Company converted from a fiscal year ending on November 30 to a fiscal year ending on the Saturday closest to November 30. For fiscal years 1993, 1992 and 1991, the year ended on November 27, 28 and 30, respectively. In the consolidated financial statements, all fiscal year ends will be shown as November 30 for clarity of presentation. RECLASSIFICATION The 1992 and 1991 consolidated statements of earnings include a reclassification of certain product distribution costs from selling and administrative expenses to cost of sales in order to be consistent with the 1993 statement of earnings. B. ACQUISITIONS AND INVESTMENT IN AFFILIATES ACQUISITIONS The Company purchased all of the shares of Airguard Industries, Inc. on April 30, 1993 and the assets of Guardian/U.E.L. effective June 1, 1993, for $13,504 in cash, including acquisition expenses. Airguard is a manufacturer of environmental air filtration products. Guardian/U.E.L. manufactures air and liquid filtration products. The acquisitions have been accounted for by the purchase method of accounting and the operating results of Airguard and Guardian/U.E.L. are included in the Company's consolidated results of operations from the date of the acquisitions. The excess of cost over fair value of assets acquired is being amortized over a forty year period, using the straight-line method. The following unaudited pro forma amounts are presented as if the acquisitions had occurred at the beginning of the periods presented and does not purport to be indicative of what would have occurred had the acquisitions been made as of those dates or of results which may occur in the future. Unaudited pro forma net sales for the Company would have been $248,171 and $237,575 for the years ended November 30, 1993 and 1992, respectively. Net earnings and earnings per share for each of these periods would not have been significantly affected. INVESTMENTS IN AFFILIATES In July 1991, the Company acquired for cash a 20% interest in the outstanding common stock of G.U.D. Holdings Limited, an Australian filter manufacturer. The acquisition cost exceeded the underlying equity in net assets by $2,107 which is amortized over a period of 40 years. The Company also has a standstill agreement which limits the Company's ability to own greater than a 20% interest and governs the manner in which the stock can be disposed. The carrying value of this investment was $7,716 and $7,048 at November 30, 1993 and 1992, respectively. The quoted market value of the Company's investment in G.U.D. was $15,300 and $11,000 at November 30, 1993 and 1992, respectively. Cash dividends totaling $439 and $670 were received in fiscal years 1993 and 1992, respectively. The Company also has a 50/50 joint venture interest with G.U.D. in Baldwin Filters (Aust.) Pty. Ltd., an Australian distributor of heavy duty filters, and a 60% interest in PleaTech, a technology and manufacturing joint venture for extended life, high-efficiency filters based in Michigan. The carrying value of these investments at November 30, 1993 and 1992 was $286 and $233, respectively. 4 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) C. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 59% and 53% of the Company's inventories at November 30, 1993 and 1992, respectively, and by the first-in, first-out (FIFO) method for all other inventories. The FIFO method would approximate the current cost. The inventories are summarized as follows:
1993 1992 --------- --------- Raw materials.................................................................... $ 10,471 $ 8,694 Work-in-process.................................................................. 4,947 5,157 Finished products................................................................ 14,977 15,625 --------- --------- Total at FIFO................................................................ 30,395 29,476 Less excess of FIFO cost over LIFO values...................................... 3,399 4,469 --------- --------- $ 26,996 $ 25,007 --------- --------- --------- ---------
During 1993, 1992 and 1991, inventory quantities were reduced resulting in a partial liquidation of the LIFO bases, the effect of which increased net earnings by approximately $650, $400 and $450, respectively. D. PLANT ASSETS Plant assets at November 30, 1993 and 1992 were as follows:
1993 1992 ----------- --------- Land........................................................................... $ 1,931 $ 1,113 Buildings and building fixtures................................................ 37,964 33,545 Machinery and equipment........................................................ 67,666 56,590 Construction-in-process........................................................ 4,693 3,934 ----------- --------- 112,254 95,182 Less accumulated depreciation................................................ 64,618 59,598 ----------- --------- $ 47,636 $ 35,584 ----------- --------- ----------- ---------
E. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at November 30, 1993 and 1992 were as follows:
1993 1992 --------- --------- Accounts payable................................................................. $ 9,777 $ 7,378 Accrued salaries, wages and commissions.......................................... 3,575 1,390 Compensated absences............................................................. 2,433 2,145 Accrued pension liabilities...................................................... 1,318 781 Other accrued liabilities........................................................ 6,672 4,275 --------- --------- $ 23,775 $ 15,969 --------- --------- --------- ---------
5 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) F. LONG-TERM DEBT Long-term debt at November 30, 1993 and 1992 consists of the following:
1993 1992 --------- --------- Promissory note.................................................................. $ 27,416 $ 33,833 Other obligations, at 6%-10% interest............................................ 5,122 2,317 --------- --------- 32,538 36,150 Less current portion........................................................... 7,921 6,825 --------- --------- $ 24,617 $ 29,325 --------- --------- --------- ---------
The promissory note matures March 31, 1997, but the Company is required to prepay, without premium, certain principal amounts as stated in the agreement. Interest at 9.71% per annum is payable quarterly. Under the note agreement, the Company must meet certain restrictive covenants. The primary covenants include maintaining minimum consolidated working capital at $25,000, a minimum consolidated current ratio of 1.5 to 1, and limiting dividends and new borrowings as stipulated in the agreement. The dividend limitation includes a base amount, reductions for treasury stock acquisitions, and increases for one-half of net earnings. As of November 30, 1993, $4,081 of retained earnings was available to the Company under this covenant for future cash dividends and future treasury stock acquisitions. Other obligations include a 15 year capital lease for a manufacturing facility acquired in 1991 from the Community Development Authority of the City of Gothenburg, Nebraska, and debt acquired in the acquisitions of Airguard Industries and Guardian Filters, including an industrial revenue bond due in 2003. Additionally, the Company had unused bank lines of credit at November 30, 1993 which permitted borrowings of $10,500. The agreements related to these obligations include certain restrictive covenants for the Company or certain subsidiaries that are similar to the promissory note. Principal maturities of long-term debt for the next five fiscal years ending November 30 approximates: $7,921 in 1994, $7,583 in 1995, $7,597 in 1996, $7,021 in 1997, $452 in 1998 and $1,964 thereafter. Interest paid totaled $3,560, $3,878 and $3,673 during 1993, 1992 and 1991, respectively. G. INCOME TAXES The provision for income taxes for continuing operations consists of:
1993 1992 1991 --------- --------- --------- Current: Federal............................................................... $ 7,632 $ 7,032 $ 8,660 State................................................................. 1,342 1,454 849 Deferred................................................................ 853 310 559 --------- --------- --------- $ 9,827 $ 8,796 $ 10,068 --------- --------- --------- --------- --------- ---------
