-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SZkRziZrSu987Nm89J1Xax7dMWCOXELkr/ARyQcc5JRldrlWqJRzcdFD1SVx3Rgt fwh+E/de6rOkdWn9p1FO8Q== 0000950137-02-000751.txt : 20020414 0000950137-02-000751.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950137-02-000751 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20011201 FILED AS OF DATE: 20020215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLARCOR INC CENTRAL INDEX KEY: 0000020740 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 360922490 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-11024 FILM NUMBER: 02550577 BUSINESS ADDRESS: STREET 1: 2323 SIXTH ST STREET 2: PO BOX 7007 CITY: ROCKFORD STATE: IL ZIP: 61125 BUSINESS PHONE: 8159628867 MAIL ADDRESS: STREET 1: 2323 SIXTH STREET CITY: ROCKFORD STATE: IL ZIP: 61125 FORMER COMPANY: FORMER CONFORMED NAME: CLARK J L MANUFACTURING CO /DE/ DATE OF NAME CHANGE: 19871001 10-K405 1 c66960e10-k405.txt ANNUAL REPORT 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 DECEMBER 1, 2001 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 1-11024
CLARCOR Inc. --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-0922490 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2323 Sixth Street, P.O. Box 7007, Rockford, Illinois 61125 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 815-962-8867 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, 2002 as reported on the New York Stock Exchange Composite Transactions) of the voting stock held by non-affiliates of the registrant as at January 15, 2002 is $673,665,916. The number of outstanding shares of Common Stock as of January 15, 2002 is 24,645,975 shares. Certain portions of the registrant's 2001 Annual Report to Shareholders are incorporated by reference in Parts I, II and IV. Certain portions of the registrant's Proxy Statement dated February 15, 2002 for the Annual Meeting of Shareholders to be held on March 19, 2002 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. The Company's fiscal year ends on the Saturday closest to November 30. For fiscal year 2001 the year ended on December 1, 2001 and included 52 weeks. For fiscal year 2000 the year ended on December 2, 2000 and included 53 weeks. In this Form 10-K, all references to fiscal years are shown to begin on December 1 and end on November 30 for clarity of presentation. (i) Certain Significant Developments. On June 4, 2001 the Company acquired several filtration management companies for approximately $33,258,000 in cash. After the acquisition the acquired companies were combined into one company, Total Filtration Services, Inc. ("TFS"). TFS is included in the Industrial/Environmental Filtration segment of the Company's business. At the time of the acquisition, the acquired companies were engaged in the business of supplying filtration products and equipment and filter maintenance services to large manufacturing facilities including major automobile manufacturing and assembly plants operated in the United States, Canada and Mexico. The acquisition resulted in an increase of approximately $28,000,000 in the Company's revenues for fiscal 2001. In addition to the continuation of its existing business, TFS has been made primarily responsible for the operation and development of the Company's "Total Filtration Program." Under the Program, the Company will offer customers the ability to purchase from the Company the filters needed by that customer for its facilities and its manufacturing, transportation and construction equipment. Customers that now purchase a broad range of filter products and services from multiple suppliers will be able, by taking advantage of the Program, to purchase all of their filter requirements through TFS, thereby reducing administrative burdens and uncertainty about filter pricing, availability, delivery, performance and longevity. The Company is confident that it will be able to serve its customers' total filtration needs because it believes that it now manufactures and supplies the broadest range of filtration products in the industry. While the Program is in an early stage, several total filtration management contracts were completed late in 2001 and negotiations continue on others. The Company expects that the impact of these contracts will grow over the next several years as these customers' facilities are converted to the Program. In the future, the Total Filtration Program will serve as an added distribution channel for all of the Company's filtration products. (ii) Summary of Business Operations. During 2001, the Company conducted business in three principal industry segments: (1) Engine/Mobile Filtration, (2) Industrial/Environmental Filtration and (3) Packaging. Engine/Mobile Filtration. Engine/Mobile Filtration includes filters for oil, air, fuel, coolants and hydraulic fluids for trucks, automobiles, construction, mining and industrial equipment, locomotives, marine and agricultural equipment. Industrial/Environmental Filtration. Industrial/Environmental Filtration products are used primarily for commercial, residential and industrial applications. The segment's industrial and environmental products include air and antimicrobial treated filters and high efficiency electronic air cleaners for commercial buildings, factories, residential buildings, paint spray booths, gas turbine systems, medical facilities, motor vehicle cabins, clean rooms, compressors and dust collector systems. The segment's process filtration products include specialty filters, industrial process liquid filters, filters for pharmaceutical processes, filtration systems for aircraft refueling, anti-pollution and water recycling, bilge separators and sand control filters for oil and gas drilling. 2 Packaging. Packaging products include a wide variety of custom styled containers and packaging items used primarily by the food, confectionery, spice, drug, toiletries and chemical specialties industries. The segment's products include lithographed metal containers, flat sheet decorated metal, combination metal and plastic containers, plastic closures and various specialties, such as spools for wire and cable and outer shells for dry cell batteries and film canisters. (b) Financial Information About Industry Segments Business segment information for the fiscal years 1999 through 2001 is included on pages 23 and 24 of the Company's 2001 Annual Report to Shareholders (the "Annual Report"), is incorporated herein by reference and is filed as part of Exhibit 13(a)(vi) to this 2001 Annual Report on Form 10-K ("2001 Form 10-K"). (c) Narrative Description of the Business ENGINE/MOBILE FILTRATION The Company's engine/mobile filtration products business is conducted by the following wholly-owned subsidiaries: Baldwin Filters, Inc.; Clark Filter, Inc.; Hastings Filters, Inc.; Baldwin Filters (Aust.) Pty. Ltd.; Baldwin Filters N.V.; and Baldwin Filters Limited. In addition, the Company owns (i) 90% of Filtros Baldwin de Mexico ("FIBAMEX"), (ii) 75% of Baldwin-Weifang Filters Ltd., and (iii) 80% of Baldwin-Unifil S.A. The companies market a full line of oil, air, fuel, coolant and hydraulic fluid filters. The filters are used in a wide variety of applications and in processes where filter efficiency, reliability and durability are essential. Impure air or fluid flow through semi-porous paper, cotton, synthetic, chemical or membrane filter media with varying efficiency filtration characteristics. The impurities on the media are disposed of when the filter is changed. The segment's filters are sold throughout the world, primarily in the replacement market for trucks, automobiles, locomotives, marine, construction, industrial, mining and agricultural equipment. In addition, some first-fit filters are sold to the original equipment market. INDUSTRIAL/ENVIRONMENTAL FILTRATION The Company's industrial/environmental filtration products business is conducted by the following wholly-owned subsidiaries: Airguard Industries, Inc. ("Airguard"); Airklean Engineering Pte. Ltd.; Airguard Asia Sdn. Bhd.; Facet USA, Inc. and related Facet companies in Italy, Spain, the United Kingdom and other European locations ("Facet"); Filter Products, Inc.; Purolator Facet, Inc. ("PFI"); Purolator Products Air Filtration Company ("Purolator"); Total Filtration Services, Inc. ("TFS"); United Air Specialists, Inc.; and United Air Specialists (U.K.) Ltd. The segment's products are sold throughout the world. The companies market commercial and industrial air filters and systems, electrostatic contamination control equipment and electrostatic high precision spraying equipment. The air filters and systems remove contaminants from recirculated indoor air and from process air which is exhausted outdoors. The products represent a complete line of air cleaners with a wide range of uses for maintaining high quality standards in interior air and exterior pollution control. Additional products include specialty filters, filtration systems for aircraft refueling, anti-pollution and water recycling, and bilge separators. These products are used in a wide range of applications including commercial, military and general aviation, marine, oil and gas drilling and refining, chemical and pharmaceutical processes, utilities, paper mills and general industry. The filters are used for the process filtration of liquids using a variety of porous and sintered and non-sintered metal media filters, strainers, separators, coalescers and absorbent media. Many of these filter products and systems require special technical approvals and product certification in order to meet commercial and military requirements. TFS does not manufacture filtration products or equipment. It is engaged in the business of supplying a full range of filtration products and equipment acquired from the Company's subsidiaries and non-affiliated manufacturers to manufacturers as well as providing filter maintenance and cleaning services for the customer's filtration equipment. In addition, TFS is promoting and developing the Company's Total Filtration Program. See Item 1.(a) (i) above for a description of that Program. 3 PACKAGING The Company's consumer and industrial packaging products business is conducted by a wholly-owned subsidiary, J. L. Clark, Inc. ("J. L. Clark"). J.L. Clark manufactures a wide variety of different types and sizes of containers and packaging specialties. Metal, plastic and combination metal/plastic containers and closures manufactured by the Company are used in packaging a wide variety of dry and paste form products, such as food specialties (tea, spices, cookies, potato chips, pretzels, candy and other confections); beverages and juices; cosmetics and toiletries; drugs and pharmaceuticals; and chemical specialties (hand cleaners, soaps and special cleaning compounds). Other packaging products include shells for dry batteries, film canisters, candles, spools for insulated and fine wire, and custom decorated flat steel sheets. Containers and 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. DISTRIBUTION Engine/Mobile Filtration and Industrial/Environmental Filtration products are sold primarily through a combination of independent distributors, dealers for original equipment manufacturers and directly to end-use customers such as truck and equipment fleet users. The engine/mobile segment also distributes filtration products worldwide through each of its subsidiaries. Baldwin Filters N.V. and Baldwin Filters Limited primarily serve the European markets. Baldwin Filters (Aust.) Pty. Ltd., markets heavy duty liquid and air filters in Australia and New Zealand. FIBAMEX manufactures filters in Mexico with distribution in Mexico and Central and South America. Through the Company's investment in Baldwin-Weifang Filters Ltd., heavy duty filters and electrostatic air pollution control systems are manufactured in China for distribution in China. Additionally, through Baldwin-Unifil S.A., air filtration products are manufactured in South Africa with distribution throughout Africa, Great Britain, Europe and the Middle East. The industrial/environmental segment also distributes and services filtration products and equipment through company-owned branches and subsidiaries located throughout the United States, Europe, Singapore, Malaysia and China. The Total Filtration Program is expected to become a significant distribution channel for all of the filtration products and equipment manufactured by the Company's subsidiaries. Packaging salespersons call directly on customers and prospective customers for containers and packaging specialties. Each salesperson is trained in all aspects of J.L. Clark's manufacturing processes with respect to the products sold and is qualified to consult with customers and prospective customers concerning the details of their particular requirements. In addition, salespersons with expertise in specific areas, such as flat-sheet decorating, are focused on specific customers and markets. CLASS OF PRODUCTS No class of products accounted for as much as 10% of the total sales of the Company. RAW MATERIAL Steel, filter media, cartons, aluminum sheet and coil, stainless steel, chrome vanadium, chrome silicon, resins, gaskets, roll paper, bulk and roll plastic materials and cotton, wood and synthetic fibers and adhesives 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 2001. 4 PATENTS, TRADEMARKS AND TRADENAMES Certain features of some of the Company's 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. The Company believes, however, that its trademarks and tradenames used in connection with certain products are significant to its business. CUSTOMERS The largest 10 customers of the Engine/Mobile Filtration segment accounted for 21.1% of the $250,960,000 of fiscal year 2001 sales of such segment. The largest 10 customers of the Industrial/Environmental Filtration segment accounted for 19.8% of the $346,394,000 of fiscal year 2001 sales of such segment. The largest 10 customers of the Packaging segment accounted for 71.0% of the $69,610,000 of fiscal year 2001 sales of such segment. No single customer accounted for 10% or more of the Company's consolidated 2001 sales. BACKLOG At November 30, 2001, the Company had a backlog of firm orders for products amounting to approximately $65,500,000. The backlog figure for 2000 was approximately $74,300,000. Substantially all of the orders on hand at November 30, 2001 are expected to be filled during fiscal 2002. COMPETITION The Company encounters strong competition in the sale of all of its products. The Company competes in a number of filtration 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 reliable 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. In addition, the Company believes that it is a leading manufacturer of liquid and air filters for diesel locomotives. The Company believes that for industrial and environmental filtration products, it is among the top five competitors measured by annual sales. In the Packaging segment, its principal competitors include several manufacturers whose specialty packaging segments are smaller than the Company's and who often compete on a regional basis only. 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 and breadth of its products and services and the broad geographic scope of its operations. PRODUCT DEVELOPMENT The Company's Technical Centers and laboratories test product components and completed products to insure high quality manufacturing results, evaluate competitive products, aid suppliers in the development of product components, and conduct controlled tests of newly designed filters, filtration systems and containers for particular uses. Product development departments are concerned with the improvement and creation of new filters, filtration systems, containers and packaging products in order to broaden the uses of these items, counteract obsolescence and evaluate other products available in the marketplace. In fiscal 2001, the Company employed 75 professional employees on either a full-time or part-time basis on research activities relating to the development of new products or the improvement or redesign of its 5 existing products. During this period the Company spent approximately $5,365,000 on such activities as compared with $6,942,000 for 2000 and $5,562,000 for 1999. 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. The Company is party to various proceedings relating to environmental issues. The U.S. Environmental Protection Agency (EPA) and/or other responsible state agencies have designated the Company as a potentially responsible party (PRP), along with other companies, in remedial activities for the cleanup of waste sites under the federal Superfund statute. Environmental and related remediation costs are difficult to quantify for a number of reasons including the number of parties involved, the difficulty in determining the extent of the contamination, the length of time remediation may require, the complexity of environmental regulation and the continuing advancement of remediation technology. Applicable federal law may impose joint and several liability on each PRP for the cleanup. It is the opinion of management that additional liabilities, if any, resulting from these matters are not expected to have a material adverse effect on the Company's financial condition or consolidated results of operations. 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. However, the Company is not aware, at this time, of any current or pending requirement to install such equipment at any of its facilities. EMPLOYEES As of November 30, 2001, the Company had approximately 4,545 employees. (d) Financial Information About Foreign and Domestic Operations and Export Sales Financial information relating to export sales and the Company's operations in the United States and other countries is set forth on page 24 of the Annual Report and is incorporated herein by reference and filed as Exhibit 13(a)(vi) to this 2001 Form 10-K. The Company is not aware of any unusual risks attendant to the conduct of its operations in other countries. ITEM 2. PROPERTIES. (i) Location An office building owned by the Company located in Rockford, Illinois houses the Corporate offices in 22,000 square feet of office space. Engine/Mobile Filtration. The following is a description of the principal properties utilized by the Company in conducting its Engine/Mobile Filtration business: The Baldwin Filters' Kearney, Nebraska plant contains 516,000 square feet of manufacturing and warehousing space, 25,000 square feet of research and development space, and 40,000 square feet of office space. The Kearney facility is located on a site of approximately 40 acres. A manufacturing facility located in Yankton, South Dakota has approximately 170,000 square feet of floor space on a 21 acre tract. Both facilities are owned by the Company. In addition, Baldwin has a capital lease for a 100,000 square foot manufacturing facility on a site of 20 acres in Gothenburg, Nebraska. 