-----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, AefrdgEz8aKctSoE3BmP83nmTEv3o9qf9H6WL66ksTOpiuHgag+aMe40z3LfHCYY 2bUTw34avJT4soH8ZLeVEQ== 0000950137-97-000746.txt : 19970222 0000950137-97-000746.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950137-97-000746 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970219 SROS: NYSE 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: 97538597 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 FORM 10-K405 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K
(MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996 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 11, 1997 as reported on the New York Stock Exchange Composite Transactions) of the voting stock held by non-affiliates of the registrant as at February 11, 1997 is $358,600,277. The number of outstanding shares of Common Stock, as of February 11, 1997 is 14,914,057 shares. Certain portions of the registrant's 1996 Annual Report to Shareholders are incorporated by reference in Parts I, II and IV. Certain portions of the registrant's Proxy Statement dated February 18, 1997 for the Annual Meeting of Shareholders to be held on March 25, 1997 are incorporated by reference in Part III. 2 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 1996, the year ended on November 30, 1996 and for fiscal year 1995, the year ended on December 2, 1995. 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. Acquisition of United Air Specialists, Inc. On September 23, 1996 the Company announced the signing of a definitive agreement to acquire United Air Specialists, Inc. ("UAS") located in Cincinnati, Ohio. The transaction, when completed, will be in the form of a merger of a wholly-owned subsidiary of CLARCOR into UAS with UAS surviving the merger and becoming a wholly-owned subsidiary of CLARCOR. UAS is engaged in the design, manufacture and sale of commercial and industrial air cleaners, electrostatic fluid contamination control equipment and high precision spraying equipment. For the fiscal year ended June 30, 1996, UAS had net sales of approximately $40.8 million and net earnings of approximately $1.5 million. For the first six months of fiscal 1997, its net sales were approximately $19.5 million and net earnings approximately $.4 million. The shareholders of UAS voted in favor of the transaction on February 14, 1997 and the transaction is expected to be closed on February 28, 1997. The transaction will be accounted for as a pooling of interests. No more than a total of 1,209,302 shares of CLARCOR's common stock will be issued in connection with such merger to the former holders of UAS common stock. Other. In December 1995, CLARCOR announced that a joint venture agreement had been signed with Weifang Power Machine Fittings Ltd. ("Weifang") located in China. The joint venture, called Baldwin-Weifang Filters Ltd., is 60% owned by CLARCOR and 40% owned by Weifang. The manufacture of heavy duty spin-on oil filters for trucks, construction equipment and agricultural equipment began in November 1996. Continued expansion of the joint venture is anticipated including a second production line for heavy duty filters which is expected to be in operation by the end of 1997. In February 1996, the acquisition was completed of Unifil (Pty.) Ltd., a South African manufacturer of air filtration products for heavy-duty transportation, construction and agricultural equipment and automobiles. Unifil was acquired by Baldwin-Unifil S.A., a South African partnership that is 70% owned by the Company's Baldwin Filters, Inc. subsidiary, and 30% owned by a three-member group from Unifil's management team. The Company's Airguard Industries subsidiary completed a new Technical Center located at its facility in Louisville, Kentucky. This new Technical Center is expected to result in the development of product enhancements and new products for the growing environmental and industrial filtration markets. The Board of Directors announced on March 29, 1996 the adoption of a new shareholder rights plan to replace an existing plan that expired on April 25, 1996. The new plan, as was the old plan, is designed to deter coercive takeover tactics and to assure that all shareholders receive fair and equal treatment in the event of any proposed takeover of CLARCOR. 2 3 A 70,000 square foot addition to the Hasting Filters plant in Yankton, South Dakota was completed during 1996 which added the capacity needed for the complete manufacture of primary components for light duty filters. The plant expansion, new and refurbished equipment installed in 1996, and improved manufacturing processes implemented in 1996 are expected to significantly improve the operating results for Hastings Filters in fiscal 1997. In November 1996, the Company sold 50% of its 5% interest in G.U.D. Holdings Limited ("GUD") and recognized an after-tax gain on the sale of approximately $1,072,000 or $0.07 per share. The remaining 2.5% investment was sold subsequent to the end of the fiscal year and an after-tax gain will be recorded in the first quarter of fiscal 1997 of approximately $1,089,000 or $0.07 per share. (ii) Summary of Business Operations. During 1996, the Company conducted business in two principal industry segments: (1) Filtration Products and (2) Consumer Products. Filtration Products. Filtration Products include filters used primarily in the replacement market in the trucking, construction, industrial, agricultural equipment, diesel locomotive, automotive and environmental industries. The segment's engine and mobile products include filters for oil, air, fuel, coolants and hydraulic fluids for trucks, automobiles, construction and industrial equipment, locomotives, marine and agricultural equipment. The segment's industrial and environmental products include air and antimicrobial treated filters for commercial buildings, factories, residential buildings, paint spray booths, gas turbine systems, medical facilities, motor vehicle cabins, clean rooms, compressors and dust collector systems. Consumer Products. Consumer Products include a wide variety of custom styled containers and packaging