Total income taxes paid, net of refunds, totaled $9,860, $10,982 and $9,474 during 1993, 1992 and 1991, respectively. 6 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) G. INCOME TAXES (CONTINUED) The provision for income taxes for continuing operations resulted in effective tax rates which differ from the statutory federal income tax rates. The reasons for these differences are as follows:
Percent of Pretax Earnings ------------------------------- 1993 1992 1991 --------- --------- --------- Statutory rates.................................................................. 34.9 34.0 34.0 State income taxes, net of federal benefit....................................... 3.2 3.8 2.0 Reduction of previously established accruals..................................... (2.6) -- -- Foreign tax credit utilization................................................... (1.7) (1.5) (.6) Foreign net operating losses..................................................... 2.6 -- -- Other............................................................................ (.1) (1.5) (.1) --- --- --- Effective rates.................................................................. 36.3 34.8 35.3 --- --- --- --- --- ---
Deferred income taxes for continuing operations resulted principally from timing differences in the recognition of depreciation, accrued pension liabilities and compensation expenses. The deferred income tax provisions for continuing operations in 1993, 1992 and 1991 include $487, $315 and $313, respectively, resulting from the excess of tax over book depreciation; $2, $93 and $428, respectively, resulting from differences in the recognition of accrued pension liabilities; and $305, ($107) and ($133), respectively, resulting from differences in recognizing compensation expenses. Included in the income taxes on the 1992 gain on disposition were taxes currently payable of $2,444, and deferred income taxes of ($1,102) which resulted principally from timing differences related to accrued liabilities. The income taxes provided exceeded the normal statutory tax rate due principally to nontax deductible costs. The disposition included the transfer of $924 of deferred income tax liabilities to the buyer. Included in the 1992 cumulative effect of change in accounting method is $1,477 of deferred income tax benefit. The income tax benefit has been provided at a rate higher than the federal statutory rate to provide for state income taxes. In February of 1992, the Financial Accounting Standards Board adopted Statement No. 109, "Accounting for Income Taxes". This statement establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise's activities during the current and preceding years. Adoption of the new standard in the first quarter of fiscal 1994 will not have a material effect on the Company's financial position and results of operations. H. FINANCIAL INSTRUMENTS In 1993, the Company adopted the provisions of Financial Accounting Standards Board Statement No. 107, "Disclosures About Fair Value of Financial Instruments". Based on the short-term maturity of cash and short-term cash investments, the carrying amount approximates fair value. A fair value estimate of $34,500 for the long-term debt is based on the current interest rates offered to the Company for debt with similar remaining maturities. I. CONTINGENCIES In December 1992, a trial jury in Texas entered a judgment against Baldwin Filters, Inc., a subsidiary of the Company, in the amount of $4,900 that resulted from the termination of a sales representative. In November 1993, the district court in Texas ordered that a joint motion filed by the 7 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) I. CONTINGENCIES (CONTINUED) two parties to dismiss the judgment be granted, that the judgment of the trial court be vacated, and that the cause be remanded to the trial court for entry of a take-nothing judgment pursuant to a settlement agreement by the two parties. The Company is involved in other legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material adverse effect on the Company's consolidated financial position. J. PREFERRED STOCK PURCHASE RIGHTS In April 1986, the Board of Directors of CLARCOR Inc. adopted a Shareholder Rights Plan (which was amended by the Board of Directors in June 1989) and declared a dividend of one preferred stock purchase right (a "right") for each outstanding share of CLARCOR common stock held as of April 25, 1986. Each full right entitles shareholders of record to purchase from the Company, until the earlier of April 25, 1996 or the redemption of the rights, one one-hundredth of a share of Series A Junior Participating Preferred Stock at an exercise price of $75, subject to certain adjustments or, under certain circumstances, to obtain additional shares of common stock of the Company (or of a corporation acquiring the Company) in exchange for the rights. The rights will not be exercisable or transferable apart from the CLARCOR common stock until the earlier of (1) 10 days following the public announcement that a person or affiliated group has acquired or obtained the right to acquire 15% or more of CLARCOR's common stock, or (2) 10 days following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the ownership by a person or group of 30% or more of the Company's outstanding common stock. The Board of Directors may redeem the rights at a price of $.05 per right at any time prior to the acquisition by a person of 15% or more of the outstanding CLARCOR common stock. The authorized preferred stock includes 300,000 shares designated as Series A Junior Participating Preferred Stock. K. STOCK OPTION AND AWARD PLANS STOCK OPTION PLAN The 1984 Stock Option Plan includes incentive stock options under the provisions of the Internal Revenue Code and nonqualified stock options. Incentive stock options are granted at the fair market value at the date of grant. There are no incentive stock options outstanding. Nonqualified stock options may, at the discretion of the Board of Directors, be granted at an exercise price less than the fair market value at the date of grant. The plan also provides for the grant of stock appreciation rights to accompany the options. The Company accrues as compensation expense the excess of the fair market value over the related options' exercise price. Compensation expense for stock appreciation rights totaled $-0-in 1993 and 1992 and $76 in 1991. Stock appreciation rights are only exercisable to the extent the related options are exercisable for all grants except those granted after 1988, in which case the optionee may surrender for cash all or any portion independent of the exercise of related options. Exercise of stock appreciation rights causes surrender of an equal number of related options. All stock appreciation rights outstanding are held by former employees. 8 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) K. STOCK OPTION AND AWARD PLANS (CONTINUED) Shares under option are as follows:
STOCK NONQUALIFIED APPRECIATION STOCK OPTIONS RIGHTS ------------- ------------ Outstanding at November 30, 1990........................................... 877,067 57,780 Granted.................................................................. -- -- Exercised/surrendered.................................................... (121,958) (33,479) ------------- ------------ Outstanding at November 30, 1991........................................... 755,109 24,301 Granted.................................................................. 219,000 -- Exercised/surrendered.................................................... (121,500) (5,625) ------------- ------------ Outstanding at November 30, 1992........................................... 852,609 18,676 Granted.................................................................. 158,000 -- Exercised/surrendered.................................................... (148,403) (6,750) ------------- ------------ Outstanding at November 30, 1993........................................... 862,206 11,926 ------------- ------------ ------------- ------------ Exercisable at November 30, 1993........................................... 431,891 11,926 ------------- ------------ ------------- ------------