6 The Company also manufactures filters in Lancaster, Pennsylvania at its Clark Filter plant. The building, constructed about 1968 on an 11.4 acre tract of land, contains 168,000 square feet of manufacturing and office space and is owned by the Company. The Company leases various facilities in Australia, Belgium, Mexico, South Africa and the United Kingdom for the manufacture and distribution of filtration products. Industrial/Environmental Filtration. The following is a description of the principal properties utilized by the Company in conducting its Industrial/Environmental Filtration business: Airguard has eight manufacturing and warehousing locations. It leases 318,000 square feet in New Albany, Indiana, 84,000 square feet in Corona, California, 44,500 square feet in Dallas, Texas and 83,000 square feet in Rockford, Illinois and a smaller facility in North Carolina. The Company owns the following three facilities. The Airguard High Efficiency Filter plant, located in Jeffersontown, Kentucky on a 7.5 acre tract of land, contains 100,000 square feet of manufacturing and office facilities. During December, 2000 Airguard began production of air filtration products in a 290,000 square foot manufacturing facility in Campbellsville, Kentucky. Airguard's ATI manufacturing and office facility in Ottawa, Kansas, contains 31,000 square feet. Airguard administrative and sales offices and distribution facilities are located in leased facilities in Louisville, Kentucky; Cincinnati, Ohio; Toledo, Ohio; Nashville, Tennessee; Atlanta, Georgia; Columbus, Ohio; Birmingham, Alabama; Portland, Oregon; Commerce City, Colorado; Kansas City, Missouri; Dallas, Texas; Corona, California and New Albany, Indiana. Airguard leases facilities in Malaysia and Singapore. Facet owns manufacturing and distribution facilities in Tulsa, Oklahoma and La Coruna, Spain. The Tulsa facilities contain approximately 142,000 square feet on a 16 acre site. The La Coruna facility is on an approximately 17,000 square meter site and the building contains 5,700 square meters. Facet also leases facilities in Stillwell, Oklahoma; Tulsa, Oklahoma; Italy; Germany; France; United Kingdom and The Netherlands. Purolator owns a 228,500 square-foot manufacturing and office facility in Henderson, North Carolina on a site of approximately 25 acres. Purolator also owns a 42,500 square foot manufacturing and office facility in Kenly, North Carolina. Purolator leases sales, manufacturing and distribution facilities in Fresno, California; Hayward, California; Sacramento, California; Davenport, Iowa; Wichita, Kansas; Metuchen, New Jersey; Henderson, North Carolina; Sparks, Nevada; Fairfax, Virginia and Auburn, Washington. Purolator Facet, Inc. ("PFI") owns a manufacturing and distribution facility in Greensboro, North Carolina. This facility contains approximately 88,000 square feet on a 21 acre site. PFI also leases facilities in Greensboro, North Carolina; Hebron, Connecticut and Middletown, Rhode Island. TFS leases 85,000 square feet of headquarters space in Rochester Hills, Michigan. In addition, it leases office or warehouse space in Cincinnati, Ohio; Toledo, Ohio; Fort Wayne, Indiana; Indianapolis, Indiana; Tonwanda, New York; Saginaw, Michigan; and several locations in Mexico and Canada. It also owns an office and warehouse facility consisting of a total of 33,000 square feet in Goodlettsville, Tennessee. United Air Specialists ("UAS") has three owned facilities. The offices and primary manufacturing facility of UAS are located in Blue Ash, Ohio (a suburb of Cincinnati), on approximately 17 acres of land. This facility was built in 1978 and was expanded in 1991 and 1993 to a total of approximately 157,000 square feet. UAS also has sales offices and a manufacturing facility in Warwick, England which total approximately 13,200 square feet. In addition, UAS leases sales and service facilities in Bad Camberg, Germany; Phoenix, Arizona; Hayward, California; Anaheim, California; Louisville, Kentucky; Troy, Michigan; Jackson, Mississippi and Houston, Texas. Filter Products Inc. owns a 40,000 square foot manufacturing and office facility in Sacramento, California. 7 Packaging. The following is a description of the principal properties utilized by the Company in conducting its Packaging 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 450,000 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. J. L. Clark also leases a manufacturing facility in Lathrop, California. The various properties owned by the Company are considered by it to be in good repair and well maintained. Plant asset additions in 2002 are estimated at $21,000,000 to $23,000,000 for land, buildings, equipment and machinery and cost reduction projects. (ii) Function Engine/Mobile Filtration. Oil, air, fuel, hydraulic fluid and coolant filters are produced at the Baldwin and Hastings facilities in Kearney, and Gothenburg, Nebraska and Yankton, South Dakota. 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 highly mechanized, but require some manual assistance. The plants also maintain an inventory of special dies and molds for filter manufacture. Oil, air and fuel filters, primarily for use in the railroad industry, are produced at Clark Filter in Lancaster, Pennsylvania. Industrial/Environmental Filtration. Air filters for the commercial, residential and industrial markets are produced in the Airguard and Purolator facilities. Dust collection systems, high efficiency electronic air cleaning systems and electrostatic precision spraying systems are designed and manufactured at the UAS facility in Cincinnati, Ohio. Specialty filter products for aviation, oil and gas drilling, military, marine and paper and chemical processes are manufactured and assembled at the PFI facilities in Greensboro, North Carolina. The manufacturing processes include bonding and sintering metal, tungsten inert gas and electron beam welding and diffusion-bonding of wire. Facet designs, manufactures and assembles filters and filtration systems for aircraft refueling, power generation, water treatment and general industrial applications at its United States and European facilities. The company also uses outside contractors for assembly and manufacturing of some of its products. Many of these products require special commercial or military technical approvals or product certification. Depth media filters for the pharmaceutical, biotech and food and beverage industries and other critical process filtration applications are manufactured at the Filter Products Inc. facility in Sacramento, California. Packaging. The Company's metal and combination metal and plastic packaging products are produced at J. L. Clark plants located in Rockford, Illinois, Lancaster, Pennsylvania, and Lathrop, California. The Rockford and Lancaster 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 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. Plastic packaging capabilities include molding and labeling of irregular shaped plastic containers and customized plastic closures which have tamper-evidence as well as convenience features. 8 ITEM 3. LEGAL PROCEEDINGS. The Company is involved in legal actions arising in the normal course of business. Management is of the opinion that the outcome of these actions will not have a material adverse effect on the Company's consolidated results of operations or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 9 ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AT YEAR ELECTED NAME 11/30/01 TO OFFICE ---- -------- ------------ Norman E. Johnson........................................... 53 2000 Chairman of the Board, President and Chief Executive Officer. Mr. Johnson has been employed by the Company since 1990. He was elected President-Baldwin Filters, Inc. in 1990, Vice President-CLARCOR in 1992, Group Vice President- Filtration Products Group in 1993, President and Chief Operating Officer in 1995 and Chairman, President and Chief Executive Officer in 2000. Mr. Johnson has been a Director of the Company since June 1996. William B. Walker........................................... 61 2000 President, Environmental Filtration. Mr. Walker has been employed by Airguard, a subsidiary of the Company since 1966. He was elected President of Airguard in 1994, Executive Vice President-Industrial/Environmental Filtration in 1999 and President, Environmental Filtration in 2000. Bruce A. Klein.............................................. 54 1995 Vice President-Finance and Chief Financial Officer. Mr. Klein was employed by the Company and elected Vice President-Finance and Chief Financial Officer on January 3, 1995. David J. Anderson........................................... 63 1999 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, Vice President-Corporate Development in 1993, Vice President-International/Corporate Development in 1994 and Vice President-Corporate Development in 1999. David J. Lindsay............................................ 46 1995 Vice President-Administration and Chief Administrative Officer. Mr. Lindsay has been employed by the Company in various administrative positions since 1987. He was elected Vice President-Group Services in 1991, Vice President-Administration in 1994 and Vice President-Administration and Chief Administrative Officer in 1995. Peter F. Nangle............................................. 40 1999 Vice President-Information Services and Chief Information Officer. Mr. Nangle has been employed by the Company since 1993. He was elected Vice President-Information Services in 1994, Vice President-Information Services and Operations Analysis, Chief Information Officer in 1997 and Vice President-Information Services and Chief Information Officer in 1999. Marcia S. Blaylock.......................................... 45 2000 Vice President, Controller. Ms. Blaylock has been an employee of the Company since 1974. She was elected Assistant Secretary in 1994, Corporate Secretary in 1995, Vice President and Corporate Secretary in 1996, Vice President, Controller and Corporate Secretary in 1997 and Vice President, Controller in 2000. David J. Boyd............................................... 61 2000 Vice President, General Counsel and Corporate Secretary. Mr. Boyd became an officer of the Company in May 2000. Prior to that date he served as a partner in the law firm of Sidley Austin Brown & Wood since 1972.
Mr. James M. Suchomel was President of the Company's Process Filtration Group until his death on October 24, 2001. 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 or she is elected, held at the time of 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 or her successor. 10 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS. The Company's Common Stock is listed on the New York Stock Exchange; it is traded under the symbol CLC. The following table sets forth the high and low market prices as quoted during the relevant periods on the New York Stock Exchange and dividends paid for each quarter of the last two fiscal years.
MARKET PRICE ----------------- QUARTER ENDED HIGH LOW DIVIDENDS ------------- ---- --- --------- March 3, 2001............................................... $25.375 $16.875 $.1175 June 2, 2001................................................ 26.844 22.500 .1175 September 1, 2001........................................... 27.547 24.656 .1175 December 1, 2001............................................ 27.594 21.906 .1200 ------ Total Dividends............................................. $.4725 ======
MARKET PRICE ----------------- QUARTER ENDED HIGH LOW DIVIDENDS ------------- ---- --- --------- February 26, 2000........................................... $19.500 $16.063 $.1150 May 27, 2000................................................ 19.750 17.000 .1150 August 26, 2000............................................. 21.375 17.375 .1150 December 2, 2000............................................ 21.438 16.938 .1175 ------ Total Dividends............................................. $.4625 ======
The approximate number of holders of record of the Company's Common Stock at January 15, 2002 is 1,500. In addition, the Company believes that there are approximately 6,000 beneficial owners whose shares are held in street names. ITEM 6. SELECTED FINANCIAL DATA. The information required hereunder is set forth on pages 26 and 27 of the Annual Report under the caption "11-Year Financial Review," is incorporated herein by reference and is filed as Exhibit 13(a)(ix) to this 2001 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 7 through 11 of the Annual Report under the caption "Financial Review," is incorporated herein by reference and is filed as Exhibit 13(a)(x) to this 2001 Form 10-K. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information required hereunder is set forth on page 10 of the Annual Report under the caption "Financial Review -- Market Risk," is incorporated herein by reference and is filed as Exhibit 13(a)(x) to this 2001 Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements, the Notes thereto and the report thereon of PricewaterhouseCoopers LLP, independent accountants, required hereunder with respect to the Company and its consolidated subsidiaries are set forth on pages 12 through 25, inclusive, of the Annual Report, are incorporated herein by reference and are filed as Exhibits 13(a)(ii) through 13(a)(vii) to this 2001 Form 10-K. 11 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 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 15, 2002 (the "Proxy Statement") for the Annual Meeting of Shareholders to be held on March 19, 2002 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 13 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 and 5 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. The information required hereunder is set forth on page 4 of the Proxy Statement under the caption "Certain Relationships and Related Transactions" and is incorporated herein by reference. 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 Shareholders for the fiscal year ended November 30, 2001: *Consolidated Balance Sheets at November 30, 2001 and 2000 *Consolidated Statements of Earnings for the years ended November 30, 2001, 2000 and 1999 *Consolidated Statements of Shareholders' Equity for the years ended November 30, 2001, 2000 and 1999 *Consolidated Statements of Cash Flows for the years ended November 30, 2001, 2000 and 1999 *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 2001 Form 10-K 12 The following items are set forth herein on the pages indicated: Report of Independent Accountants.......................................... F-1 Financial Statement Schedules: II. Valuation and Qualifying Accounts................................. F-2 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) None (c) Exhibits 3.1 The registrant's Second 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, 1998. 3.1(a) Amendment to ARTICLE FOURTH of the Second Restated Certificate of Incorporation. Incorporated by reference to the Company's Proxy Statement dated February 18, 1999 for the Annual Meeting of Shareholders held on March 23, 1999. 3.2 The registrant's By-laws, as amended. Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1995. 3.3 Certificate of Designation of Series B Junior Participating Preferred Stock of CLARCOR as filed with the Secretary of State of the State of Delaware on April 2, 1996. Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form 8-A filed April 3, 1996. 4.1 Stockholder Rights Agreement dated as of March 28, 1996 between the registrant and the First Chicago Trust Company of New York. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed April 3, 1996. 4.1(a) First Amendment to Stockholders Rights Agreement dated as of March 23, 1999. Incorporated by reference to Exhibit 4 to the Company's Form 8-A/A filed March 29, 1999. 4.2 Certain instruments defining the rights of holders of long-term debt securities of CLARCOR and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. CLARCOR hereby agrees to furnish copies of these instruments to the SEC upon request. 4.2(a) Multicurrency Credit Agreement dated as of September 9, 1999. Incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K filed September 17, 1999. 10.1 The registrant's Deferred Compensation Plan for Directors. Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1984 (the "1984 10-K"). 10.2 The registrant's Supplemental Retirement Plan. Incorporated by reference to Exhibit 10.2 to the 1984 10-K. 10.2(a) The registrant's 1994 Executive Retirement Plan. Incorporated by reference to Exhibit 10.2(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 3, 1994 ("1994 10-K"). 10.2(b) The registrant's 1994 Supplemental Pension Plan. Incorporated by reference to Exhibit 10.2(b) to the 1994 10-K. 10.2(c) The registrant's Supplemental Retirement Plan (as amended and restated effective December 1, 1994). Incorporated by reference to Exhibit 10.2(c) to the 1994 10-K. 10.3 The registrant's 1984 Stock Option Plan. Incorporated by reference to Exhibit A to the Company's Proxy Statement dated March 2, 1984 for the Annual Meeting of Shareholders held on March 31, 1984.
13 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. 10.4(a)(1) Form of Amended and Restated Employment Agreement with each of David J. Anderson, Marcia S. Blaylock, David J. Boyd, Bruce A. Klein, David J. Lindsay, Norman E. Johnson, Peter F. Nangle, and William B. Walker. Incorporated by Reference to Exhibit 10.4(a)(1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 2, 2000 (the "2000 10-K"). 10.4(b) Employment Agreement with Lawrence E. Gloyd dated July 1, 1997. Incorporated by reference to Exhibit 10.4(b) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997 ("1997 10-K"). 10.4(c) Employment Agreement with Norman E. Johnson dated July 1, 1997. Incorporated by reference to Exhibit 10.4(c) to the 1997 10-K. 10.4(c)(1) Amended and Restated Employment Agreement with Norman E. Johnson dated as of December 17, 2000. Incorporated by Reference to Exhibit 10.4(c)(1) to the 2000 10-K. 10.4(d) Trust Agreement dated December 1, 1997. Incorporated by reference to Exhibit 10.4(d) to the 1997 10-K. 10.4(e) Executive Benefit Trust Agreement dated December 22, 1997. Incorporated by reference to Exhibit 10.4(e) to the 1997 10-K. 10.5 The registrant's 1994 Incentive Plan (the "Plan") as amended through June 30, 2000. Incorporated by Reference to Exhibit 10.5 to the 2000 10-K. 10.5(a) Amendment to the Plan adopted December 18, 2000. Incorporated by Reference to Exhibit 10.5(a) to the 2000 10-K. *13 (a) The following items incorporated by reference herein from the Company's 2001 Annual Report to Shareholders ("2001 Annual Report"), are filed as Exhibits to this Annual Report Form 10-K:
(i) Business segment information for the fiscal years 1999 through 2001 set forth on pages 23 and 24 of the 2001 Annual Report (included in Exhibit 13(a)(vi) -- Note Q of Notes to Consolidated Financial Statements); (ii) Consolidated Balance Sheets of the Company and its Subsidiaries at November 30, 2001 and 2000 set forth on page 12 of the 2001 Annual Report; (iii) Consolidated Statements of Earnings of the Company and its Subsidiaries for the years ended November 30, 2001, 2000 and 1999 set forth on page 13 of the 2001 Annual Report; (iv) Consolidated Statements of Shareholders' Equity for the Company and its Subsidiaries for the years ended November 30, 2001, 2000 and 1999 set forth on page 14 of the 2001 Annual Report; (v) Consolidated Statements of Cash Flows of the Company and its Subsidiaries for the years ended November 30, 2001, 2000 and 1999 set forth on page 15 of the 2001 Annual Report; (vi) Notes to Consolidated Financial Statements set forth on pages 16 through 24 of the 2001 Annual Report; (vii) Report of Independent Accountants set forth on page 25 of the 2001 Annual Report; (viii) Management's Report on Responsibility for Financial Reporting set forth on page 25 of the 2001 Annual Report; (ix) Information under the caption "11-Year Financial Review" set forth on pages 26 and 27 of the 2001 Annual Report; and (x) Management's Discussion and Analysis of Financial Condition and Results of Operation set forth under the caption "Financial Review" on pages 7 through 11 of the 2001 Annual Report.