items used primarily by the food, spice, drug, toiletries and chemical specialties industries. The segment's products include lithographed metal containers, flat sheet decorating, combination metal and plastic containers, plastic closures, collapsible metal tubes, composite containers and various specialties, such as spools for wire and cable, dispensers for razor blades and outer shells for dry cell batteries and film canisters. (b) Financial Information About Industry Segments Business segment information for the fiscal years 1994 through 1996 is included on page 35 of the Company's 1996 Annual Report to Shareholders (the "Annual Report"), is incorporated herein by reference and is filed as part of Exhibit 13(a)(vi) to this 1996 Annual Report on Form 10-K ("1996 Form 10-K"). (c) Narrative Description of the Business FILTRATION PRODUCTS The Company's filtration products business is conducted by the CLARCOR Filtration Products segment which includes the following wholly-owned subsidiaries: Baldwin Filters, Inc.; Airguard Industries, Inc.; Clark Filter, Inc.; Hastings Filters, Inc.; Baldwin Filters N.V.; and Baldwin Filters Limited. In addition, the Company owns (i) 50% of Baldwin Filters (Aust.) Pty. Ltd., (ii) 90% of Filtros Baldwin de Mexico ("FIBAMEX"), (iii) 60% of Baldwin-Weifang Filters Ltd., and (iv) 70% of Baldwin-Unifil S.A. The companies market a line of over 18,000 oil, air, fuel, coolant and hydraulic fluid filters and industrial and environmental filters. The Company's filters are used in a wide variety of applications including engines, industrial equipment, environmentally controlled areas and in processes where effectiveness, reliability and durability are essential. Impure air or fluid impinge upon a paper, cotton, synthetic, chemical or membrane filter media which collects the impurities which are then disposed of when the filter is changed. Pleated filter media elements are held in specially treated paper or metal containers while cotton and synthetic filters use wound or compressed fibers with high absorption characteristics. The Company's filters are sold throughout the United States, Canada and worldwide, 3 4 primarily in the replacement market for trucks, automobiles, locomotives, marine, construction, industrial and agricultural equipment and for air filtration systems for buildings. In addition, some filters are sold to the original equipment market. The segment distributes filtration products worldwide through each of its subsidiaries. The Baldwin Filters N.V. and Baldwin Filters Limited subsidiaries primarily serve the European markets. The Company's joint venture with GUD, 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 fiscal 1996 investment in Baldwin-Weifang Filters Ltd., heavy duty filters are being manufactured in China for distribution in China and Southeast Asia. Additionally, through the Baldwin-Unifil S.A. acquisition, air filtration products are manufactured in South Africa with distribution throughout South Africa, Great Britain, Europe and the Middle East. CONSUMER PRODUCTS The Company's consumer products business is conducted by the Consumer Products segment which includes the Company's wholly-owned subsidiary, J. L. Clark, Inc. ("J. L. Clark"). In fiscal 1996 over 1,500 different types and sizes of containers and metal packaging specialties were manufactured for the Company's customers. Flat sheet decorating is provided by use of state-of-the-art lithography equipment. Metal, plastic and paper containers and plastic closures manufactured by the Company are used in packaging a wide variety of dry and paste form products, such as food specialties (tea, spices, dry bakery products, potato chips, pretzels, candy and other confections); beverages and juices; cosmetics and toiletries; drugs and pharmaceuticals; and chemical specialties (hand cleaners, soaps and special cleaning compounds). Metal packaging specialties include shells for dry batteries, film canisters, dispensers for razor blades, spools for insulated and fine wire, and custom decorated flat steel sheets. Containers and metal packaging specialties are manufactured only upon orders received from customers, and individualized containers and packaging specialties are designed and manufactured, usually with distinctive decoration, to meet each customer's marketing and packaging requirements and specifications. Through the Tube Division of J. L. Clark, the Company manufactures collapsible metal tubes for packaging ointments, artists' supplies, adhesives, cosmetic creams and other viscous materials. Over 150 types and sizes of collapsible metal tubes are manufactured. Tubes are custom manufactured from aluminum to the customer's specifications as to size, shape, neck design and decoration. Both coating and lithographic tube printing decoration techniques are used. During 1995 the Tube Division entered into an agreement with Kunststoffwerk Kutterer ("Kutterer") of Germany to distribute Kutterer's plastic tube closures in North America. DISTRIBUTION Filtration Products are sold primarily through a combination of over 3,300 independent distributors and dealers for original equipment manufacturers. The Australian joint venture markets heavy duty filtration products through the distributors of GUD, the Company's joint venture partner. Consumer Products salespersons call directly on customers and prospective customers for containers and packaging specialties. Each salesperson is trained in all aspects of the Company's manufacturing processes with respect to the products sold and as a result is qualified to consult with customers and prospective customers concerning the details of their particular requirements. 4 5 CLASS OF PRODUCTS The percentage of the Company's sales volume contributed by each class of similar products within the Company's Consumer Products segment which contributed 10% or more of sales is as follows:
1996 1995 1994 ---- ---- ---- Containers............................................... 17% 18% 20%