The outstanding nonqualified stock options at November 30, 1993 are exercisable at an average of $14.67 per share or $12,645 in total. There were also 241,528 shares reserved for future grants at November 30, 1993 (376,350 shares at November 30, 1992), of which 191,500 shares were granted in December 1993. The remaining ungranted shares expired on December 31, 1993. LONG RANGE PERFORMANCE SHARE PLAN The Long Range Performance Share Plan became effective December 1, 1987. Under this plan, officers and key employees may be granted target awards of Company shares of common stock and performance units which represent the right to a cash payment. The awards are earned and shares are issued only to the extent that the Company achieves performance goals determined by the Board of Directors, during a three-year performance period. As of November 30, 1993, 680,355 of authorized shares have been reserved for the plan. During the performance period, officers and key employees are permitted to vote the restricted stock and receive compensation equal to dividends declared on common shares. The Company accrues compensation expense for the performance opportunity ratably during the performance cycle. Compensation expense for the plan totaled $364, $196 and $541 in 1993, 1992 and 1991, respectively. Distribution of Company shares of common stock and cash for the performance periods ended November 30, 1993, 1992 and 1991 were $432, $268 and $332, respectively. DIRECTORS' RESTRICTED STOCK COMPENSATION PLAN During 1990, the Company adopted a plan to grant all nonemployee directors, in lieu of cash, shares of common stock equal to five years directors' annual retainer. The directors' rights to the shares vest 20% on date of grant and 20% annually during the next four years. The directors are entitled to receive dividends and exercise voting rights with respect to all shares prior to vesting. Any unvested shares are forfeited if the director ceases to be a nonemployee director for any reason. Compensation expense for the plan totaled $131, $135 and $120 in 1993, 1992 and 1991, respectively. During 1992 and 1991, $43 and $15, respectively, in Company shares of common stock were issued, net of forfeitures, under the plan. 9 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) L. DISCONTINUED OPERATIONS In June 1991, the Company adopted a plan to dispose of its Precision Products Group (Group). Effective November 30, 1992, the Company sold the Group for $20,700 in cash, with settlement on December 31, 1992, and a $2,500 note receivable, included in other assets. The 8% note receivable, due December 30, 1997, has certain collateral pledged from the buyer, a highly leveraged entity. The sale was recorded as of November 30, 1992 and resulted in a pretax gain of $1,342 after considering estimated costs to be incurred in connection with the sale, operating results through the date of disposition, and including a $686 curtailment gain of certain pension benefits related to the Group. The income tax effects, net of $1,342, which offsets the gain, exceeds the normal statutory tax rate due principally to nontax deductible costs. Revenues applicable to the Group were $40,698 and $38,563 for the years ended November 30, 1992 and 1991, respectively. This Group has been reported as Discontinued Operations in the Consolidated Statements of Earnings and Cash Flows. Certain other disclosures and amounts in the footnotes for 1991 include amounts related to the Precision Products Group. M. UNAUDITED QUARTERLY FINANCIAL DATA The unaudited quarterly data for 1993 and 1992 are as follows:
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTALS --------- --------- --------- --------- ----------- 1993: Net sales................................. $ 41,913 $ 49,732 $ 64,634 $ 69,040 $ 225,319 Gross profit.............................. 13,075 15,085 19,384 22,160 69,704 Net earnings.............................. 3,091 2,781 5,060 6,319 17,251 Net earnings per common share............. $ .21 $ .19 $ .34 $ .42 $ 1.16 1992: Net sales................................. $ 40,780 $ 45,353 $ 50,655 $ 51,837 $ 188,625 Gross profit.............................. 12,784 14,751 16,010 15,793 59,338 Earnings from continuing operations....... 2,932 4,376 5,054 4,147 16,509 Earnings from discontinued operations..... -- -- -- -- -- Cumulative effect of accounting change.... (2,370) -- -- -- (2,370) Net earnings.............................. 562 4,376 5,054 4,147 14,139 Net earnings (loss) per common share: Continuing operations................... $ .20 $ .29 $ .34 $ .27 $ 1.10 Discontinued operations................. -- -- -- -- -- Cumulative effect of accounting change................................. (.16) -- -- -- (.16) --------- --------- --------- --------- ----------- $ .04 $ .29 $ .34 $ .27 $ .94 --------- --------- --------- --------- ----------- --------- --------- --------- --------- -----------
10 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) M. UNAUDITED QUARTERLY FINANCIAL DATA (CONTINUED) NOTES TO QUARTERLY FINANCIAL DATA Net earnings and net earnings per share for the first quarter of 1992 have been restated to reflect the adoption in the fourth quarter of 1992 of SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions", retroactively effective December 1, 1991. The 1992 quarterly gross profit disclosures include a reclassification of certain product distribution costs from selling and administrative expenses to cost of sales in order to be consistent with the 1993 presentation. The second quarter of 1993 includes a charge to net earnings of approximately $1,200 related to the Company's subsidiary in Belgium. During the fourth quarters of 1993 and 1992, LIFO inventory reductions increased net earnings by approximately $650 and $400, respectively. N. SEGMENT INFORMATION At November 30, 1993, the Company has two principal product segments: Filtration Products and Consumer Products. The Filtration Products Group manufactures and markets a complete line of filters used in the filtration of internal combustion engines, clean rooms, sterile air and gases, and lubrication oils, air, fuel, coolant, hydraulic and transmission fluids. The Consumer Products Group manufactures and markets plastic closures, custom designed lithographed metal and metal-plastic containers, spiral and convolute-wound composite containers and collapsible metal tubes. Net sales represent sales to unaffiliated customers, as reported in the consolidated statements of earnings. Intersegment sales were not material. Assets are those assets used in each business segment. Corporate assets consist of cash and short-term cash investments, receivable from sale of Precision Products Group in 1992, deferred income taxes, world headquarters facility, pension assets and various other assets which are not specific to an industry segment. The segment data for the years ended November 30, 1993, 1992 and 1991 are as follows:
1993 1992 1991 ----------- ----------- ----------- Net sales: Filtration Products............................................ $ 156,165 $ 118,215 $ 109,360 Consumer Products.............................................. 69,154 70,410 70,178 ----------- ----------- ----------- Total........................................................ $ 225,319 $ 188,625 $ 179,538 ----------- ----------- ----------- ----------- ----------- ----------- Operating profit: Filtration Products............................................ $ 19,661 $ 18,666 $ 20,909 Consumer Products.............................................. 9,406 8,964 9,944 ----------- ----------- ----------- Total........................................................ $ 29,067 $ 27,630 $ 30,853 ----------- ----------- ----------- ----------- ----------- ----------- Assets: Filtration Products............................................ $ 105,278 $ 74,364 $ 71,691 Consumer Products.............................................. 30,377 28,588 29,161 Corporate...................................................... 34,241 58,303 26,175 Discontinued operations........................................ -- -- 30,972 ----------- ----------- ----------- Total........................................................ $ 169,896 $ 161,255 $ 157,999 ----------- ----------- ----------- ----------- ----------- -----------
11 CLARCOR INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) N. SEGMENT INFORMATION (CONTINUED)