14 *21 Subsidiaries of the Registrant. *23 Consent of Independent Accountants.
- --------------- * Filed herewith. 15 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. Date: February 15, 2002 CLARCOR Inc. (Registrant) By: /s/ NORMAN E. JOHNSON -------------------------------------- Norman E. Johnson Chairman of the Board, President & Chief Executive Officer 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 15, 2002 By: /s/ NORMAN E. JOHNSON ------------------------------------------------ Norman E. Johnson Chairman of the Board, President & Chief Executive Officer and Director Date: February 15, 2002 By: /s/ BRUCE A. KLEIN ------------------------------------------------ Bruce A. Klein Vice President -- Finance & Chief Financial Officer Date: February 15, 2002 By: /s/ MARCIA S. BLAYLOCK ------------------------------------------------ Marcia S. Blaylock Vice President, Controller & Chief Accounting Officer Date: February 15, 2002 By: ------------------------------------------------ J. Marc Adam Director Date: February 15, 2002 By: /s/ MILTON R. BROWN ------------------------------------------------ Milton R. Brown Director Date: February 15, 2002 By: ------------------------------------------------ Robert J. Burgstahler Director Date: February 15, 2002 By: /s/ LAWRENCE E. GLOYD ------------------------------------------------ Lawrence E. Gloyd Director
16 Date: February 15, 2002 By: /s/ ROBERT H. JENKINS ------------------------------------------------ Robert H. Jenkins Director Date: February 15, 2002 By: /s/ PHILIP R. LOCHNER, JR. ------------------------------------------------ Philip R. Lochner, Jr. Director Date: February 15, 2002 By: /s/ JAMES L. PACKARD ------------------------------------------------ James L. Packard Director Date: February 15, 2002 By: /s/ KEITH E. WANDELL ------------------------------------------------ Keith E. Wandell Director
17 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois Our audits of the consolidated financial statements referred to in our report dated January 8, 2002 appearing on page 25 in the 2001 Annual Report to Shareholders of CLARCOR Inc. and Subsidiaries (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a) of this Form 10-K (page 13, index of exhibits). In our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP Chicago, Illinois January 8, 2002 F-1 CLARCOR INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999 (DOLLARS IN THOUSANDS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------------------------------------------- ---------- ----------------------- ---------- ---------- ADDITIONS ----------------------- (1) (2) BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------- ---------- ---------- ---------- ---------- ---------- 2001: Allowance for losses on accounts receivable................................ $5,027 $1,628 $2,286(A) $1,021(B) $7,920 ====== ====== ====== ====== ====== 2000: Allowance for losses on accounts receivable................................ $5,155 $1,167 $ 17(A) $1,312(B) $5,027 ====== ====== ====== ====== ====== 1999: Allowance for losses on accounts receivable................................ $2,711 $ 975 $2,255(A) $ 786(B) $5,155 ====== ====== ====== ====== ======
NOTES: (A) Due to business acquisitions. (B) Bad debts written off during year, net of recoveries. F-2 EX-13.(A)(II) 3 c66960ex13-aii.txt CONSOLIDATED BALANCE SHEETS EXHIBIT 13(a)(ii) - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- NOVEMBER 30, 2001 AND 2000 (Dollars in thousands except per share data)
ASSETS 2001 2000 - ---------------------------------------------------------------------------------------- Current assets: Cash and short-term cash investments .................. $ 7,418 $ 10,864 Accounts receivable, less allowance for losses of $7,920 for 2001 and $5,027 for 2000 ....................... 115,003 110,083 Inventories ........................................... 104,291 100,561 Prepaid expenses and other current assets ............. 4,120 3,640 Deferred income taxes ................................. 13,518 5,331 ---------------------------- Total current assets ............................ 244,350 230,479 ---------------------------- Plant assets, at cost less accumulated depreciation ..... 137,316 140,121 Acquired intangibles, less accumulated amortization ..... 116,746 101,877 Pension assets .......................................... 18,939 19,519 Other noncurrent assets ................................. 13,266 9,934 ---------------------------- Total assets .................................... $ 530,617 $ 501,930 ============================ LIABILITIES - ---------------------------------------------------------------------------------------- Current liabilities: Current portion of long-term debt ..................... $ 5,579 $ 5,482 Accounts payable and accrued liabilities .............. 84,826 84,187 Income taxes .......................................... 4,526 8,157 ---------------------------- Total current liabilities ....................... 94,931 97,826 ---------------------------- Long-term debt, less current portion .................... 135,203 141,486 Postretirement health care benefits ..................... 3,851 3,574 Long-term pension liabilities ........................... 4,955 4,374 Deferred income taxes ................................... 15,114 10,663 Other long-term liabilities ............................. 1,868 1,519 Minority interests ...................................... 434 395 Contingencies SHAREHOLDERS' EQUITY - ---------------------------------------------------------------------------------------- Capital stock: Preferred, par value $1,authorized 5,000,000 shares, none issued ........................................ - - Common, par value $1,authorized 60,000,000 shares, issued 24,626,236 in 2001 and 24,381,307 in 2000 ... 24,626 24,381 Capital in excess of par value ........................ 9,565 5,700 Accumulated other comprehensive earnings .............. (9,179) (6,919) Retained earnings ..................................... 249,249 218,931 ---------------------------- Total shareholders' equity ...................... 274,261 242,093 ---------------------------- Total liabilities and shareholders' equity ...... $ 530,617 $ 501,930 ============================
The accompanying notes are an integral part of the consolidated financial statements. 12 | CLARCOR EX-13.(A)(III) 4 c66960ex13-aiii.txt CONSOLIDATED STATEMENT OF EARNINGS EXHIBIT 13(a)(iii) - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF EARNINGS - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999 (Dollars in thousands except per share data)
2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------- Net sales .................................................. $ 666,964 $ 652,148 $ 477,869 Cost of sales .............................................. 471,477 453,803 329,282 ------------------------------------------------ Gross profit .......................................... 195,487 198,345 148,587 Selling and administrative expenses ........................ 119,677 122,358 92,510 ------------------------------------------------ Operating profit ...................................... 75,810 75,987 56,077 ------------------------------------------------ Other income (expense): Interest expense ......................................... (10,270) (11,534) (3,733) Interest income .......................................... 654 698 1,451 Other, net ............................................... (460) (1,664) 1,820 ------------------------------------------------ (10,076) (12,500) (462) ------------------------------------------------ Earnings before income taxes and minority interests ... 65,734 63,487 55,615 Provision for income taxes ................................. 23,804 23,201 20,137 ------------------------------------------------ Earnings before minority interests .................... 41,930 40,286 35,478 Minority interests in earnings of subsidiaries ............. (37) (49) (66) ------------------------------------------------ Net earnings ............................................... $ 41,893 $ 40,237 $ 35,412 ================================================ Net earnings per common share: Basic .................................................... $ 1.71 $ 1.66 $ 1.48 Diluted .................................................. $ 1.68 $ 1.64 $ 1.46 ================================================ Average number of common shares outstanding: Basic .................................................... 24,535,199 24,269,675 23,970,011 Diluted .................................................. 24,892,062 24,506,171 24,313,607 ================================================
The accompanying notes are an integral part of the consolidated financial statements. EX-13.(A)(IV) 5 c66960ex13-aiv.txt CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY EXHIBIT 13(a)(iv) - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999 (Dollars in thousands except per share data)
Common Stock ------------------------------------------- Number of Shares Amount Accumulated ---------------------- ------------------ Capital in Other In In Excess of Comprehensive Retained Issued Treasury Issued Treasury Par Value Earnings Earnings Total - -------------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1998 ....... 23,949,358 - $23,949 $ - $ 156 $ (2,993) $ 165,695 $ 186,807 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings ..................... - - - - - - 35,412 35,412 Other comprehensive earnings: Translation adjustments ........ - - - - - (1,158) - (1,158) --------- Total comprehensive earnings .................... 34,254 --------- Purchase of treasury stock ....... - (50,000) - (897) - - - (897) Retirement of treasury stock ..... (50,000) 50,000 (50) 897 (455) - (392) - Stock options exercised .......... 82,344 - 83 - 740 - - 823 Issuance of stock under award plans .................... 38,020 - 38 - 507 - - 545 Cash dividends - $0.4525 per common share ............... - - - - - - (10,814) (10,814) - -------------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1999 ....... 24,019,722 - 24,020 - 948 (4,151) 189,901 210,718 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings ..................... - - - - - - 40,237 40,237 Other comprehensive earnings: Translation adjustments ........ - - - - - (2,768) - (2,768) --------- Total comprehensive earnings .................... 37,469 --------- Business acquisition ............. 160,704 - 161 - 2,734 - - 2,895 Stock options exercised .......... 182,479 - 182 - 1,898 - - 2,080 Issuance of stock under award plans .................... 18,402 - 18 - 120 - - 138 Cash dividends - $0.4625 per common share ............... - - - - - - (11,207) (11,207) - -------------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 2000 ....... 24,381,307 - 24,381 - 5,700 (6,919) 218,931 242,093 - -------------------------------------------------------------------------------------------------------------------------------- Net earnings ..................... - - - - - - 41,893 41,893 Other comprehensive earnings: Cumulative effect of accounting change ........... - - - - - (769) - (769) Unrealized losses on derivative .................. - - - - - (1,137) - (1,137) Translation adjustments ........ - - - - - (354) - (354) --------- Total comprehensive earnings .................... 39,633 --------- Stock options exercised .......... 246,424 - 246 - 3,223 - - 3,469 Issuance of stock under award plans .................... 10,618 - 11 - 642 - - 653 Forfeiture of stock under award plans .................... (12,113) - (12) - - - - (12) Cash dividends - $0.4725 per common share ............... - - - - - - (11,575) (11,575) - -------------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 2001 ....... 24,626,236 - $24,626 $ - $ 9,565 $ (9,179) $ 249,249 $ 274,261 ================================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. EX-13.(A)(V) 6 c66960ex13-av.txt CONSOLIDATED STATEMENTS OF CASH FLOWS EXHIBIT 13(a)(v) - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- FOR THE YEARS ENDED NOVEMBER 30, 2001, 2000 AND 1999 (Dollars in thousands)
2001 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings ......................................................... $ 41,893 $ 40,237 $ 35,412 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation ...................................................... 18,187 17,537 13,729 Amortization ...................................................... 3,663 3,542 1,643 Minority interests in earnings of subsidiaries .................... 37 49 66 Net (gain) loss on dispositions of plant assets ................... 338 109 (1,660) Impairment of plant assets ........................................ 2,422 - - Changes in assets and liabilities, net of business acquisitions: Accounts receivable ............................................ 5,116 (3,448) (6,062) Inventories .................................................... 5,190 (9,636) (4,585) Prepaid expenses and other current assets ...................... (374) 8,040 (1,369) Other noncurrent assets ........................................ (2,523) (554) (18) Accounts payable and accrued liabilities ....................... (8,693) (1,170) 4,790 Pension assets and liabilities, net ............................ 1,163 (7,430) (583) Income taxes ................................................... (2,683) 4,663 (2,366) Deferred income taxes .......................................... (446) 2,191 (355) --------------------------------------- Net cash provided by operating activities .................... 63,290 54,130 38,642 --------------------------------------- Cash flows from investing activities: Additions to plant assets ............................................ (18,204) (29,005) (21,822) Business acquisitions, net of cash acquired .......................... (33,388) (12,735) (142,709) Dispositions of plant assets ......................................... 539 55 3,873 Other, net ........................................................... (300) (440) - --------------------------------------- Net cash used in investing activities ........................ (51,353) (42,125) (160,658) --------------------------------------- Cash flows from financing activities: Proceeds from multicurrency revolving credit agreement ............... 27,500 43,200 115,000 Payments on multicurrency revolving credit agreement ................. (36,500) (42,200) - Proceeds from borrowings under long-term debt ........................ 8,000 - - Reduction of long-term debt .......................................... (5,349) (7,034) (468) Sales of capital stock under stock option plan ....................... 2,598 1,379 680 Purchases of treasury stock .......................................... - - (897) Cash dividends paid .................................................. (11,575) (11,207) (10,814) --------------------------------------- Net cash provided by (used in) financing activities .......... (15,326) (15,862) 103,501 --------------------------------------- Net effect of exchange rate changes on cash ............................ (57) (24) (61) --------------------------------------- Net change in cash and short-term cash investments ..................... (3,446) (3,881) (18,576) Cash and short-term cash investments, beginning of year ................ 10,864 14,745 33,321 --------------------------------------- Cash and short-term cash investments, end of year ...................... $ 7,418 $ 10,864 $ 14,745 =======================================
The accompanying notes are an integral part of the consolidated financial statements. EX-13.(A)(VI) 7 c66960ex13-avi.txt NOTES TO CONSOLIDATED FINANCIAL STATEMENTS EXHIBIT 13(a)(vi) - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) A. ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include all domestic and foreign subsidiaries that are more than 50% owned and controlled. CLARCOR Inc. and its subsidiaries are hereinafter collectively referred to as the "Company" or CLARCOR. Minority interests represent an outside shareholder's 10% ownership of the common stock of Filtros Baldwin de Mexico (FIBAMEX) and outside shareholders' 20% ownership of Baldwin-Unifil S.A. Foreign Currency Translation Financial statements of foreign subsidiaries 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 with other comprehensive earnings as a separate component of shareholders' equity and are presented, net of tax, in the Consolidated Statements of Shareholders' Equity. Plant Assets Depreciation is provided by the straight-line and accelerated methods for financial statement purposes and by the accelerated method for tax purposes. The provision for depreciation is based on the estimated useful lives of the assets (15 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment). It is the policy of the Company to capitalize renewals and betterments and to charge to expense the cost of current maintenance and repairs. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company's books and the resulting gain or loss is reflected in earnings. Excess of Cost Over Fair Value of Assets Acquired and Other Intangible Assets The excess of cost over fair value of assets acquired is being amortized over a forty-year period using the straight-line method. Other acquired intangible assets are being amortized over the estimated periods to be benefited using the straight-line method. These intangibles include trademarks (40 year life), patents (average 14 year life), and other identifiable intangible assets with lives ranging from one to thirty years. In June 2001,the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," which discontinues amortization of the excess of cost over fair value of assets acquired and of intangible assets with indefinite lives. It also requires goodwill and intangible assets with indefinite lives to be tested for impairment annually or whenever there is an impairment indicator. Although not required to adopt the provisions of SFAS 142 until fiscal 2003, the Company expects to adopt SFAS 142 in the first quarter of fiscal 2002. The Company has not completed an assessment of the impact of this statement, including the impairment tests. However, as a result of adopting SFAS 142, the Company expects amortization expense will be reduced by approximately $2,500 in fiscal 2002. In accordance with Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of," the Company determines any impairment losses based on underlying cash flows related to specific groups of acquired plant assets and identifiable intangibles and excess of cost over fair value of assets acquired, and would first apply any such impairment losses to related goodwill. Statements of Cash Flows All highly liquid investments with a maturity of three months or less when purchased or that are readily saleable are considered to be short-term cash equivalents. The carrying amount of the investments approximates fair value. Income Taxes The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109),"Accounting for Income Taxes." SFAS 109 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Revenue Recognition Revenue is recognized when product ownership and risk of loss has transferred to the customer or performance of services is complete and the Company has no remaining obligations regarding the transaction. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements," relating to revenue recognition under generally accepted accounting principles in financial statements. No significant changes to the Company's revenue recognition policies were necessary to comply with SAB 101. Product Warranties The Company provides for estimated warranty costs when the related products are recorded as sales or for specific items at the time their existence is known and the amounts are reasonably determinable. Comprehensive Earnings Foreign currency translation adjustments and unrealized losses on derivative instruments are included in other comprehensive earnings, net of tax, in accordance with Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." Use of Management's Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) Accounting Period The Company's fiscal year ends on the Saturday closest to November 30. The fiscal year ended December 1,2001 included fifty-two weeks. The fiscal years ended December 2, 2000 and November 27, 1999 were comprised of fifty-three and fifty-two weeks, respectively. In the consolidated financial statements, all fiscal years are shown to begin as of December 1 and end as of November 30 for clarity of presentation. Reclassifications Certain reclassifications have been made to conform prior years' data to the current presentation. These reclassifications had no effect on reported earnings. B. ACCOUNTING CHANGE AND DERIVATIVE INSTRUMENTS The Company makes limited use of derivative financial instruments to manage certain interest rate and foreign currency risks. Interest rate swap agreements are utilized to convert certain floating rate debt into fixed rate debt. Cash flows related to interest rate swap agreements are included in interest expense over the terms of the agreements. Effective December 1, 2000,the Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 requires the recognition of all derivatives in the balance sheet as either an asset or a liability measured at fair value and requires a company to recognize changes in the derivative's fair value currently in earnings unless it meets specific hedge accounting criteria. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive earnings and are recognized in the income statement when the hedged item affects earnings. The Company documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. In addition, the Company assesses (both at the hedge's inception and on an ongoing basis) the effectiveness of the derivatives that are used in hedging transactions. If it is determined that a derivative is not (or has ceased to be) effective as a hedge, the Company would discontinue accounting for it as a hedge prospectively. Ineffective portions of changes in the fair value of cash flow hedges are recognized in earnings. During 2000,the Company entered into interest rate agreements to manage its interest exposure related to the multicurrency credit revolver. The agreement in place at November 30, 2001 provides for the Company to pay a 7.34% fixed interest rate on a notional amount of $60,000. The agreement expires September 11, 2002. Under the agreement the Company will receive interest at floating rates based on LIBOR. The adoption of SFAS 133 resulted in a cumulative effect of an accounting change to accumulated other comprehensive earnings of a negative $769 ($1,183 pretax) and the recognition of a liability. The Company's derivative instrument is designated as a cashflow hedge and determined to be effective. Therefore, there was no adjustment to net earnings. At November 30, 2001, the fair value of the agreement was a negative $2,932 and is included in other current liabilities. The net loss included in other comprehensive earnings for the fiscal year ended November 30,2001 was $1,137 ($1,750 pretax). Derivative gains and losses will be reclassified into earnings as payments are made on its variable rate interest debt. Approximately $711 ($1,094 pretax) was reclassified into earnings during the fiscal year ended November 30, 2001. The amount of net derivative losses included in other comprehensive income at November 30,2001 will be reclassified into earnings in fiscal year 2002. C. BUSINESS COMBINATIONS AND INVESTMENTS IN AFFILIATES On June 4, 2001,the Company acquired the stock of several filtration management companies for approximately $33,258, net of cash received, including acquisition expenses. The purchase price was paid in cash with available funds and proceeds from long-term borrowings from a revolving credit facility. As a result of the acquisition, the companies were combined into one company, Total Filtration Services, Inc. (TFS), and became a subsidiary of the Company. TFS is included in the Industrial/Environmental Filtration segment. The transaction was accounted for under the purchase method of accounting with the excess of the initial purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill and amortized over 40 years by the straight-line method. The initial purchase price was based on the net assets of the businesses acquired as shown on a June 4, 2001 balance sheet and is subject to a final adjustment. A preliminary allocation of the initial purchase price has been made to major categories of assets and liabilities. The allocation will be completed when the Company finalizes a closing balance sheet in accordance with the purchase agreement with the seller. The results are included in the Company's consolidated results of operations from the date of acquisition. The following unaudited pro forma information summarizes the results of operations for the periods indicated as if the acquisition had been completed as of the beginning of the periods presented. The pro forma information gives effect to the actual operating results prior to the acquisition, adjusted to include the pro forma effect of interest expense, depreciation, amortization of intangibles and income taxes. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition had occurred as of the beginning of the periods presented or that may be obtained in the future. Unaudited pro forma net sales for the Company would have been $695,729 and $707,460 for the years ended November 30, 2001 and 2000. Net earnings and earnings per share for each of these periods would not have been significantly affected. During 2000, the Company purchased Filter Products, Inc., a Sacramento, California liquid process filtration manufacturer, and two air filtration distributors. All three of these acquisitions were accounted for under the purchase method of accounting and are included in the Industrial/Environmental Filtration segment. Two of the acquisitions were paid for in cash. The purchase price of the other was paid in cash and stock. For these acquisitions, the Company - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) paid $12,730 in cash, net of cash received, and issued 160,704 shares of its common stock (valued at $2,895). The final allocation of the purchase price to the assets and liabilities acquired with the purchase of Filter Products, Inc. resulted in an increase to goodwill of $615 in the second quarter of 2001. These acquisitions did not have a significant impact on the results of the Company. On September 10, 1999, the Company completed its acquisitions of Purolator Air Filtration (Purolator), Facet International (Facet), and Purolator Facet, Inc. (PFI), manufacturers of air and liquid filtration products, for approximately $140,985, net of cash received, including acquisition expenses. The purchase price was paid in cash with available funds and proceeds from long-term borrowings of approximately $115,000 from a revolving credit facility. (See Note H.) As a result of the acquisitions, Purolator, Facet, and PFI became subsidiaries of the Company and are included in the Company's Industrial/Environmental Filtration segment. The Company's non-cash investing and financing activities related to this acquisition included assumed liabilities of $25,910. The transaction was accounted for under the purchase method of accounting with the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill and amortized over 40 years by the straight-line method. Other acquired intangible assets are being amortized as discussed in Note A. During fiscal year 2000,the Company finalized the purchase price according to the terms of the purchase agreement and completed the estimates of assets acquired and liabilities assumed, including those associated with exit and other costs of the acquisition. The finalized allocation to major categories of assets and liabilities resulted in a reduction to goodwill of $34. As part of the final allocation of purchase price, the Company had accrued and paid $1,012 for severance and exit costs as of November 30, 2001. The operating results are included in the Company's consolidated results of operations from September 1, 1999, the effective date of the acquisitions. D. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for approximately 40% and 43% of the Company's inventories at November 30, 2001 and 2000, respectively, and by the first-in, first-out (FIFO) method for all other inventories. The FIFO method approximates current cost. Inventories are summarized as follows: 2001 2000 - -------------------------------------------------------------------------------- Raw materials ........................................... $ 37,455 $ 38,444 Work-in-process ......................................... 12,120 14,253 Finished products ....................................... 55,078 48,316 ------------------- Total at FIFO ........................................... 104,653 101,013 Less excess of FIFO over LIFO ........................... 362 452 ------------------- $104,291 $100,561 =================== During 2001 and 2000, certain LIFO inventory quantities were reduced resulting in a partial liquidation of the LIFO bases. The effect on net earnings was not material. E. PLANT ASSETS AND IMPAIRMENT LOSS Plant assets at November 30, 2001 and 2000 were as follows: 2001 2000 - -------------------------------------------------------------------------------- Land .................................................... $ 4,736 $ 3,911 Buildings and building fixtures ......................... 73,497 67,986 Machinery and equipment ................................. 191,984 182,689 Construction-in-process ................................. 7,092 17,666 ------------------- 277,309 272,252 Less accumulated depreciation ........................... 139,993 132,131 ------------------- $137,316 $140,121 =================== During the first quarter of 2001, the Company recognized an impairment loss in its Packaging segment of $2,422 related to certain plant assets used exclusively in the manufacture of plastic closures for a customer who terminated a manufacturing contract. The loss is included in the cost of sales and was calculated under the guidelines of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." F. ACQUIRED INTANGIBLES Acquired intangibles, net of accumulated amortization, at November 30, 2001 and 2000 consisted of the following: 2001 2000 - -------------------------------------------------------------------------------- Excess of cost over fair value of assets acquired .................................. $ 78,620 $ 62,333 Trademarks .............................................. 28,358 29,090 Other acquired intangibles .............................. 9,768 10,454 ------------------- $116,746 $101,877 =================== Accumulated amortization was $17,392 and $13,812 at November 30, 2001 and 2000, respectively. G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at November 30, 2001 and 2000 were as follows: 2001 2000 - -------------------------------------------------------------------------------- Accounts payable ....................................... $42,657 $40,826 Accrued salaries, wages and commissions ................. 8,733 12,678 Compensated absences ................................... 6,366 6,192 Accrued pension liabilities ............................ 263 262 Other accrued liabilities .............................. 26,807 24,229 ------------------- $84,826 $84,187 =================== H. LONG-TERM DEBT Long-term debt at November 30, 2001 and 2000 consisted of the following: 2001 2000 - -------------------------------------------------------------------------------- Multicurrency revolving credit agreement, interest payable at the end of each funding period at an adjusted LIBOR ................ $107,000 $ 116,000 Promissory note, interest payable semi-annually at 6.69% ............................. 15,000 20,000 Industrial Revenue Bonds, at 1.6% to 5.85% interest rates ............................ 17,815 10,063 Other .................................................. 967 905 -------------------- 140,782 146,968 Less current portion ................................... 5,579 5,482 -------------------- $135,203 $141,486 =================== A fair value estimate of $140,023 and $145,990 for long-term debt in 2001 and 2000, respectively, is based on the current interest rates available to the Company for debt with similar remaining maturities. On May 1, 2001, the Company, in cooperation with the Campbellsville-Taylor County Industrial Development Authority (Kentucky), issued $8,000 of Industrial Revenue Bonds. The bonds are due May 1, 2031, with a variable rate of interest that is reset weekly. In conjunction with the issuance of the Industrial Revenue Bonds, the Company holds in trust certain restricted investments committed for the acquisition of plant equipment. At November 30, 2001, the restricted asset balance was $2,343 and is included in other noncurrent assets. The Company has other industrial revenue bonds, including $8,410 issued in cooperation with the South Dakota Economic Development Finance Authority due February 1, 2016 with a variable rate of interest that is reset weekly and additional bonds of $1,405 and $1,653 outstanding as of November 30, 2001 and 2000, respectively, which mature in 2005. In September 1999, the Company entered into a three-year, multicurrency revolving credit agreement with a group of participating financial institutions under which it may borrow up to $185,000. The agreement, which was extended for one additional year in 2000, provides that loans may be made under a selection of currencies and rate formulas. The interest rate is based upon either a defined Base Rate or the London Interbank Offered Rate (LIBOR) plus a variable spread of .55% to 1.25%. The variable spread is based on the ratio of the Company's outstanding borrowings compared with its shareholders' equity. The spread was .65% and .80% at November 30, 2001 and 2000, respectively. Facility fees and other fees on the entire loan commitment are payable for the duration of this facility. At November 30, 2001 and 2000, $107,000 and $116,000 were outstanding under this agreement and the related LIBOR, including the spread, was 4.17% and 7.46%, respectively. Borrowings under the credit facility are unsecured but are guaranteed by certain of the Company's subsidiaries. The agreement related to this borrowing includes certain restrictive covenants that include maintaining minimum consolidated net worth, limiting new borrowings, maintaining a minimum interest coverage, and restricting certain changes in ownership as stipulated in the agreement. The Company was in compliance with these covenants as of November 30, 2001 and 2000. This agreement also includes a letter of credit facility, against which $11,182 and $10,841 in letters of credit had been issued as of November 30, 2001 and 2000, respectively. The 6.69% promissory note matures July 25, 2004, but the Company is required to prepay, without premium, certain principal amounts as stated in the agreement. Under the note agreement, the Company must meet certain restrictive covenants. The covenants were amended during 1999 to be similar to those contained in the multicurrency revolving credit facility. Exclusive of the multicurrency revolving credit facility, principal maturities of long-term debt for the next five fiscal years ending November 30 approximates: $5,579 in 2002, $5,624 in 2003, $5,629 in 2004, $381 in 2005, $166 in 2006 and $16,403 thereafter. The borrowings under the revolving credit facility that matures in 2003 have been classified as long-term as the Company has both the intent and ability to refinance this amount on a long-term basis. Interest paid totaled $10,666, $10,714 and $2,228 during 2001, 2000 and 1999, respectively. I. LEASES The Company has various lease agreements for offices, warehouses, manufacturing plants, and equipment that expire on various dates through June 2007 and contain renewal options. Some of these leases provide for payment of property taxes, utilities and certain other expenses. Commitments for minimum rentals under noncancellable leases at November 30, 2001 for the next five years are: $7,278 in 2002, $4,881 in 2003, $3,641 in 2004, $1,997 in 2005, and $936 in 2006. Rent expense totaled $8,869, $8,367 and $6,063 for the years ended November 30, 2001, 2000 and 1999, respectively. J. PENSION AND OTHER POSTRETIREMENT PLANS The Company has defined benefit pension plans and postretirement health care plans covering certain employees and retired employees. In addition to the plan assets related to qualified plans, the Company has funded approximately $2,281 and $2,580 at November 30, 2001 and 2000, respectively, in restricted trusts for its nonqualified plans. These trusts are included in other noncurrent assets in the Company's Consolidated Balance Sheets. During 2001, the Company received approval from the Internal Revenue Service to terminate one of its plans related to a business that was previously sold and distribute all the plan's assets. The Company terminated the plan and settled all of its obligations by making lump-sum distributions or purchasing annuity contracts for its participants. The following table shows reconciliations of the pension plans and other postretirement plan benefits as of November 30, 2001 and 2000. The accrued pension benefit liability includes an unfunded benefit obligation of $6,974 and $5,231 - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) as of November 30, 2001 and 2000, respectively. The obligations have been determined with a weighted average discount rate of 7.25% and 7.75% in 2001 and 2000, respectively,and a rate of increase in future compensation of primarily 5.0% in both years. The expected weighted average long-term rate of return was 9.0% in both 2001 and 2000.