1993 1992 1991 ----------- ----------- ----------- Additions to plant assets: Filtration Products (including capitalized leases in 1991)..... $ 6,339 $ 3,861 $ 5,537 Consumer Products.............................................. 3,816 2,652 2,677 Corporate...................................................... 63 44 148 Discontinued operations........................................ -- 893 1,482 ----------- ----------- ----------- Total........................................................ $ 10,218 $ 7,450 $ 9,844 ----------- ----------- ----------- ----------- ----------- ----------- Depreciation: Filtration Products............................................ $ 2,758 $ 2,063 $ 1,745 Consumer Products.............................................. 2,912 2,738 2,466 Corporate...................................................... 146 151 358 Discontinued operations........................................ -- 2,092 2,138 ----------- ----------- ----------- Total........................................................ $ 5,816 $ 7,044 $ 6,707 ----------- ----------- ----------- ----------- ----------- -----------
12 EXHIBIT 13(A)(VII) REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois We have audited the accompanying consolidated balance sheets of CLARCOR Inc. as of November 30, 1993 and 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended November 30, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CLARCOR Inc. as of November 30, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended November 30, 1993, in conformity with generally accepted accounting principles. As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits other than pensions, effective December 1, 1991. COOPERS & LYBRAND Rockford, Illinois January 7, 1994 EXHIBIT 13(A)(VIII) MANAGEMENT'S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING The management of CLARCOR is responsible for the preparation, integrity and objectivity of the Company's financial statements and the other financial information in this report. The financial statements were prepared in conformity with generally accepted accounting principles and reflect in all material respects the results of operations and the Company's financial position for the periods shown. The financial statements are presented on the accrual basis of accounting and, where appropriate, reflect estimates based upon judgments of management. In addition, management maintains a system of internal controls designed to assure that Company assets are safeguarded from loss or unauthorized use or disposition. Also, the controls system provides assurance that transactions are authorized according to the intent of management and are accurately recorded to permit the preparation of financial statements in accordance with generally accepted accounting principles. For the periods covered by the financial statements in this report, management believes this system of internal controls was effective concerning all material matters. The effectiveness of the controls system is supported by the selection and training of qualified personnel, an organizational structure that provides an appropriate division of responsibility, a strong budgetary system of control and a comprehensive internal audit program. The Audit Committee of the Board of Directors, which is composed of four outside directors, serves in an oversight role to assure the integrity and objectivity of the Company's financial reporting process. The Committee meets periodically with representatives of management and the independent and internal auditors to review matters of a material nature related to financial reporting and the planning, results and recommendations of audits. The independent and internal auditors have free access to the Audit Committee. The Committee is also responsible for making recommendations to the Board of Directors concerning the selection of the independent auditors. Lawrence E. Gloyd L. Paul Harnois William F. Knese Chairman, President and Senior Vice President Vice President, Chief Executive Officer and Chief Financial Officer Treasurer and Controller
January 7, 1994 EXHIBIT 13(A)(IX) 13-YEAR FINANCIAL SUMMARY
1993 1992 1991 1990 1989 ------------ ------------ ------------ ------------ ------------ PER SHARE Equity....................................... $ 7.06 $ 6.64 $ 6.42 $ 5.57 $ 4.83 Earnings from Continuing Operations.......... 1.16 1.10 1.24 1.29 0.69 Net Earnings................................. 1.16 0.94 1.26 1.37 0.42 Dividends.................................... 0.610 0.600 0.550 0.520 0.480 Price: High.................................. 20.00 22.50 22.67 17.83 18.92 Low.................................... 16.00 15.00 13.00 11.83 11.75 EARNINGS DATA ($000) Net Sales.................................... $ 225,319 $ 188,625 $ 179,538 $ 170,279 $ 156,530 Operating Profit............................. 29,067 27,630 30,853 30,832 22,128 Interest Expense............................. 3,525 3,803 3,682 3,675 1,327 Pretax Income................................ 27,078 25,305 28,543 30,204 22,084 Income Taxes................................. 9,827 8,796 10,068 10,999 10,474 Earnings from Continuing Operations.......... 17,251 16,509 18,475 19,205 11,610 Earnings from Discontinued Operations........ 0 0 297 1,200 (4,493 ) Net Earnings................................. 17,251 14,139 18,772 20,405 7,117 Average Shares Outstanding................... 14,838 14,973 14,873 14,843 17,040 EARNINGS ANALYSIS Operating Margin............................. 12.9 % 14.6 % 17.2 % 18.1 % 14.1 % Pretax Margin................................ 12.0 % 13.4 % 15.9 % 17.7 % 14.1 % Effective Tax Rate........................... 36.3 % 34.8 % 35.3 % 36.4 % 47.4 % Net Margin -- Continuing Operations.......... 7.7 % 8.8 % 10.3 % 11.3 % 7.4 % Net Margin................................... 7.7 % 7.5 % 10.5 % 12.0 % 4.5 % Asset Turnover............................... 1.40 x 1.19 x 1.25 x 1.30 x 1.09 x Return on Assets............................. 10.7 % 8.9 % 13.0 % 15.6 % 4.9 % Financial Leverage........................... 1.62 x 1.66 x 1.74 x 1.80 x 1.16 x Return on Equity............................. 17.3 % 14.8 % 22.7 % 28.1 % 5.7 % Reinvestment Rate............................ 47.6 % 36.6 % 56.5 % 62.2 % -16.5 % BALANCE SHEET ($000) Current Assets............................... $ 86,161 $ 93,627 $ 75,207 $ 72,623 $ 58,019 Plant Assets, net............................ 47,636 35,584 45,712 42,748 44,223 Total Assets................................. 169,896 161,255 157,999 144,127 131,009 Current Liabilities.......................... 33,288 25,272 20,570 20,758 21,405 Long-Term Debt............................... 24,617 29,325 35,834 35,810 32,634 Shareholders' Equity......................... 104,641 99,551 95,662 82,689 72,662 BALANCE SHEET ANALYSIS ($000) Debt to Capitalization....................... 19.0 % 22.8 % 27.3 % 30.2 % 31.0 % Working Capital.............................. 52,873 68,355 54,637 51,865 36,614 Quick Ratio.................................. 1.6:1 2.5:1 2.1:1 2.1:1 1.4:1 CASH FLOW DATA ($000) From Operations.............................. $ 19,992 $ 22,807 $ 18,343 $ 25,284 $ 17,791 Used for Investment.......................... (1,193 ) (7,185 ) (14,719 ) (4,973 ) (8,251 ) Used for Financing........................... (20,012 ) (10,200 ) (8,805 ) (10,316 ) (23,915 ) Change in Cash & Equivalents................. (1,213 ) 5,422 (5,181 ) 9,995 (14,375 ) Capital Expenditures......................... 10,218 7,450 8,128 8,638 8,334 Depreciation................................. 5,816 7,044 6,707 6,619 6,321 Dividends Paid............................... 9,036 8,958 8,165 7,708 8,290 Interest (Income)/Expense.................... 2,650 3,505 2,560 3,143 53 Taxes Paid................................... 9,860 10,982 9,474 10,068 11,234 CASH FLOW ANALYSIS ($000) Operating Cash Flow(1)....................... $ 32,502 $ 37,294 $ 30,377 $ 38,495 $ 29,078 Net Cash Flow(2)............................. 22,284 29,844 22,249 29,857 20,744 Elective Cash Flow(3)........................ 738 6,399 2,050 8,938 1,167 - -------------------------- (1) From operations before interest income/expense and taxes paid. (2) Operating cash flow less capital expenditures before interest income/expense and taxes paid. (3) Net cash flow less dividends +(-) interest income/expense and less taxes paid.