Pension Postretirement Benefits Benefits - -------------------------------------------------------------------------------- 2001 2000 2001 2000 - -------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year ...................... $ 68,980 $ 73,356 $ 4,082 $ 3,866 Service cost .................... 3,142 3,122 107 92 Interest cost ................... 5,114 5,021 305 280 Amendments ...................... 1,154 -- -- -- Actuarial losses / (gains) ...... 3,750 (2,038) (808) (6) Benefits paid ................... (5,717) (10,481) (151) (150) ------------------------------------------- Benefit obligation at end of year 76,423 68,980 3,535 4,082 ------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year ............ 86,686 87,214 -- -- Actual return on plan assets .... (10,726) 3,012 -- -- Benefits paid ................... (5,455) (3,540) -- -- ------------------------------------------- Fair value of plan assets at end of year ...................... 70,505 86,686 -- -- ------------------------------------------- Funded status ................... (5,918) 17,706 (3,535) (4,082) Unrecognized prior service cost ................. 1,320 188 -- -- Unrecognized net actuarial loss / (gain) ................ 18,319 (3,011) (570) 238 ------------------------------------------- Net amount recognized ........... $ 13,721 $ 14,883 $ (4,105) $ (3,844) ============================================ Amounts recognized in the Consolidated Balance Sheets include: Prepaid benefit cost ..... $ 18,939 $ 19,519 $ -- $ -- Accrued benefit liability (5,218) (4,636) (4,105) (3,844) ------------------------------------------- Net amount recognized ........... $ 13,721 $ 14,883 $ (4,105) $ (3,844) ============================================
The components of net periodic benefit cost for pensions are shown below. Pension Benefits - -------------------------------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost ........................ $ 3,142 $ 3,122 $ 2,364 Interest cost ....................... 5,114 5,021 5,251 Expected return on plan assets ...... (7,527) (7,695) (7,041) Additional recognition amount ....... -- -- 196 Amortization of unrecognized: Net transition asset ............. -- (1,056) (1,056) Prior service cost ............... 22 21 62 Net actuarial loss ............... 5 7 54 Settlement cost for a terminated plan ................ 669 -- -- ------------------------------------ Net periodic benefit cost / (income) .................. $ 1,425 $ (580) $ (170) ==================================== The postretirement obligations represent a fixed dollar amount per retiree. The Company has the right to modify or terminate these benefits. The participants will assume substantially all future health care benefit cost increases, and therefore, future increases in health care costs will not increase the postretirement benefit obligation or cost to the Company. Therefore, the Company has not assumed any annual rate of increase in the per capita cost of covered health care benefits for future years. The components of net periodic benefit cost for postretirement health care benefits are shown below. Postretirement Benefits - -------------------------------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Components of net periodic benefit cost: Service cost ........................... $107 $ 92 $ 13 Interest cost .......................... 305 280 149 ------------------------------------ Net periodic benefit cost .............. $412 $372 $162 ==================================== The Company also sponsors various defined contribution plans that provide employees with an opportunity to accumulate funds for their retirement. The Company matches the contributions of participating employees based on the percentages specified in the respective plans. The Company recognized expense related to these plans of $1,395, $1,408 and $1,211 in 2001, 2000 and 1999, respectively. K. INCOME TAXES The provision for income taxes consisted of: 2001 2000 1999 - -------------------------------------------------------------------------------- Current: Federal .............................. $21,644 $17,693 $18,398 State ................................ 2,751 2,574 2,177 Foreign .............................. 1,460 1,063 547 Deferred ................................ (2,051) 1,871 (985) ------------------------------------ $23,804 $23,201 $20,137 ==================================== Income taxes paid,net of refunds, totaled $26,858, $16,458 and $22,234 during 2001, 2000 and 1999, respectively. Earnings before income taxes and minority interests included the following components: 2001 2000 1999 - -------------------------------------------------------------------------------- Domestic income ........................ $62,664 $60,471 $53,467 Foreign income ......................... 3,070 3,016 2,148 ------------------------------------ $65,734 $63,487 $55,615 ==================================== The provision for income taxes resulted in effective tax rates that differ from the statutory United States federal income tax rate. The reasons for these differences are as follows: Percent of Pretax Earnings - -------------------------------------------------------------------------------- 2001 2000 1999 - -------------------------------------------------------------------------------- Statutory U.S. tax rate ................. 35.0% 35.0% 35.0% State income taxes, net of federal benefit ...................... 2.6 2.6 2.6 Foreign sales ........................... (1.1) (0.8) (0.8) Other, net .............................. (0.3) (0.3) (0.6) ------------------------------------ Consolidated effective income tax rate ...................... 36.2% 36.5% 36.2% ==================================== The components of the net deferred tax liability as of November 30, 2001 and 2000 were as follows: - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) 2001 2000 - -------------------------------------------------------------------------------- Deferred tax assets: Deferred compensation ................................. $ 4,304 $ 3,930 Other postretirement benefits ......................... 931 783 Foreign net operating loss carryforwards .............. 406 377 Accounts receivable ................................... 3,385 2,177 Inventories ........................................... 3,113 1,774 Other comprehensive income items ...................... 1,026 -- Accrued liabilities and other ......................... 2,915 2,071 -------------------- Total gross deferred tax assets ........................... 16,080 11,112 -------------------- Deferred tax liabilities: Pensions .............................................. (5,069) (5,209) Plant assets .......................................... (12,081) (11,189) Intangibles ........................................... (526) 36 Other ................................................. -- (82) -------------------- Total gross deferred tax liabilities ...................... (17,676) (16,444) -------------------- Net deferred tax liability ................................ $ (1,596) $(5,332) ==================== The Company expects to realize the deferred tax assets, including foreign net operating loss carryforwards, through the reversal of taxable temporary differences and future earnings. As of November 30, 2001, the Company has not provided taxes on accumulated unremitted foreign earnings of approximately $6,000 that are intended to be indefinitely reinvested to finance operations and expansion outside the United States. If such earnings were distributed beyond the amount for which taxes have been provided, foreign tax credits would substantially offset any incremental U.S. tax liability. L. CONTINGENCIES The Company is involved in legal actions arising in the normal course of business. Additionally, the Company is party to various proceedings relating to environmental issues. The U.S. Environmental Protection Agency (EPA) and/or other responsible state agencies have designated the Company as a potentially responsible party (PRP), along with other companies, in remedial activities for the cleanup of waste sites under the federal Superfund statute. Environmental and related remediation costs are difficult to quantify for a number of reasons, including the number of parties involved, the difficulty in determining the extent of the contamination, the length of time remediation may require, the complexity of the environmental regulation and the continuing advancement of remediation technology. Applicable federal law may impose joint and several liability on each PRP for the cleanup. It is the opinion of management that additional liabilities, if any, resulting from these legal or environmental issues, are not expected to have a material adverse effect on the Company's financial condition or consolidated results of operations. M. PREFERRED STOCK PURCHASE RIGHTS In March 1996, the Board of Directors of CLARCOR adopted a Shareholder Rights Plan to replace an existing plan that expired on April 25, 1996. Under the terms of the Plan, each shareholder received rights to purchase shares of CLARCOR Series B Junior Participating Preferred Stock. The rights become exercisable only after the earlier to occur of (i) 10 business days after the first public announcement that a person or group (other than a CLARCOR-related entity) has become the beneficial owner of 15% or more of the outstanding shares of CLARCOR Common Stock; or (ii) 10 business days (unless extended by the CLARCOR Board in accordance with the Rights Agreement) after the commencement of, or the intention to make, a tender or exchange offer, the consummation of which would result in any person or group (other than a CLARCOR related entity) becoming such a 15% beneficial owner. Each right entitles the holder to buy one- hundredth of a share of such preferred stock at an exercise price of $80 subject to certain adjustments. Once the rights become exercisable, each right will entitle the holder, other than the acquiring person or group, to purchase a number of CLARCOR common shares at a 50% discount to the then-market price of CLARCOR Common Stock. In addition, under certain circumstances, if the rights become exercisable, the holder will be entitled to purchase the stock of the acquiring individual or group at a 50% discount. The Board may also elect to redeem the rights at $.01 per right. The rights expire on April 25, 2006. The authorized preferred stock includes 300,000 shares designated as Series B Junior Participating Preferred Stock. N. INCENTIVE PLAN In 1994, the shareholders of CLARCOR adopted the 1994 Incentive Plan, which allows the Company to grant stock options, restricted stock and performance awards to officers, directors and key employees. The 1994 Incentive Plan incorporates the various incentive plans in existence prior to March 1994. In addition, the Company has, in connection with the 1997 acquisition of United Air Specialists, Inc. (UAS), assumed the stock option plans of UAS and has reserved 6,949 shares of the Company's common stock for issuance under the assumed UAS stock option plans. The amended 1994 Incentive Plan allows grants and awards of up to 1.5% of the outstanding common stock as of January 1 of each calendar year. In addition, the Compensation and Stock Option Committee of the Company's Board of Directors may approve an additional 1% of outstanding common stock to be awarded during any calendar year. Any portion that is not granted in a given year is available for future grants. After the close of fiscal year 2001, 314,761 shares were granted, including the restricted stock units discussed hereafter. The following is a description and a summary of key provisions related to this Plan. Stock Options In accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," the Company accounts for stock-based compensation using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related Interpretations and provides the disclosure-only provisions of SFAS 123. - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) Nonqualified stock options may, at the discretion of the Board of Directors, be granted at the fair market value at the date of grant or at an exercise price less than the fair market value at the date of grant. All options granted in 2001, 2000, and 1999 were at the fair market value at the dates of the grants. Options granted to key employees prior to the end of fiscal year 2000 vest 25% per year beginning at the end of the third year; therefore,they become fully exercisable at the end of six years. Options granted to key employees after the close of fiscal year 2000 vest 25% per year beginning at the end of the first year; therefore, they become fully exercisable at the end of four years. Options granted to non-employee directors vest immediately. All options expire ten years from the date of grant unless otherwise terminated. The following table summarizes the activity under the non-qualified stock option plans.
2001 2000 1999 - --------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price - --------------------------------------------------------------------------------------------------------- Outstanding at beginning of year ................ 2,286,026 $14.53 2,239,162 $14.83 2,116,182 $14.18 Granted ............................ 449,366 19.93 412,404 17.80 287,982 18.00 Exercised/ surrendered ...................... (411,262) 14.15 (365,540) 12.75 (165,002) 12.93 ----------------------------------------------------------------- Outstanding at end of year ...................... 2,324,130 $16.83 2,286,026 $14.53 2,239,162 $14.83 ----------------------------------------------------------------- Options exercisable at end of year ................... 1,531,152 $16.06 1,508,859 $14.68 1,159,462 $12.62 =================================================================
The following table summarizes information about the options at November 30, 2001. Options Outstanding Options Exercisable - -------------------------------------------------------------------------------- Weighted Weighted Weighted Range of Average Average Average Exercise Exercise Remaining Exercise Prices Number Price Life in Years Number Price - -------------------------------------------------------------------------------- $12.17 - $17.94 1,247,757 $14.49 4.57 935,988 $13.49 $18.38 - $26.00 1,076,373 $19.55 7.49 595,164 $20.10 In addition, stock options outstanding and exercisable at November 30, 2001 and 2000 assumed as part of the UAS acquisition were 6,949 and 20,669, respectively. These substitute options have an exercisable price range per share of $2.40 to $5.94 at November 30, 2001 and expire between 2002 and 2005. Long Range Performance and Restricted Stock Awards 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. The Company granted 28,383 performance shares on December 1, 1999. The shares vest at the end of three years. As of November 30, 2001, the Company has cancelled 14,609 and 4,860 shares of the 2000 and 1999 grants, respectively. Subsequent to the end of the fiscal year, the Company cancelled an additional 4,475 shares of the 1999 grant. During the performance period, officers and key employees are permitted to vote the performance shares and receive compensation equal to dividends declared on common shares. The Company accrues compensation expense assuming attainment of the performance goals ratably during the performance cycle. Distributions of Company common stock and cash for the performance periods ended November 30, 2001, 2000 and 1999 were $437, $488 and $485, respectively. During 2001,the Company granted 35,222 restricted units of Company common stock with a fair value of $18.50 per share, the market price of the stock at the date granted. In connection therewith, the Company cancelled 12,113 performance shares and 8,074 performance units from the December 1, 1999 grant and replaced them with 9,182 units of restricted stock and with additional stock option awards. The restricted share units require no payment from the employee and compensation cost is recorded based on the market price on the grant date and is recorded over the vesting period of four years. During the vesting period, officers and key employees receive compensation equal to dividends declared on common shares. Upon vesting, the employee may elect to defer receipt of their shares. Subsequent to the end of fiscal year 2001, 2,464 shares (net of 1,157 shares withheld for taxes) of the December 2000 restricted unit grant were issued and 6,855 units were deferred. In addition, the Company granted 25,436 restricted stock units in December 2001 at the market price on the date granted of $27.50. Compensation expense related to long range performance and restricted stock awards totaled $618, $901 and $534 in 2001, 2000 and 1999, respectively. No future awards of long range performance shares or units are expected to be granted. Directors' Restricted Stock Compensation The 1994 Incentive Plan, as amended on March 25,2000, provides for grants of shares of common stock to all non-employee directors equal to a one-year annual retainer in lieu of cash. The directors' rights to the shares vest immediately on the date of grant. In 2001 and 2000, respectively, 10,618 and 7,076 shares of Company common stock were issued under the amended plan. During 1999, 16,002 shares of Company common stock were issued under the plan of which 15,488 were cancelled in 2000 due to the plan amendment. During 1999, 1,321 shares from a prior year grant were forfeited. Compensation expense for the plan totaled $252, $184 and $191 in 2001, 2000 and 1999, respectively. Fair Value Accounting (SFAS 123) Had compensation expense for the Company's stock-based compensation plans been determined based on the fair value at the grant dates consistent with the method of SFAS 123, the Company's pro forma net earnings and diluted earnings per share would have been $40,760, $39,520 and $34,848 and $1.64, $1.61 and $1.43 for 2001, 2000 and 1999, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2000,and 1999. Adjustments for forfeitures are made as they occur. - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) 2001 2000 1999 - -------------------------------------------------------------------------------- Risk-free interest rate ....................... 5.53% 6.34% 4.87% Expected dividend yield ....................... 2.50% 2.47% 2.35% Expected volatility factor .................... 25.50% 25.00% 24.50% Expected option term (in years)................ 7.0 7.0 7.0 The weighted average fair value per option at the date of grant for options granted in 2001, 2000 and 1999 was $5.12, $5.28 and $4.88, respectively. The above pro forma disclosures may not be representative of the effects on reported net income and earnings per share for future years because compensation cost under SFAS 123 is amortized over the options' vesting period and compensation cost for options granted prior to fiscal year 1996 is not considered. O. TREASURY STOCK TRANSACTIONS AND EARNINGS PER SHARE During 1999, the Company purchased and retired 50,000 shares of common stock. The number of issued shares was reduced as a result of the retirement of these shares. The Company calculates and presents basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share." Diluted earnings per share reflects the impact of outstanding stock options if exercised during the periods presented using the treasury stock method. The following table provides a reconciliation of the numerators and denominators utilized in the calculation of basic and diluted earnings per share:
2001 2000 1999 - ---------------------------------------------------------------------------------------------- Net Earnings (numerator) ............................. $ 41,893 $ 40,237 $ 35,412 Basic EPS: Weighted average number of common shares outstanding (denominator) ................................... 24,535,199 24,269,675 23,970,011 Basic per share amount .......................... $ 1.71 $ 1.66 $ 1.48 -------------------------------------- Diluted EPS: Weighted average number of common shares outstanding ..................................... 24,535,199 24,269,675 23,970,011 Dilutive effect of stock options .................. 356,863 236,496 343,596 -------------------------------------- Diluted weighted average number of common shares outstanding (denominator) ................................ 24,892,062 24,506,171 24,313,607 Diluted per share amount ........................ $ 1.68 $ 1.64 $ 1.46 =====================================
For fiscal years ended November 30, 2001, 2000 and 1999, respectively, 28,491, 682,866 and 525,156 stock options with a weighted average exercise price of $25.97, $19.34 and $19.81 were not included in the computation of diluted earnings per share as the exercise prices of the options were greater than the average market price of the common shares during the respective periods. P. UNAUDITED QUARTERLY FINANCIAL DATA The unaudited quarterly data for 2001 and 2000 were as follows: First Second Third Fourth Quarter Quarter Quarter Quarter Total - -------------------------------------------------------------------------------- 2001: Net sales ...... $156,197 $159,505 $175,645 $175,617 $666,964 Gross profit ... 46,286 45,344 50,306 53,551 195,487 Net earnings ... 9,804 8,936 10,257 12,896 41,893 Net earnings per common share: Basic ........ $ 0.40 $ 0.36 $ 0.42 $ 0.52 $ 1.71 Diluted ...... $ 0.40 $ 0.36 $ 0.41 $ 0.51 $ 1.68 2000: Net sales ...... $150,697 $162,205 $160,830 $178,416 $652,148 Gross profit ... 44,283 49,985 47,778 56,299 198,345 Net earnings ... 7,063 10,090 10,078 13,006 40,237 Net earnings per common share: Basic ........ $ 0.29 $ 0.42 $ 0.41 $ 0.53 $ 1.66 Diluted ...... $ 0.29 $ 0.41 $ 0.41 $ 0.53 $ 1.64 Fiscal year 2001 was a fifty-two week year, whereas fiscal year 2000 was a fifty-three week year. Likewise, fourth quarter 2001 was a thirteen week quarter while fourth quarter 2000 was a fourteen week quarter. During the first quarter of 2001, the Company received a settlement payment of $7,000 for the early termination of a supply and license agreement and in connection therewith recognized an impairment loss in its Packaging segment of $2,422 related to certain plant assets as discussed in Note E. Q. SEGMENT INFORMATION The Company adopted Statement of Financial Accounting Standards No. 131 (SFAS 131), "Disclosures About Segments of an Enterprise and Related Information" effective with year-end 1999. This standard requires that companies disclose selected information by operating segment. SFAS 131 defines an operating segment as a component of a company which engages in business activities from which it may earn revenues and incur expenses; has its operating results regularly reviewed by the entity's chief operating decision makers to make decisions about the allocation of resources and the assessment of performance; and has discrete financial information available. Based on the economic characteristics of the Company's business activities,the nature of products, customers and markets served, and the performance evaluation by management and the Company's Board of Directors, the Company has identified three reportable segments: Engine/Mobile Filtration, Industrial/Environmental Filtration and Packaging. The Engine/Mobile Filtration segment manufactures and markets a complete line of filters used in the filtration of oils, air, fuel, coolant, hydraulic and transmission fluids in both domestic and international markets. The Engine/Mobile Filtration segment provides filters for certain types of transportation equipment including automobiles, heavy-duty and light trucks, buses and locomotives, marine and mining equipment, industrial equipment and heavy-duty construc- - -------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (Dollars in thousands except per share data) tion and agricultural equipment. The products are sold to aftermarket distributors, original equipment manufacturers and dealer networks, private label accounts and directly to truck service centers and large national accounts. The Industrial/Environmental Filtration segment manufactures and markets a complete line of filters, cartridges, dust collectors and filtration systems used in the filtration of air and industrial fluid processes in both domestic and international markets. The filters and filter systems are used in commercial and industrial buildings, hospitals, manufacturing processes, pharmaceutical processes, clean rooms, airports, shipyards, refineries, power generation plants and residences. The products are sold to commercial and industrial distributors, original equipment manufacturers and dealer networks, private label accounts, retailers and directly to large national accounts. The Packaging segment manufactures and markets consumer and industrial packaging products including custom-designed plastic and metal containers and closures and lithographed metal sheets in both domestic and international markets. The products are sold directly to consumer and industrial packaging customers. As discussed in Note P, the Company received a settlement payment of $7,000 for the early termination of a supply and license agreement and in connection therewith recognized an impairment loss in its Packaging segment of $2,422 related to certain plant assets as discussed in Note E. The segment's sales of plastic closures were reduced in 2001 as a result of the termination of the agreement. Net sales represent sales to unaffiliated customers. No single customer or class of product accounted for 10% or more of the Company's consolidated 2001 sales. Intersegment sales are not material. Assets are those assets used in each business segment. Corporate assets consist of cash and short-term cash investments, deferred income taxes, headquarters facility and equipment, pension assets and various other assets that are not specific to an operating segment. Unallocated amounts include interest income and expense and other non-operating income and expense items. The segment data for the years ended November 30, 2001, 2000 and 1999 were as follows: 2001 2000 1999 - -------------------------------------------------------------------------------- Net sales: Engine/Mobile Filtration .......... $ 250,960 $ 259,791 $ 238,680 Industrial/Environmental Filtration 346,394 319,746 174,889 Packaging ......................... 69,610 72,611 64,300 ----------------------------------- $ 666,964 $ 652,148 $ 477,869 =================================== Operating profit: Engine/Mobile Filtration .......... $ 51,785 $ 49,162 $ 43,591 Industrial/Environmental Filtration 16,761 18,433 5,120 Packaging ......................... 7,264 8,392 7,366 ----------------------------------- 75,810 75,987 56,077 Other income (expense) ............ (10,076) (12,500) (462) ----------------------------------- Earnings before income taxes and minority interests ............. $ 65,734 $ 63,487 $ 55,615 =================================== Identifiable assets: Engine/Mobile Filtration .......... $ 135,265 $ 144,563 $ 137,351 Industrial/Environmental Filtration 303,901 271,669 241,471 Packaging ......................... 41,652 41,891 36,173 Corporate ......................... 49,799 43,807 57,996 ----------------------------------- $ 530,617 $ 501,930 $ 472,991 =================================== Additions to plant assets: Engine/Mobile Filtration .......... $ 3,852 $ 7,588 $ 13,115 Industrial/Environmental Filtration 8,746 10,842 4,824 Packaging ......................... 5,404 8,045 3,217 Corporate ......................... 202 2,530 666 ----------------------------------- $ 18,204 $ 29,005 $ 21,822 =================================== Depreciation and amortization: Engine/Mobile Filtration .......... $ 7,725 $ 7,475 $ 6,944 Industrial/Environmental Filtration 10,711 10,145 5,132 Packaging ......................... 2,725 2,832 2,742 Corporate ......................... 689 627 554 ----------------------------------- $ 21,850 $ 21,079 $ 15,372 =================================== Financial data relating to the geographic areas in which the Company operates are shown for the years ended November 30, 2001, 2000 and 1999. Net sales by geographic area are based on sales to final customers within that region. 2001 2000 1999 - -------------------------------------------------------------------------------- Net sales: United States .................. $549,210 $532,210 $399,717 Europe ......................... 58,490 60,250 35,984 Other international ............ 59,264 59,688 42,168 ---------------------------------- $666,964 $652,148 $477,869 =================================== Plant assets, at cost less accumulated depreciation: United States .................. $131,171 $133,323 $119,196 Europe ......................... 5,144 5,695 5,650 Other international ............ 1,001 1,103 1,180 ---------------------------------- $137,316 $140,121 $126,026 =================================== EX-13.(A)(VII) 8 c66960ex13-avii.txt REPORT OF INDEPENDENT ACCOUNTANTS EXHIBIT 13(a)(vii) - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of earnings, shareholders' equity and cash flows present fairly, in all material respects, the consolidated financial position of CLARCOR Inc. and its subsidiaries at November 30, 2001 and November 30, 2000 and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 30, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP Chicago, Illinois January 8, 2002 EX-13.(A)(VIII) 9 c66960ex13-aviii.txt MANAGEMENT'S REPORT 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 three 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. /s/ NORMAN E. JOHNSON Norman E. Johnson Chairman, President and Chief Executive Officer /s/ BRUCE A. KLEIN Bruce A. Klein Vice President-Finance and Chief Financial Officer /s/ MARCIA S. BLAYLOCK Marcia S. Blaylock Vice President, Controller January 8, 2002 EX-13.(A)(IX) 10 c66960ex13-aix.txt INFORMATION UNDER THE CAPTION "11-YR FIN. REVIEW" EXHIBIT 13(a)(ix) - -------------------------------------------------------------------------------- 11-YEAR FINANCIAL REVIEW - --------------------------------------------------------------------------------
2001 2000 1999 1998 - --------------------------------------------------------------------------------------------------------- PER SHARE Equity ................................................ $ 11.14 $ 9.93 $ 8.77 $ 7.80 Diluted Earnings from Continuing Operations ........... 1.68 1.64 1.46 1.30 Diluted Net Earnings .................................. 1.68 1.64 1.46 1.30 Dividends ............................................. 0.4725 0.4625 0.4525 0.4425 Price: High ........................................... 27.59 21.44 21.38 24.63 Low ............................................ 16.88 16.06 14.25 14.25 - --------------------------------------------------------------------------------------------------------- EARNINGS DATA ($000) Net Sales ............................................. $ 666,964 $ 652,148 $ 477,869 $426,773 Operating Profit ...................................... 75,810 75,987 56,077 51,663 Interest Expense ...................................... 10,270 11,534 3,733 2,336 Pretax Income ......................................... 65,734 63,487 55,615 51,347 Income Taxes .......................................... 23,804 23,201 20,137 19,262 Income from Continuing Operations ..................... 41,893 40,237 35,412 32,079 Income from Discontinued Operations ................... -- -- -- -- Cumulative Effect of Accounting Changes ............... -- -- -- -- Net Earnings .......................................... 41,893 40,237 35,412 32,079 Basic Average Shares Outstanding ...................... 24,535 24,270 23,970 24,268 Diluted Average Shares Outstanding .................... 24,892 24,506 24,314 24,649 - --------------------------------------------------------------------------------------------------------- EARNINGS ANALYSIS Operating Margin ...................................... 11.4% 11.7% 11.7% 12.1% Pretax Margin ......................................... 9.9% 9.7% 11.6% 12.0% Effective Tax Rate .................................... 36.2% 36.5% 36.2% 37.5% Net Margin-Continuing Operations ...................... 6.3% 6.2% 7.4% 7.5% Net Margin ............................................ 6.3% 6.2% 7.4% 7.5% Return on Beginning Assets ............................ 8.3% 8.5% 11.6% 11.5% Return on Beginning Shareholders' Equity .............. 17.3% 19.1% 19.0% 18.7% Dividend Payout to Net Earnings ....................... 27.6% 27.9% 30.5% 33.4% - --------------------------------------------------------------------------------------------------------- BALANCE SHEET DATA ($000) Current Assets ........................................ $ 244,350 $ 230,479 $ 227,670 $168,173 Plant Assets, Net ..................................... 137,316 140,121 126,026 86,389 Total Assets .......................................... 530,617 501,930 472,991 305,766 Current Liabilities ................................... 94,931 97,826 97,475 61,183 Long-Term Debt ........................................ 135,203 141,486 145,981 36,419 Shareholders' Equity .................................. 274,261 242,093 210,718 186,807 - --------------------------------------------------------------------------------------------------------- BALANCE SHEET ANALYSIS ($000) Debt to Capitalization ................................ 33.0% 36.9% 40.9% 16.3% Working Capital ....................................... $ 149,419 $ 132,653 $ 130,195 $106,990 Current Ratio ......................................... 2.6 2.4 2.3 2.7 - --------------------------------------------------------------------------------------------------------- CASH FLOW DATA ($000) From Operations ....................................... $ 63,290 $ 54,130 $ 38,642 $ 42,267 For Investment ........................................ (51,353) (42,125) (160,658) (19,290) From/(For) Financing .................................. (15,326) (15,862) 103,501 (19,943) Change in Cash & Equivalents .......................... (3,446) (3,881) (18,576) 2,997 Capital Expenditures .................................. 18,204 29,005 21,822 15,825 Depreciation & Amortization ........................... 21,850 21,079 15,372 12,380 Dividends Paid ........................................ 11,575 11,207 10,814 10,717 Net Interest Expense .................................. 9,616 10,836 2,282 1,053 Income Taxes Paid ..................................... 26,858 16,485 22,234 16,199 EBITDA (A) ............................................ 100,082 97,066 71,449 64,043 Free Cash Flow (B) .................................... 33,511 13,918 6,006 15,725 - ---------------------------------------------------------------------------------------------------------
(A) Operating profit before depreciation, asset impairment and amortization. (B) Cash flow from operations less capital expenditures and dividends paid. - -------------------------------------------------------------------------------- 11-YEAR FINANCIAL REVIEW - --------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE Equity ........................................ $ 7.06 $ 6.46 $ 5.79 $ 5.18 $ 4.63 $ 4.39 $ 4.26 Diluted Earnings from Continuing Operations ... 1.11 1.07 0.97 0.87 0.72 0.66 0.78 Diluted Net Earnings .......................... 1.11 1.07 0.97 0.89 0.72 0.56 0.79 Dividends ..................................... 0.4350 0.4283 0.4217 0.4150 0.4067 0.4000 0.3667 Price: High ................................... 20.79 16.75 18.00 14.92 13.33 15.00 15.11 Low .................................... 13.33 12.42 12.08 10.58 10.67 10.00 8.67 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS DATA ($000) Net Sales ..................................... $ 394,264 $ 372,382 $ 330,110 $ 300,450 $253,211 $218,172 $213,999 Operating Profit .............................. 44,424 42,596 38,728 33,188 29,960 27,810 32,204 Interest Expense .............................. 2,759 3,822 3,418 3,298 3,979 4,438 4,402 Pretax Income ................................. 44,192 41,405 36,631 31,886 27,221 24,930 28,778 Income Taxes .................................. 17,164 15,315 13,060 12,057 9,944 8,941 10,095 Income from Continuing Operations ............. 26,918 25,945 23,500 20,786 17,277 15,989 18,683 Income from Discontinued Operations ........... -- -- -- -- -- -- 297 Cumulative Effect of Accounting Changes ....... -- -- -- 630 -- (2,370) -- Net Earnings .................................. 26,918 25,945 23,500 21,416 17,277 13,619 18,980 Basic Average Shares Outstanding .............. 24,133 23,908 23,850 23,804 23,831 24,030 23,915 Diluted Average Shares Outstanding ............ 24,344 24,217 24,205 24,030 24,076 24,346 23,988 - ------------------------------------------------------------------------------------------------------------------------------------ EARNINGS ANALYSIS Operating Margin .............................. 11.3% 11.4% 11.7% 11.0% 11.8% 12.7% 15.0% Pretax Margin ................................. 11.2% 11.1% 11.1% 10.6% 10.8% 11.4% 13.4% Effective Tax Rate ............................ 38.8% 37.0% 35.7% 37.8% 36.5% 35.9% 35.1% Net Margin-Continuing Operations .............. 6.8% 7.0% 7.1% 6.9% 6.8% 7.3% 8.7% Net Margin .................................... 6.8% 7.0% 7.1% 7.1% 6.8% 6.2% 8.9% Return on Beginning Assets .................... 10.1% 10.6% 11.4% 11.2% 9.5% 7.6% 11.6% Return on Beginning Shareholders' Equity ...... 17.4% 18.8% 19.1% 19.4% 16.4% 13.4% 21.3% Dividend Payout to Net Earnings ............... 38.2% 36.7% 39.7% 43.0% 52.3% 65.8% 43.0% - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE SHEET DATA ($000) Current Assets ................................ $ 160,527 $ 140,726 $ 133,286 $ 109,992 $ 97,569 $105,067 $ 87,322 Plant Assets, Net ............................. 82,905 84,525 73,047 58,787 53,839 42,324 52,324 Total Assets .................................. 282,519 267,019 245,697 206,928 191,657 181,660 179,337 Current Liabilities ........................... 54,237 51,297 49,841 43,926 37,647 30,559 25,977 Long-Term Debt ................................ 37,656 43,449 41,860 25,090 32,650 38,534 45,406 Shareholders' Equity .......................... 171,162 154,681 138,144 122,801 110,299 105,460 102,000 - ------------------------------------------------------------------------------------------------------------------------------------ BALANCE SHEET ANALYSIS ($000) Debt to Capitalization ........................ 18.0% 21.9% 23.3% 17.0% 22.8% 26.8% 30.8% Working Capital ............................... $ 106,290 $ 89,429 $ 83,445 $ 66,066 $ 59,922 $ 74,508 $ 61,345 Current Ratio ................................. 3.0 2.7 2.7 2.5 2.6 3.4 3.4 - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOW DATA ($000) From Operations ............................... $ 41,632 $ 26,675 $ 21,092 $ 25,670 $ 20,727 $ 23,456 $ 19,012 For Investment ................................ (8,193) (18,934) (29,044) (1,159) (74) (7,737) (15,848) From/(For) Financing .......................... (21,850) (8,774) 7,226 (18,656) (22,772) (9,929) (8,059) Change in Cash & Equivalents .................. 11,497 (964) (684) 5,912 (2,197) 5,811 (4,895) Capital Expenditures .......................... 11,349 22,230 14,471 12,119 10,776 8,290 10,804 Depreciation & Amortization ................... 11,600 10,704 9,145 8,166 7,227 8,387 7,722 Dividends Paid ................................ 10,290 9,512 9,330 9,201 9,036 8,958 8,165 Net Interest Expense .......................... 1,739 2,991 2,560 2,750 3,104 4,140 3,280 Income Taxes Paid ............................. 15,112 11,230 11,939 10,194 10,059 11,200 9,693 EBITDA (A) .................................... 56,024 53,300 47,873 41,354 37,187 36,197 39,926 Free Cash Flow (B) ............................ 19,993 (5,067) (2,709) 4,350 915 6,208 43 - ------------------------------------------------------------------------------------------------------------------------------------