1988 1987 1986 1985 1984 1983 1982 1981 - ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $ 6.99 $ 6.36 $ 5.76 $ 5.22 $ 4.68 $ 4.13 $ 3.69 $ 3.29 1.02 0.95 0.90 0.86 0.82 0.73 0.69 0.65 1.15 1.04 0.96 0.93 0.91 0.79 0.73 0.73 0.453 0.431 0.418 0.391 0.365 0.338 0.338 0.318 14.59 16.89 14.17 12.78 12.89 15.33 8.00 8.00 9.75 9.25 10.09 10.00 9.56 7.61 5.28 5.00 $ 149,468 $ 146,225 $ 135,319 $ 143,716 $ 163,059 $ 150,840 $ 148,604 $ 113,699 27,287 29,045 25,032 27,222 27,816 25,551 25,177 20,108 151 176 192 216 766 1,503 3,503 1,042 28,833 30,378 29,769 30,139 29,167 25,730 24,411 22,951 10,647 13,270 13,566 14,492 14,439 12,600 11,983 11,248 18,186 17,108 16,203 15,647 14,728 13,130 12,428 11,703 2,412 1,672 1,165 1,250 1,634 1,039 728 1,448 20,598 18,780 17,368 16,897 16,362 14,169 13,156 13,151 17,926 18,121 18,094 18,074 18,062 18,050 18,025 18,037 18.3 % 19.9 % 18.5 % 18.9 % 17.1 % 16.9 % 16.9 % 17.7 % 19.3 % 20.8 % 22.0 % 21.0 % 17.9 % 17.1 % 16.4 % 20.2 % 36.9 % 43.7 % 45.6 % 48.1 % 49.5 % 49.0 % 49.1 % 49.0 % 12.2 % 11.7 % 12.0 % 10.9 % 9.0 % 8.7 % 8.4 % 10.3 % 13.8 % 12.8 % 12.8 % 11.8 % 10.0 % 9.4 % 8.9 % 11.6 % 1.11 x 1.19 x 1.16 x 1.34 x 1.58 x 1.45 x 1.38 x 1.77 x 15.3 % 15.3 % 14.9 % 15.7 % 15.8 % 13.7 % 12.2 % 20.4 % 1.17 x 1.18 x 1.23 x 1.27 x 1.38 x 1.56 x 1.81 x 1.23 x 17.9 % 18.0 % 18.4 % 20.0 % 21.9 % 21.3 % 22.2 % 25.2 % 60.6 % 58.4 % 56.5 % 58.2 % 59.8 % 57.0 % 53.7 % 56.4 % $ 70,028 $ 67,523 $ 75,457 $ 72,837 $ 61,806 $ 56,345 $ 53,932 $ 56,120 42,063 39,828 32,431 27,934 27,482 30,742 31,818 33,916 143,842 134,877 122,779 116,184 107,423 103,381 103,707 107,448 14,244 15,899 13,153 15,815 16,805 17,424 18,455 19,239 1,116 1,507 1,634 1,875 2,197 8,508 16,902 27,315 125,012 115,015 104,186 94,372 84,466 74,663 66,412 59,344 0.9 % 1.3 % 1.5 % 1.9 % 2.5 % 10.2 % 20.3 % 31.5 % 55,784 51,624 62,304 57,022 45,001 38,921 35,477 36,881 3.3:1 2.9:1 4.2:1 3.4:1 2.4:1 2.0:1 1.9:1 1.6:1 $ 18,545 $ 22,015 $ 16,330 $ 22,752 $ 22,423 $ 13,871 $ 24,023 $ 22,192 (1,374 ) (16,231 ) (7,923 ) (22,511 ) (3,057 ) (2,499 ) (2,181 ) (49,277 ) (11,105 ) (8,374 ) (7,767 ) (7,306 ) (12,870 ) (14,312 ) (16,501 ) 17,768 6,066 (2,590 ) 640 (7,065 ) 6,496 (2,940 ) 5,341 (9,317 ) 6,137 5,086 9,720 4,187 2,574 3,387 3,239 2,991 6,287 6,008 4,384 3,676 4,231 4,347 4,079 2,158 8,121 7,814 7,560 7,069 6,583 6,098 6,088 5,731 (946 ) (911 ) (1,876 ) (1,819 ) (1,214 ) (49 ) 1,261 (2,611 ) 13,313 14,502 13,117 16,871 14,751 15,238 12,877 12,709 $ 30,912 $ 35,606 $ 27,571 $ 37,804 $ 35,960 $ 29,060 $ 38,161 $ 32,290 24,775 30,520 17,851 33,617 33,386 25,673 34,922 29,299 4,287 9,115 (950 ) 11,496 13,266 4,386 14,696 13,470
EXHIBIT 13(A)(X) MARKET-FOCUSED STRATEGY: 1991-PRESENT The Market-Focused strategy adopted in 1991 concentrates corporate investment in the domestic and international filtration markets, focusing on customer needs in the most dynamic markets. Positioning to execute that aim was completed last year with the sale of the Precision Products Group. CLARCOR's financial results for the year 1993 reflected the effects of acquisitions and a one-time charge in the Filtration Group and reduced demand for promotional containers in the Consumer Products Group. Consolidated sales reached a record high, while operating profit, net earnings, and earnings per share increased over the prior year. This financial review should be read in conjunction with the other financial information presented in this report. OPERATING RESULTS
1992 VS. 1993 VS. 1992 1991 CHANGE CHANGE --------------------- --------- $ 1993 % SALES $ % $ 1992 % SALES $ --------- ----------- --------- ---------- --------- ----------- --------- Continuing Operations: Net Sales............................ $ 225.3 100.0 % $ 36.7 19.5 % $ 188.6 100.0 % $ 9.1 Cost of Sales........................ 155.6 69.1 % 26.3 20.4 % 129.3 68.6 % 9.0 Selling & Administrative Expenses.... 40.6 18.0 % 8.9 28.2 % 31.7 16.8 % 3.4 Operating Profit..................... 29.1 12.9 % 1.5 5.2 % 27.6 14.6 % (3.3) Other Income (Deductions)............ (2.0) -0.9 % 0.3 14.5 % (2.3) -1.2 % -- Earnings Before Taxes................ 27.1 12.0 % 1.8 7.0 % 25.3 13.4 % (3.3) Income Taxes......................... 9.8 4.3 % 1.0 11.7 % 8.8 4.6 % (1.3) Earnings............................. 17.3 7.7 % 0.8 4.5 % 16.5 8.8 % (2.0) Discontinued Operations -- Earnings.... -- -- -- -- -- -- (0.3) Cumulative Effect -- SFAS 106.......... -- -- 2.4 -- (2.4) -1.3 % (2.4) Net Earnings........................... $ 17.3 7.7 % $ 3.2 22.0 % $ 14.1 7.5 % $ (4.7) --------- ----- --------- ----- --------- ----- --------- Shares Outstanding -- Average.......... 14.8 15.0 Earnings Per Share: Continuing Operations.................. $ 1.16 $ 0.06 5.5 % $ 1.10 $ (0.14) Discontinued Operations................ -- -- -- -- $ (0.02) Cumulative Effect -- SFAS 106.......... -- $ 0.16 -- $ (0.16) $ (0.16) Total.............................. $ 1.16 $ 0.22 23.4 % $ 0.94 $ (0.32) % ---------- Continuing Operations: Net Sales............................ 