EX-13.(A)(X) 11 c66960ex13-ax.txt MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBIT 13(a)(x) - -------------------------------------------------------------------------------- FINANCIAL REVIEW - -------------------------------------------------------------------------------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) CLARCOR's operating results for fiscal 2001 reached record levels for sales, cash flow and earnings. Fiscal 2001 included six-month results from Total Filtration Services, Inc. (TFS) which was acquired at the beginning of the third quarter of fiscal 2001. This acquisition increased CLARCOR's sales and operating profit, and after related interest and amortization expenses, also increased net earnings and diluted earnings per share in fiscal 2001. Purchase accounting adjustments for the acquisition will be completed in fiscal 2002 as described in Note C to the Consolidated Financial Statements. The Company also made several smaller acquisitions in fiscal 2000 that were not material to the Company's operating results. Fiscal 2000 included the full-year results from three industrial filtration companies (hereafter, the Industrial Filtration Acquisitions) that were acquired at the beginning of the fourth quarter 1999. TFS, the Industrial Filtration Acquisitions and the smaller fiscal 2000 acquisitions are included in the Industrial/Environmental Filtration segment. The information presented in this financial review should be read in conjunction with other financial information provided throughout this 2001 Annual Report. The following discussion of operating results focuses on the Company's three reportable business segments: Engine/Mobile Filtration, Industrial/Environmental Filtration and Packaging. Fiscal 2001 was a fifty-two week year for the Company and fiscal years 2000 and 1999 were fifty-three and fifty-two week years, respectively. OPERATING RESULTS SALES Net sales in fiscal 2001 were $667.0 million, a 2.3% increase from $652.1 million in fiscal 2000. The 2001 net sales included approximately $28 million for TFS which was acquired at the beginning of the third quarter. Fiscal 2000 included approximately $12-$13 million in additional sales compared to fiscal 2001 as fiscal year 2000 was a fifty-three week year for the Company. The 2001 sales increase was the 15th consecutive year of sales growth for the Company. Net sales grew 36.5% in 2000 over the 1999 level of $477.9 million primarily due to a full year of sales from the Industrial Filtration Acquisitions compared to 1999 which included only the fourth quarter activity. Excluding the additional sales from the Industrial Filtration Acquisitions, sales increased approximately 11% in 2000 from 1999. Comparative net sales information related to CLARCOR's operating segments is shown in the following tables. 2001 VS. 2000 CHANGE -------------- NET SALES 2001 % TOTAL $ % - --------------------------------------------------------------------------- Engine/Mobile Filtration ............... $251.0 37.6% $(8.8) -3.4% Industrial/Environmental Filtration .... 346.4 52.0% 26.7 8.3% Packaging .............................. 69.6 10.4% (3.0) -4.1% -------------------------------- Total ............................... $667.0 100.0% $14.9 2.3% ================================ 2000 vs. 1999 Change ---------------- NET SALES 2000 % Total $ % - ------------------------------------------------------------------------------- Engine/Mobile Filtration ............... $259.8 39.9% $ 21.1 8.8% Industrial/Environmental Filtration .... 319.7 49.0% 144.8 82.8% Packaging .............................. 72.6 11.1% 8.3 12.9% ------------------------------------ Total ............................... $652.1 100.0% $174.2 36.5% ==================================== The Engine/Mobile Filtration segment's sales decreased 3.4% in 2001 from 2000,or approximately 1.5%,excluding the additional week in fiscal 2000. The segment's sales were lower than expected for fiscal 2001 due to the slow down in the U.S. economy that led to competitive pricing pressures and a reduction in inventory levels and product demand by our customers. Fiscal 2000 sales included increases for heavy-duty, light-duty and railroad filter products from both domestic and international markets compared to fiscal 1999. The segment's sales were favorably impacted in 2000 by new product introductions, additional OEM sales, and penetration into new domestic and international distribution channels, primarily through sales to quick lube and truck service centers, fleets and automotive parts buying groups. The Company's Industrial/Environmental Filtration segment recorded an 8.3% increase in sales in 2001 over 2000. Included in 2001 were sales of approximately $28 million for six months of activity from TFS. Excluding sales from TFS and the additional week in fiscal 2000, sales for the segment increased approximately 1.5% compared to fiscal 2000. Fiscal 2001 also included additional sales from new products introduced late in fiscal 2000 and greater distribution coverage for environmental filters. This increase was partially offset by lower sales due to the U.S. economic recession which primarily affected sales of filtration equipment and systems. The segment's sales increased 82.8% in 2000,or excluding acquisitions, approximately 11% over fiscal 1999. The 11% sales increase resulted primarily from higher sales of environmental air filtration and electrostatic air quality products. The Packaging segment's sales of $69.6 million decreased 4.1% in fiscal 2001 from 2000. Included in 2001 was a non-recurring $7.0 million payment arising from the early termination of a supply and license agreement by a customer. Sales to this customer of plastic closures decreased substantially beginning in the first quarter 2001. The segment was unable to completely replace this business during the year although sales increased for non-promotional metal packaging products and flat sheet decorating. The segment focuses on sales of non-promotional packaging products such as metal closures for food and beverage containers, wire spools, and film and battery cartridges. This focus resulted in a 12.9% increase in sales in 2000 from 1999. OPERATING PROFIT Operating profit of $75.8 million in 2001 was slightly lower than $76.0 million in 2000. Operating profit in 2001 included approximately $1.2 million from the TFS acquisition and operating profit in 2000 included approximately $1.5 million of additional profit due to the fifty-three week fiscal year in 2000. Operating profit increased 35.5% in fiscal 2000 from 1999. Excluding the Industrial Filtration Acquisitions, fiscal - -------------------------------------------------------------------------------- FINANCIAL REVIEW - -------------------------------------------------------------------------------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) 2000 operating profit rose approximately 19% over fiscal 1999. Operating margin was 11.4% of sales in 2001 and 11.7% of sales in both fiscal 2000 and 1999. In both fiscal 2001 and 2000,continued cost reductions, improved manufacturing productivity and the integration of acquired businesses positively impacted operating margin. These profit improvements offset, in part, competitive pricing pressures and cost increases the Company experienced for energy, employee insurance and pensions. Selling and administrative expenses were reduced to $119.7 million in 2001 from $122.3 million in 2000 primarily due to discretionary cost reductions and reduced incentive compensation expenses. Selling and administrative expenses increased to $122.3 million in 2000 from $92.5 million in 1999 primarily due to the Industrial Filtration Acquisitions that were included for an additional nine months in 2000 and related amortization charges, and also due to new product development and sales and marketing programs. Although foreign currency fluctuations reduced sales and operating profit in fiscal 2001 and 2000, currency adjustments did not have a material impact on consolidated operating profit in 2001, 2000 or 1999. Comparative operating profit information related to the Company's business segments is as follows. 2001 VS. 2000 CHANGE ---------------- OPERATING PROFIT 2001 % TOTAL $ % - ---------------------------------------------------------------------------- Engine/Mobile Filtration ............... $51.8 68.3% $ 2.6 5.3% Industrial/Environmental Filtration .... 16.8 22.1% (1.6) -9.1% Packaging .............................. 7.2 9.6% (1.2) -13.4% --------------------------------- Total ............................... $75.8 100.0% $ (0.2) -0.2% ================================= 2000 vs. 1999 Change ---------------- OPERATING PROFIT 2000 % Total $ % - ---------------------------------------------------------------------------- Engine/Mobile Filtration ............... $49.2 64.7% $ 5.6 12.8% Industrial/Environmental Filtration .... 18.4 24.3% 13.3 260.0% Packaging .............................. 8.4 11.0% 1.0 13.9% --------------------------------- Total ............................... $76.0 100.0% $ 19.9 35.5% ================================= OPERATING MARGIN AS A PERCENT OF NET SALES 2001 2000 1999 - ---------------------------------------------------------------------------- Engine/Mobile Filtration ............... 20.6% 18.9% 18.3% Industrial/Environmental Filtration .... 4.8% 5.8% 2.9% Packaging .............................. 10.4% 11.6% 11.5% --------------------------------- Total ............................... 11.4% 11.7% 11.7% ================================= Operating profit for the Engine/Mobile Filtration segment increased to $51.8 million in 2001 from $49.2 million in 2000, an increase of 5.3%. Operating margin as a percent of sales in fiscal 2001 improved to a record 20.6% from 18.9% in 2000 and 18.3% in 1999. In fiscal 2001,the segment's operating margin improved as a result of material and labor cost reductions and improved productivity in its main distribution and light-duty filter manufacturing facilities. These improvements more than offset increased energy and employee insurance costs and competitive pricing pressures. In fiscal 2000,the segment's operating profit was favorably impacted compared to 1999 by higher sales volumes, productivity improvements and reduced legal costs, which more than offset the negative impacts of increased energy, labor and raw material costs. The Industrial/Environmental Filtration segment's operating profit in 2001 was $16.8 million, a decrease from $18.4 million in 2000 primarily as a result of start-up costs early in fiscal 2001 related to two new production facilities and reduced sales of filtration equipment and systems. The start-up costs associated with the new facilities and new product introductions decreased during the third quarter of 2001 as production efficiencies and capacity utilization improved. Fiscal 2001 also included approximately $1.2 million of operating profit from TFS for the six-month period since the acquisition. The segment's operating profit of $18.4 million in 2000 increased significantly from $5.1 million in 1999. Approximately $9 million of the increase was due to the Industrial Filtration Acquisitions. The remaining increase of $4.3 million, or an increase of approximately 90%, was due to improvements in previously existing businesses. The increased profit in these businesses reflected a significantly higher sales volume of industrial and environmental air filtration products, improved manufacturing operations and significant reductions in overhead and administrative costs, many of which were implemented beginning in fiscal 1999. The Packaging segment's operating profit in fiscal 2001 decreased to $7.2 million from $8.4 million in fiscal 2000. Fiscal 2001 results included approximately $7.0 million related to a non-recurring termination payment from a customer that was reduced by $2.4 million for related asset impairment charges. Excluding this item, operating profit was lower than 2000 due to the lower sales of plastic closures to this customer, reduced capacity utilization, higher energy and pension costs, and increased costs related to the installation of new lithography equipment in early 2001. Due to difficulties with the start-up of this new equipment, plant utilization was reduced throughout 2001 from expected levels and costs were incurred for product scrap and rework. In fiscal 2000, the segment's operating profit increased to $8.4 million from $7.4 million in 1999, or 13.9%. This increase resulted from better capacity utilization, a significant increase in sales volume and reduced discretionary spending. OTHER INCOME & EXPENSE Net other expense totaled $10.1 million in 2001, $12.5 million in 2000 and $0.5 million in 1999. Interest expense of $10.3 million was lower in 2001 compared with $11.5 million in 2000, due to declining interest rates and reduced overall borrowings during the year. Interest expense increased in 2000 from $3.7 million in 1999 due to additional borrowings in the fourth quarter of 1999 for the Industrial Filtration Acquisitions. Interest income was $0.7 million for both 2001 and 2000, which was reduced from $1.5 million in 1999 as a result of lower interest rates and lower average cash and short-term cash investment balances primarily due to the use of cash for acquisitions in 1999. Currency gains of $0.2 million in 2001 and losses of $1.2 million in 2000 resulted primarily from fluctuations in European currency exchange rates against the U.S. dollar. There were no significant gains or losses on the disposition of plant assets in fiscal 2001 or 2000; however, a gain of $1.7 million recorded in 1999 was primarily from the sale of a building. PROVISION FOR INCOME TAXES The provision for income taxes in 2001 was $23.8 million and resulted in an effective tax rate of 36.2%, which was slightly lower than the effective tax rate of 36.5% in 2000. The effective tax rate was 36.2% in 1999. The effective tax rate in 2002 is expected to be approximately the same rate as recorded in 2001. NET EARNINGS AND EARNINGS PER SHARE Net earnings were a record $41.9 million in 2001,or diluted earnings per share of $1.68, compared to $40.2 million, or $1.64 per diluted share in 2000. Net earnings in 1999 were $35.4 million, or $1.46 per diluted share. Diluted average shares outstanding for fiscal 2001 were 24,892,062 compared to 24,506,171 for 2000,an increase of 1.6%. Diluted average shares outstanding for fiscal 1999 were 24,313,607. The increase in outstanding shares was primarily due to stock options. FINANCIAL CONDITION CORPORATE LIQUIDITY The Consolidated Statements of Cash Flows are shown on page 15, and this discussion of corporate liquidity should be read in conjunction with information presented in those statements. Cash and short-term cash investments decreased to $7.4 million at year-end 2001 from $10.9 million at year-end 2000. Cash provided by operating activities totaled $63.3 million in 2001 compared to $54.1 million in 2000 and $38.6 million in 1999. As a result of an increased emphasis on working capital management during fiscal 2001, accounts receivable and inventories decreased excluding the TFS assets acquired in the third quarter 2001. Accounts receivable and inventories increased during 2000 due to the higher level of business activity throughout the Company. Other current assets and pension liabilities were reduced in 2000 as restricted trust assets were used for the payment of nonqualified pension liabilities. Depreciation and amortization increased in fiscal 2000 from 1999 primarily due to the fourth quarter 1999 Industrial Filtration Acquisitions. The Company used cash of $51.4 million for investing activities in 2001, $42.1 million in 2000 and $160.7 million in 1999. Cash used for acquisitions in 2001, primarily for TFS, totaled $33.4 million, while cash used for the acquisition of several small filtration businesses in 2000 totaled $12.7 million. In fiscal 1999, $142.7 million, net of cash acquired, was used for acquisitions, primarily the Industrial Filtration Acquisitions. Additions to plant assets totaled $18.2 million in 2001 and included residual payments on several projects begun in fiscal 2000. Additions to plant assets in 2000 totaled $29.0 million and included payments on new state-of-the-art lithography equipment, the purchase and refurbishment of a manufacturing building in Campbellsville, Kentucky, and additional manufacturing capacity throughout the Company. Additions to plant