5.1 % Cost of Sales........................ 7.4 % Selling & Administrative Expenses.... 12.0 % Operating Profit..................... -10.4 % Other Income (Deductions)............ -- Earnings Before Taxes................ -11.3 % Income Taxes......................... -12.6 % Earnings............................. -10.6 % Discontinued Operations -- Earnings.... -- Cumulative Effect -- SFAS 106.......... -- Net Earnings........................... -24.7 % ---------- Shares Outstanding -- Average.......... Earnings Per Share: Continuing Operations.................. -11.3 % Discontinued Operations................ -- Cumulative Effect -- SFAS 106.......... -- Total.............................. -25.4 %
SALES CLARCOR generated record net sales during fiscal 1993. Consolidated net sales of $225.3 were 19.5% higher than sales reported for 1992. This increase was the result of higher Filtration Products Group sales, due principally to acquisitions in 1993, and also to increased sales in the heavy duty and railroad locomotive markets. Consolidated sales of $188.6 in 1992 were 5.1% higher than 1991 sales of $179.5, again due to higher shipments in the Filtration Products Group, principally in the Baldwin heavy duty lines. Information comparing the net sales of CLARCOR's continuing operating groups is presented in the table on page 20 [See Note N to Notes to Consolidated Financial Statements included in Exhibit 13(a)(vi)]. Boosted by the acquisitions of Airguard Industries and Guardian/U.E.L., Filtration Group sales of $156.2 in 1993 were 32.1% higher than sales in 1992. Without the sales contribution of Airguard and Guardian/U.E.L., net sales increased 5.8%. Sales gains were recorded in the group's Baldwin heavy duty markets and the railroad locomotive markets. Net sales recorded in the Filtration Products Group in 1992 totaled $118.2, and were 8.1% higher than the sales level of $109.4 recorded in 1991. Sales gains in 1992 were recorded in the group's Baldwin heavy duty market, and, to a lesser extent, in the HEFCO clean room markets. 1 The Consumer Products Group experienced increased sales of plastic closures during 1993. This increase was more than offset by a reduced level of sales to the promotional container markets during the year. As a result of this net reduction, 1993 sales were $69.1, down 1.8% from the 1992 sales. Sales in the Consumer Products Group during 1992 were flat, totaling $70.4 compared to sales of $70.1 in 1991.
1993 vs. 1992 1992 vs. 1991 ----------------------------------- ----------------------------------- Net Sales $ % Total Change $ % Total Change - --------------------------------------- --------- ----------- ----------- --------- ----------- ----------- Filtration Products.................... $ 156.2 69.3% 32.1% $ 118.2 62.7% 8.1% Consumer Products...................... 69.1 30.7% -1.8% 70.4 37.3% 0.3% --------- ----- ----------- --------- ----- --- Total................................ $ 225.3 100.0% 19.5% $ 188.6 100.0% 5.1% --------- ----- ----------- --------- ----- --- --------- ----- ----------- --------- ----- ---
EARNINGS Operating profit recorded by CLARCOR in 1993 totaled $29.1, an increase of $1.5, or 5.2%, over the 1992 operating profit. Profits in both of the Company's operating groups increased. In the Filtration Products Group, profits increased 5.3%, while profits in the Consumer Products Group increased 4.9%. In 1992, the consolidated operating profit earned by the Company's continuing operations totaled $27.6, down $3.3, or 10.4% from the record level of 1991. Profits in both the Filtration Products and Consumer Products groups were down compared to the prior year. Operating profit of $30.9 was recorded in the year 1991.
1993 VS. 1992 1992 VS. 1991 ------------------------------------ ----------------------------------- OPERATING PROFIT $ % TOTAL CHANGE $ % TOTAL CHANGE - ------------------------------------------ --------- ----------- ------------ --------- ----------- ----------- Filtration Products....................... $ 19.7 67.6% 5.3% $ 18.7 67.6% -10.7% Consumer Products......................... 9.4 32.4% 4.9% 8.9 32.4% -9.9% -- --------- ----- --------- ----- ----------- Total................................... $ 29.1 100.0% 5.2% $ 27.6 100.0% -10.4% -- -- --------- ----- --------- ----- ----------- --------- ----- --------- ----- -----------
Operating profit as a percent of sales in 1993 was 12.9%. This is lower than the 1992 operating profit percent because of the acquisitions and charges recorded in the Filtration Products Group. In line with Company expectations, the acquisitions contributed significant sales for CLARCOR, but did not contribute operating profits consistent with either the sales contributed or the profit level of the rest of the group. As a percent of net sales, the 1992 operating profit was 14.6%. In 1991, the operating profit return on sales was 17.2%.