assets in 1999 of $21.8 million included adding plant capacity and the completion of an expansion to a manufacturing and distribution facility in Kearney, Nebraska. Cash of $3.9 million was received in 1999 primarily from the sale of a building. Net cash used in financing activities totaled $15.3 million and $15.9 million in 2001 and 2000, respectively. The Company received $8.0 million in 2001 from the issuance of industrial revenue bonds related to the manufacturing facility in Campbellsville, Kentucky. During 2001 the Company also borrowed an additional $27.5 million against a revolving credit agreement, primarily for the TFS acquisition; however, payments of $36.5 million were made during the year which reduced the total borrowed from the agreement at year-end 2001 to $107.0 million. The Company borrowed a net additional $1.0 million against the revolving credit agreement during 2000. Net cash provided by financing activities in fiscal 1999 totaled $103.5 million and included $115.0 million in borrowings used for the Industrial Filtration Acquisitions. The Company did not repurchase any shares in 2001 or 2000 under the remaining authorization of approximately 920,000 shares from the December 1997 Board of Directors' approved stock repurchase plan. The Company purchased 50,000 shares of CLARCOR common stock for $0.9 million in 1999. Dividend payments totaled $11.6 million, $11.2 million and $10.8 million in 2001,2000 and 1999,respectively. Payments on long-term debt were $5.3 million in 2001, $7.0 million in 2000 and $0.5 million in 1999. CLARCOR's current operations continue to generate cash and sufficient lines of credit remain available to fund current operating needs, pay dividends, provide for additions and the replacement of necessary plant facilities, and to service and repay long-term debt. Capital expenditures for normal facility maintenance, productivity improvements and new products are expected to be approximately $21-$23 million in fiscal 2002. Due to the September 1999 Industrial Filtration Acquisitions, a $185.0 million multicurrency revolving credit facility was established with several financial institutions. Of the $185.0 million, a total of $107.0 million of the credit facility was outstanding as of year-end 2001 and $11.2 million was outstanding for letters of credit. Principal payments on long-term debt will be approximately $5.6 million in 2002 based on scheduled payments in current debt agreements. No payments are required in fiscal 2002 on the multicurrency revolving credit facility and the Company is in compliance with all covenants related to the credit facility, as described in Note H to the Consolidated Financial Statements. Other than operating leases, as described in Note I to the Consolidated Financial Statements, the Company has no material off-balance sheet arrangements. Commitments for noncancellable leases in 2002 total approximately $7.3 million. While customer demand for our products will affect operating cash flow, the Company is not aware of any known trends, demands or reasonably likely events that would materially affect cash flow from operations in the future. It is possible that business acquisitions or dispositions could be made in the future that may require changes in the Company's debt and capitalization. CAPITAL RESOURCES The Company's financial position at November 30,2001 continued to be sufficiently liquid to support current operations. Total assets increased to $530.6 million at the end of fiscal 2001,an increase of 5.7% from the year-end 2000 level of $501.9 million. Total current assets increased to $244.4 million - -------------------------------------------------------------------------------- FINANCIAL REVIEW - -------------------------------------------------------------------------------- (DOLLARS IN MILLIONS EXCEPT PER SHARE DATA) from $230.5 million at year-end 2000 and total current liabilities decreased to $94.9 million from $97.8 million at year-end 2000. The current ratio was 2.6 at year-end 2001 compared to 2.4 at year-end 2000. Excluding the TFS assets acquired at the beginning of the third quarter 2001,accounts receivable and inventories decreased during fiscal 2001 partially due to increased emphasis on working capital management. Current liabilities at year-end 2001 were lower primarily due to reduced accruals for incentive plans and income taxes. Plant assets decreased to $137.3 million as a result of increased depreciation and the write-off of certain Packaging manufacturing equipment, which offset the plant asset additions made during the year. Acquired intangibles increased to $116.7 million primarily due to the acquisition of TFS during fiscal 2001. Current liabilities include accruals for costs related to litigation matters arising in the normal course of business. See Note L in the Notes to Consolidated Financial Statements for further information on these matters. Long-term debt of $135.2 million at year-end 2001 included the borrowing against the revolving credit facility. Shareholders' equity increased to $274.3 million from $242.1 million at year-end 2000. The increase in shareholders' equity resulted primarily from net earnings of $41.9 million offset by dividend payments of $11.6 million, or $0.4725 per share. Long-term debt decreased to 33.0% of total capitalization at year-end 2001,compared to 36.9% at year-end 2000. At November 30, 2001, CLARCOR had 24,626,236 shares of common stock outstanding at $1.00 par value, compared to 24,381,307 shares outstanding at the end of 2000. OTHER MATTERS MARKET RISK The Company's market risk is primarily the potential loss arising from adverse changes in interest rates. The Company's long-term debt obligations are primarily at variable LIBOR associated rates and fixed interest rates and are denominated in U.S. dollars. In order to minimize the long-term costs of borrowing, the Company manages its interest rate risk by monitoring trends in rates as a basis for determining whether to enter into fixed rate or variable rate agreements. In addition, during fiscal 2000 the Company entered into several interest rate agreements related to the revolving credit agreement as described in Note H to the Consolidated Financial Statements. Market risk is estimated as the potential change in fair value of the Company's long-term debt obligations resulting from a hypothetical 1% increase in interest rates. A hypothetical 1% increase in interest rates on the Company's variable rate agreements would adversely affect fiscal 2002 net earnings and cash flows by approximately $0.4 million and reduce the fair value of fixed rate long-term debt, as measured at November 30, 2001, by approximately $0.3 million. Last year, a hypothetical 1% increase in interest rates would have adversely affected fiscal 2001's net earnings and cash flows by approximately $0.3 million and reduced the fair value of fixed rate long-term debt by approximately $0.9 million. Although the Company continues to evaluate derivative financial instruments, including forwards, swaps and purchased options, to manage foreign currency exchange rate changes, the Company did not hold derivatives for trading purposes during 2001, 2000 or 1999. The Company uses forward exchange contracts on a limited basis to manage foreign currency exchange risk related to certain transactions, primarily equipment purchases denominated in currencies other than U.S. dollars. As a result of increased foreign sales and business activities, the Company will continue to evaluate the use of derivative financial instruments to manage foreign currency exchange rate changes in the future. CRITICAL ACCOUNTING POLICIES The Company's critical accounting policies, including the assumptions and judgments underlying them, are disclosed in the Notes to the Consolidated Financial Statements. These policies have been consistently applied in all material respects and address such matters as revenue recognition, depreciation methods, inventory valuation, asset impairment recognition, business combination accounting and pension and postretirement benefits. While the estimates and judgments associated with the application of these policies may be affected by different assumptions or conditions, the Company believes the estimates and judgments associated with the reported amounts are appropriate in the circumstances. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001,the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS No. 142,"Goodwill and Other Intangible Assets." SFAS 141 requires that the purchase method of accounting be used for business combinations initiated after June 30,2001. Under SFAS 142,amortization of goodwill, including goodwill recorded in past business combinations, will discontinue upon adoption of this standard. In addition, goodwill and intangible assets with indefinite lives will be tested for impairment in accordance with the provisions of SFAS 142. Although not required to adopt the provisions of SFAS 142 until fiscal 2003,the Company expects to adopt SFAS 142 in the first quarter of fiscal 2002. The Company has not completed an assessment of the impact of these statements including the impairment test of goodwill and other intangible assets; however, at this time, it is expected that amortization expense will be reduced by approximately $2.5 million in fiscal 2002 as a result of adopting SFAS 142. Two other recently issued pronouncements, SFAS No. 143, "Accounting for Asset Retirement Obligations" and SFAS No. 144,"Accounting for the Impairment or Disposal of Long-Lived Assets" will be effective for the Company beginning in fiscal 2003. The Company has not yet evaluated the impact of these standards on its financial statements. OUTLOOK The Company's long-term objective to record compound annual growth rates in diluted earnings per share of 10% to 15% will require both sales growth and improved profitability in the Company's existing operations and additional acquisitions. Due in part to the recession in the U.S. economy during 2001, growth in diluted earnings per share was less in fiscal 2001 than in 2000 and in 1999. During fiscal 2001 the Company incurred significant start-up costs related to new production facilities and equipment, and incurred higher energy, employee insurance and pension costs than in prior years. If the U.S. economy improves during 2002 as expected, the Company anticipates that improved economic conditions will positively impact sales and earnings, and that 2002 will be the tenth consecutive year of earnings per share growth for the Company. The Company's Total Filtration Program that was started in fiscal 2000 is expected to continually add to sales levels in the Company's two filtration segments over the next several years. The acquisition of TFS in June 2001 increased the Company's ability to provide filtration management services to industrial companies throughout North America. Since the TFS acquisition, the Company's various other total filtration activities have been combined with TFS to provide a single focus throughout the Company. Several total filtration management contracts were completed late in 2001 and negotiations continue on others. The impact of these contracts will grow over the next several years as customers' facilities are converted to CLARCOR's Total Filtration Program. The Total Filtration Program is expected to serve as an added distribution channel for all of the Company's filtration products. The Company expects to make investments at TFS in 2002 that are planned to significantly accelerate its sales growth, but will slow the improvement in its operating margin in 2002. It is anticipated that TFS' margins will improve beginning in 2003. The Engine/Mobile Filtration segment is expected to increase its sales and profit by providing outstanding customer service, introducing new products and expanding marketing programs. These sales initiatives are expected to offset any continued reduction in sales due to reduced customer demand as a result of the economic recession, especially due to reduced freight mileage. The Industrial/Environmental Filtration segment is expected to grow sales and profits as a result of continued expansion of sales programs throughout various distribution channels, including the Total Filtration Program, and by continuing to achieve synergies and cost savings from integrating production facilities and processes. This segment continues to have the most potential for improved operating margins over the next few years, although this continues to be a highly competitive industry. The Packaging segment's focus on non-promotional metal decorating sales is expected to increase utilization of both the new lithography equipment and other production capacity. Due to decreased customer orders for plastic closures and the non-recurring termination payment received in 2001,overall sales and operating profit for the segment are expected to be lower in fiscal 2002 than in 2001. Excluding the $7.0 million non-recurring termination payment in 2001,Packaging sales are expected to increase to approximately $67-$69 million in fiscal 2002 compared to approximately $63 million in fiscal 2001. The Company will continue to implement cost reductions and productivity improvements, although competitive pricing pressures, increases in labor, healthcare, insurance and energy costs, and worldwide business conditions may reduce the overall profit improvement. Due to significantly reduced pension asset valuations and lower discount rates, pension expense will increase by approximately $3.0 million in fiscal 2002 from 2001. Capital investments will continue to be made in each segment's facilities during 2002 to improve productivity and support new products. It is expected that the investments made in fiscal 2001 and 2000 for new manufacturing facilities and production lines will continue to improve productivity and profitability. While the Company fully anticipates that sales and profits will improve as a result of these efforts, the Company has developed contingency plans to reduce discretionary spending if recessionary economic conditions persist. The Company continues to look at acquisition opportunities, primarily in related filtration businesses. It is expected that these acquisitions would expand the Company's market base, distribution coverage and product offerings. The Company has established financial standards that will continue to be vigorously applied in the review of all acquisition opportunities. Additionally, even though debt increased significantly in 1999 due to the Industrial Filtration Acquisitions, the Company believes that it has sufficient additional borrowing capacity to continue this acquisition program. FORWARD-LOOKING STATEMENTS Certain statements quoted in this Annual Report are forward-looking. These statements involve risk and uncertainty. Actual future results and trends may differ materially depending on a variety of factors including: the volume and timing of orders received during the year; the mix of changes in distribution channels through which the Company's products are sold; the success of the Company's Total Filtration Program; the timing and acceptance of new products and product enhancements by the Company or its competitors; changes in pricing, labor availability and related costs, product life cycles, raw material costs, insurance, pension and energy costs and purchasing patterns of distributors and customers; competitive conditions in the industry; business cycles affecting the markets in which the Company's products are sold; the effectiveness of plant conversions, plant expansions and productivity improvement programs; the management of both growth and acquisitions; the fluctuation in foreign and U.S. currency exchange rates; the fluctuation in interest rates, primarily LIBOR, which affect the cost of borrowing under the revolving credit facility; extraordinary events such as litigation, acquisitions or divestitures including related charges; and economic conditions generally or in various geographic areas. All of the foregoing matters are difficult to forecast. The future results of the Company may fluctuate as a result of these and the other risk factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. Due to the foregoing items, it is possible that, in the future, the Company's operating results will be below the expectations of stock market analysts and investors. In such event, the price of CLARCOR common stock could be materially adversely affected. EX-21 12 c66960ex21.txt SUBSIDIARIES EXHIBIT 21 CLARCOR INC. SUBSIDIARIES AS OF FEBRUARY 15, 2002
JURISDICTION OF INCORPORATION OR PERCENT OF NAME ORGANIZATION OWNERSHIP* - -------------------------------------- ---------------- ---------- CLARCOR Consumer Products, Inc. Delaware 100% J.L. Clark, Inc. Delaware 100% Clark Europe, Inc. Delaware 100% CLARCOR Filtration Products, Inc. Delaware 100% Airguard Industries, Inc. Kentucky 100% Airklean Engineering Pte. Ltd. Singapore 100% Airguard Asia Sdn. Bhd. Malaysia 100% Purolator Products Air Filtration Company Delaware 100% Baldwin Filters, Inc. Delaware 100% Baldwin Filters N.V. Belgium 100% Baldwin Filters Limited United Kingdom 100% Baldwin South Africa, Inc. Delaware 100% Baldwin-Unifil S.A. South Africa 80% Hastings Filters, Inc. Delaware 100% Hastings Filters Ltd. Canada Canada 100% Baldwin Filters (Aust.) Pty. Limited Australia 100% Clark Filter, Inc. Delaware 100% Filtros Baldwin de Mexico Mexico 90% Purolator Facet, Inc. Delaware 100% Facet FCE S.A.R.L. France 100% Facet Iberica S.A. Spain 100% Facet Industrial B.V. Netherlands 100% Facet Industrial U.K. Limited United Kingdom 100% Facet Italiana, S.p.A. Italy 100% Facet USA Inc. Delaware 100% Filter Products, Inc. California 100% GS Costa Mesa, Inc. Delaware 100% Purolator Filter GmbH Germany 100% Total Filtration Services, Inc. Ohio 100% MPW Industrial LLC of VC Mexico 100% United Air Specialists, Inc. Ohio 100% United Air Specialists (U.K.) Ltd. United Kingdom 100% CLARCOR International, Inc. Delaware 100% Baldwin-Weifang Filters Ltd. China 75% CLARCOR Foreign Sales Corporation Barbados 100% CLARCOR Trading Company Delaware 100%
- ------------------------------ * Direct or indirect EX-23 13 c66960ex23.txt CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in each Registration Statement on Form S-8 (file numbers 33-5456, 33-38590, 33-39374, 33-53763 and 33-53899) of CLARCOR Inc. and Subsidiaries of our report dated January 8, 2002 relating to the consolidated financial statements, which appears in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated January 8, 2002 relating to the financial statement schedule, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP Chicago, Illinois February 15, 2002 -----END PRIVACY-ENHANCED MESSAGE-----