OPERATING PROFIT AS A PERCENT OF NET SALES 1993 1992 1991 - --------------------------------------------------------------------------- ----------- ----------- ----------- Filtration Products........................................................ 12.6% 15.8% 19.1% Consumer Products.......................................................... 13.6% 12.7% 14.2% --- --- --- Total.................................................................... 12.9% 14.6% 17.2% --- --- --- --- --- ---
The 1993 operating profit recorded by the Filtration Products Group totaled $19.7, up $1.0, or 5.3% from the level recorded in 1992. This profit results principally from the group's 1993 acquisitions, and gains recorded in the group's Baldwin heavy duty markets and Clark Filter railroad locomotive business. The 1993 operating profit was negatively impacted by a $1.5 one-time charge related to Baldwin Filters' Belgian operations plus the cost of settling the Baldwin lawsuit contingency. The group recorded operating profit of $18.7 in 1992. Compared to the 1991 profit, this was a decrease of $2.2, or 10.7%. The 1992 reduction in operating profit was chiefly the result of discounting due to pricing pressures in the heavy duty markets and decreased volume in the railroad filter and food and beverage markets. Operating profit in 1991 was $20.9. The 1993 operating profit as a percent of net sales was 12.6%. While the acquisitions of Airguard and Guardian/U.E.L. contributed earnings in 1993, their contributions were not at the same level as 2 the margin from the group's existing businesses. Charges related to the Baldwin N.V. operation and settlement of the lawsuit contingency contributed to the reduced margin. Operating margin was 15.8% in 1992, and compares to 19.1% in 1991. Operating profit in the Consumer Products Group was $9.4, an increase of $.5, or 4.9%, over the 1992 operating profit. Despite a decline in promotional sales from the prior year, the group realized profit gains from the sale of engineering activities, productivity improvements and inventory management. In 1992, the Consumer Products Group posted a decrease of $1.1, or 9.9%, from operating profit recorded in 1991. The group's 1992 profits were negatively impacted by product mix changes within the flat volume. In 1991, group operating profits were $10.0. In 1993, Consumer profit as a percent of sales was 13.6%. Profit as a percent of net sales was 12.7% in 1992, and 14.2% in 1991. Net other expense in 1993 totaled $2.0. This net figure resulted from $3.5 of interest expense, chiefly resulting from the Company's long-term debt. Offsetting income items included $.9 of interest on the higher 1993 cash and investment balances, and $.7 of equity in affiliates. In 1992, net other expense was $2.3. Interest expense totaled $3.8, and was mostly related to the Company's long-term debt. Total income items of $1.5 included interest earnings on cash and short-term investments of $.3 and other items of $1.2, $.9 of which was equity in the earnings from CLARCOR's investment in the stock of G.U.D. Holdings Limited. In 1991, net other expense totaled $2.3. Interest expense in 1991 was $3.7, related to the outstanding long-term debt. Income items included $1.1 of interest on cash and short-term cash investments, and other items of $.3, mostly equity earnings on the G.U.D. stock investment. CLARCOR's provision for income taxes in 1993 totaled $9.8, an increase of $1.0 over 1992 income taxes. This increase results from increased pretax profit in the current year. The 1993 provision includes higher statutory rates offset by a $.7 reduction of previously established accruals for taxes and non-deductible Baldwin N.V. operating losses. The 1993 effective tax rate is 36.3%. In 1992, income taxes related to continuing operations totaled $8.8. This was $1.3 lower than expense of $10.1 recorded in 1991. The reduced 1992 tax expense is related to the lower pretax profit in that year. The effective tax rate was 34.8% in 1992. In 1991, income tax expense was $10.1, resulting in an effective tax rate of 35.3%. Net earnings in 1993 were $17.3, and reflect higher profit from operating activities and lower non-operating expense. Net earnings as a percent of net sales was 7.7%. The 1992 earnings from continuing operations before the cumulative effect of adopting an accounting change totaled $16.5, a decline of $2.0, or 10.6%, from earnings in the prior year. This earnings decline was the result of the lower operating profit experienced in 1992. As a percent of net sales, earnings from continuing operations in 1992 were 8.8%. Earnings from continuing operations in 1991 were $18.5, or 10.3% of sales. Earnings from discontinued operations were not reported in 1992, as amounts equal to these earnings were provided as reserves for the Company's planned divestiture of the Precision Products Group, which occurred at year-end 1992. In 1991, these discontinued operations contributed $.3. During 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting For Postretirement Benefits Other Than Pensions." This new accounting standard, required to be adopted by 1994, resulted in a $2.4 after-tax charge against earnings that year. Total net earnings for 1993 were $17.3, a 22.0% increase over the 1992 total net earnings. Net earnings in 1992 were reduced by the adoption of the postretirement benefits accounting standard. As a result of the adoption of this standard, CLARCOR's total net earnings for the year 1992 were $14.1, a decline of 24.7% from the level of $18.8 recorded in fiscal 1991. Net earnings as a percent of beginning total assets increased to 10.7% in 1993. The return on beginning assets was 8.9% in 1992, and 13.0% in 1991. Net earnings as a percent of beginning shareholders' equity increased to 17.3% in 1993. In 1992, the return on equity was 14.8%, and 22.7% in 1991. 3 Earnings per share in 1993 were $1.16. These earnings represent a $.06, or 5.5% increase over 1992 earnings per share from continuing operations of $1.10. The 1992 per share earnings are before the cumulative effect of adopting the postretirement benefits accounting change and reflect earnings from continuing operations only. In that year, amounts equal to the per share earnings from discontinued operations were provided as reserves for the divestiture of the Precision Products Group, completed at year-end. The cumulative effect of adopting the postretirement benefits accounting change was $.16 per share, resulting in 1992 total earnings per share of $.94. The total 1992 earnings were down $.32 per share from the 1991 earnings of $1.26. Of the total $.32, per share earnings from continuing operations were down $.14, per share earnings from discontinued operations were down $.02, and per share earnings were reduced $.16 due to the one-time postretirement benefits charge.
1993 1992 ---------------------------------------------- ---------------------- SUMMARY OF CASH FLOWS $ % CHANGE $ % CHANGE - ----------------------------------------------------------- --------- ----------- --------- ----------- From Operations............................................ $ 20.0 -12.3% $ 22.8 24.3% Interest Payments........................................ 3.6 -8.2% 3.9 5.6% For Investing.............................................. 1.2 -83.4% 7.2 -51.2% Capital Expenditures..................................... 10.2 55.8% 6.5 -1.3% For Financing.............................................. 20.0 96.2% 10.2 15.8% Dividends................................................ 9.0 .9% 8.9 9.7% Change in Cash & Equivalents............................... (1.2) -122.4% 5.4 204.7%
FINANCIAL CONDITION CORPORATE LIQUIDITY The discussion of corporate liquidity should be read in conjunction with the information presented in the Consolidated Statements of Cash Flows on page 33 [See Exhibit 13(a)(v) hereto]. CLARCOR carried substantial cash balances in 1993, as the Company's business continued to generate strong cash inflows. This is consistent with the results from the years 1992 and 1991. In 1993, the net change in cash and short-term cash investments was a decrease of $1.2. In 1992, the Company generated a net cash increase of $5.4. The net cash used in 1991 was $5.2. In 1993, the Company's operating activities provided $20.0 of cash, investing activities used $1.2, and financing activities used $20.0. Operating activities, including net earnings and adjustments of depreciation and amortization, provided $23.5. Offsetting this total was $3.5 consumed for other uses, principally the net of changes in assets and liabilities. The $20.0 provided by continuing operations in 1993 compares to $22.8 in 1992, which included $19.7 of cash from continuing operations and $3.1 of cash from discontinued operations. Cash generated in 1992 was $22.8, up substantially from amounts generated by the 1991 operating activities. Net earnings contributed $14.1 in that year, while adjustments, mainly depreciation and amortization, totaled $8.7. Included in the net earnings is the $2.4 impact of adopting the postretirement benefits standard. In 1991, earnings from continuing operations provided $18.5, but investment in accounts receivable and inventory had been significant, more than offsetting amounts for depreciation and amortization. Operating activities of discontinued operations provided $5.1, bringing the total operating activities to $18.3. Investing activities in 1993 used a net $1.2. Of this total, $20.7 of cash proceeds originated from the sale of the Precision Products Group, and other investing activities generated a net $1.1. Cash of $12.8, net of cash acquired, was invested in business acquisitions. Investment in plant asset additions totaled $10.2. Investing activities in 1992 used net cash of $7.2, representing mostly additions to plant assets. In 1991, investing activities used $14.7, the result of expenditures for additions to plant assets and the net investment in G.U.D. Holdings Limited stock. Cash outflows from financing activities in 1993 totaled $20.0. Included in this total are debt reduction payments of $7.6, treasury stock purchases of $3.4 and dividends of $9.0. Cash outflows 4 from 1992 financing activities were $10.2, and consisted chiefly of cash dividend payments of $8.9 and $1.4 in long-term debt repayments. In 1991, the cash used for financing activities totaled $8.8, principally for dividends and debt repayment. Cash generation by CLARCOR businesses remains strong, and is adequate for the Company's current level of operations, including asset additions and debt repayment. In February of 1992, the Financial Accounting Standards Board adopted Statement No. 109, "Accounting for Income Taxes." This statement establishes financial accounting and reporting standards for the effects of income taxes that result from an enterprise's activities during the current and preceding years. The 1994 adoption of the new standard will not have a material effect on the Company's financial position and results of operations. CAPITAL RESOURCES CLARCOR's 1993 balance sheet reflected the Company's strength, and its redeployment of assets resulting from the sale of the Precision Products Group.
1993 1992 ----------------------- ----------------------- SUMMARY BALANCE SHEET $ % CHANGE $ % CHANGE - ------------------------------------------------------------ --------- ------------ --------- ------------ Current Assets.............................................. $ 86.2 (8.0)% $ 93.6 24.5% Investment in Affiliates.................................... 8.0 9.9% 7.3 2.6% Plant Assets, net........................................... 47.6 33.9% 35.6 (22.2)% Excess Cost over Fair Value, net............................ 15.7 23.0% 12.8 (38.2)% Pension & Other Assets...................................... 12.4 3.3% 12.0 28.8% Total Assets................................................ 169.9 5.4% 161.3 2.1% Current Liabilities......................................... 33.3 31.7% 25.3 22.9% Long-term Debt.............................................. 24.6 (16.1)% 29.3 (18.2)% Postretirement Healthcare Benefits.......................... 3.1 (12.0)% 3.5 100.0% Deferred Income Taxes....................................... 4.3 18.7% 3.6 (39.8)% Shareholders' Equity........................................ 104.6 5.1% 99.6 4.1%
Total assets increased to $169.9, up from $161.3 last year. Working capital at year-end totaled $52.9, down from $68.4 in the prior year, as liquid assets at the prior year-end were converted during the year chiefly into productive capacity. The 1993 current ratio was 2.6:1, down from the prior year-end which reflected the receivable from the Precision Products Group sale. In 1992, CLARCOR's consolidated balance sheet reflected significant changes from the 1991 level because of the sale of the Precision Products Group. Total assets reached $161.3 at year-end 1992. The current ratio was 3.7:1 in 1992, due to the Precision Products current receivable.
1993 1992 ----------- ----------- Current Ratio...................................................... 2.6:1 3.7:1 Quick Ratio........................................................ 1.6:1 2.5:1 Debt/Equity........................................................ 23.5% 29.5 %
The 1993 balance sheet reflected the results of the Company's 1993 acquisitions. Total current assets declined to $86.2 from $93.6, principally because the $20.7 Precision Products Group receivable was converted to cash and invested in the assets and liabilities of the Airguard and Guardian/U.E.L. acquisitions. Cash and short-term cash investments totaled a healthy $13.8, down from $15.1 last year. Accounts receivable increased to $40.9 from $27.9, the result of the addition of receivables from the acquisitions. In the long-term assets, plant assets increased to $47.6 from $35.6, again reflecting the inclusion of the Airguard and Guardian/U.E.L. net fixed assets. The year-end 1993 current liabilities also reflected the effects of CLARCOR's acquisitions during the year. The liabilities saw a reduction in the long-term debt, as scheduled 1993 payments were made and amounts payable in 1994 were classified as current liabilities. In 1992, the liabilities were related to the scheduled repayment of the debt. Both current liabilities and long-term debt reflected the 5 effects of this repayment schedule. At the end of 1992, current liabilities increased over the level of the prior year-end to $25.3. This change resulted from an increase in the current portion of the long-term debt, as amounts were moved from the long-term classification to reflect their scheduled payment in 1993. The long-term debt at year-end 1992 totaled $29.3. CLARCOR's 1993 operations resulted in shareholders' equity which totaled $104.6 at year-end. This is an increase of $5.0, or 5.1%, over the prior year's level. Total shareholders' equity at year-end 1992 had increased to $99.6. In 1992, the equity accounts reflected a 3-for-2 stock split paid in February, and the retirement of the Company's treasury shares. Year-end totals of 14,819,199 and 14,985,831 common shares were issued and outstanding at November 30, 1993 and 1992, respectively. THE FUTURE The upward trend in CLARCOR's operating results for the year 1993 is indicative of the Company's future plans. Sales and operating profit increased, and this trend is expected to continue. It is the Company's plan to expand the Filtration Products Group while maintaining a positive presence in the Consumer Products markets. The majority of future Filtration Products revenue growth is expected to come from the introduction of new filtration products, expansion of international sales and a growing contribution from new filtration businesses. In Consumer Products, future revenue growth is anticipated to come from engineered plastic closures for the aseptic container market and the new SST-TM- closure. These are expected to play a significant role in the future development of a European presence and allow for growth in a high volume market. The Company's plan for internal development, coupled with expected future acquisitions and strategic alliances, will provide the planned growth which will further the realization of CLARCOR's sales and operating profit goals, and provide the liquidity and financial strength needed to fund this growth. 6 EX-21 5 EXHIBIT 21 EXHIBIT 21 CLARCOR INC. SUBSIDIARIES
JURISDICTION OF INCORPORATION OR PERCENT OF NAME ORGANIZATION OWNERSHIP - --------------------------------------------- -------------------- ------------- CLARCOR Consumer Products, Inc. Delaware 100% J. L. Clark, Inc. Delaware 100% CLARCOR Filtration Products, Inc. Delaware 100% Baldwin Filters, Inc. Delaware 100% Baldwin Filters N.V. Belgium 100%* Baldwin Filters Limited United Kingdom 100%* Clark Filter, Inc. Delaware 100% Dahl Manufacturing, Inc. California 100% CLARCOR Air Filtration, Inc. Delaware 100% MicroPure Filtration, Inc. Delaware 100% Baldwin Filters (Aust.) Pty. Limited Australia 50% Airguard Industries, Inc. Kentucky 100% PleaTech Co. Michigan 60% Guardian Filter Company Kentucky 100% CLARCOR Precision Products, Inc. Delaware 100% EPC Industries Inc. Michigan 100% CLARCOR Services, Inc. Delaware 100% CLARCOR Foreign Sales Corporation Virgin Islands 100% G.U.D. Holdings Limited Australia 20% CLARCOR Trading Company Delaware 100% - ------------------------ * Direct or indirect
EX-23 6 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in each Registration Statement of CLARCOR Inc. on Form S-8 (file numbers 33-5456, 33-38590 and 33-39374) of our reports dated January 7, 1994, on our audits of the consolidated financial statements of CLARCOR Inc. as of November 30, 1993 and 1992 and for the years ended November 30, 1993, 1992 and 1991, and the financial statement schedules for the years ended November 30, 1993, 1992, and 1991, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND Rockford, Illinois February 23, 1994 -----END PRIVACY-ENHANCED MESSAGE-----