No class of products within the Company's Filtration Products segment accounted for as much as 10% of the total sales of the Company. RAW MATERIAL Steel, filter media, aluminum sheet and coil, stainless steel, chrome vanadium, chrome silicon, resins and aluminum slugs for tubes, 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 1996. PATENTS Certain features of some of the Company's Filtration and Consumer Products are covered by domestic and, in some cases, foreign patents or patent applications. While these patents are valuable and important for certain products, the Company does not believe that its competitive position is dependent upon patent protection. CUSTOMERS The largest 10 customers of the Filtration Products segment accounted for 13.4% of the $259,617,000 of fiscal year 1996 sales of such segment. The largest 10 customers of the Consumer Products segment accounted for 48.7% of the $73,771,000 of fiscal year 1996 sales of such segment. No single customer accounted for 10% or more of the Company's consolidated 1996 sales. BACKLOG At November 30, 1996, the Company had a backlog of firm orders for products amounting to approximately $33,900,000. The comparable backlog figure for 1995 was approximately $33,700,000. All of the orders on hand at November 30, 1996 are expected to be filled during fiscal 1997. The Company's backlog is not subject to significant seasonal fluctuations. COMPETITION The Company encounters strong competition in the sale of all of its products. In the Filtration Products segment, the Company competes in a number of markets against a variety of competitors. The Company is unable to state its relative competitive position in all of these markets due to a lack of 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 the replacement market for industrial and environmental filtration products, 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. 5 6 In the Consumer Products segment, its principal competitors are approximately 10 manufacturers whose specialty packaging segments are smaller than the Company's and who often compete on a regional basis only. In the Consumer Products market, strong competition is also presented by manufacturers of paper, plastic and glass containers. The Company's competitors generally manufacture and sell a wide variety of products in addition to packaging products of the type produced by the Company and do not publish separate sales figures relative to these competitive products. Consequently, the Company is unable to state its relative competitive position in those markets. The Company believes that it is able to maintain its competitive position because of the quality and breadth of its products and services. PRODUCT DEVELOPMENT The Company's laboratories test filters, containers, filter components, paints, inks, varnishes, adhesives and sealing compounds to insure high quality manufacturing results, aid suppliers in the development of special finishes and conduct controlled tests of finishes and newly designed filters and containers being perfected for particular uses. Product development departments are concerned with the improvement of existing filters, consumer products and the creation of new and individualized filters, containers and consumer products, in order to broaden the uses of these items, counteract obsolescence and evaluate other products available in the marketplace. During fiscal 1993, a new 25,000 square foot technical center in Kearney, Nebraska designed to enhance the Company's technology in the heavy duty filter industry became operational. During the fourth quarter of 1995, the Company added the Gas Turbine Systems Business Unit for the development of inlet air filtration systems. In 1996, a new technical center was completed in Louisville, Kentucky to develop new and redesigned environmental and industrial filtration products. In fiscal 1996, the Company employed 46 professional employees on a full-time basis on research activities relating to the development of new products or the improvement or redesign of its existing products. During this period the Company spent approximately $3,335,000 on such activities as compared with $3,013,000 for 1995 and $3,354,000 for 1994. ENVIRONMENTAL FACTORS The Company is not aware of any facts which would cause it to believe that it is in material violation of existing applicable standards respecting emissions to the atmosphere, discharges to waters, or treatment, storage and disposal of solid or hazardous wastes. There are no pending material claims or actions against the Company alleging violations of such standards. The Company does anticipate, however, that it may be required to install additional pollution control equipment to augment existing equipment in the future in order to meet applicable environmental standards. The Company is presently unable to predict the timing or the cost of such equipment and cannot give any assurance that the cost of such equipment may not have an adverse effect on earnings. 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, 1996, the Company had approximately 2,562 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 35 of the Annual Report and is incorporated herein by reference and filed as Exhibit 13(a)(vi) to this 1996 Form 10-K. The Company is not aware of any unusual risks attendant to the conduct of its operations in other countries. 6 7 ITEM 2. PROPERTIES. (i) Location The corporate office building located in Rockford, Illinois, houses the Corporate offices and the Filtration and Consumer Products headquarters offices in 22,000 square feet of office space. Filtration Products. The following is a description of the principal properties owned and utilized by the Company in conducting its Filtration Products business: The Baldwin Filters' Kearney, Nebraska plant contains 410,000 square feet of manufacturing and warehousing space, 25,000 square feet of research and development space, and 40,000 square feet of office space. It is located on a site of approximately 40 acres. In addition, Baldwin has a capital lease for a 100,000 square foot manufacturing facility on a site of 20 acres in Gothenburg, Nebraska. Airguard Industries has four manufacturing locations. It leases 167,000 square feet in New Albany, Indiana on a 8.5 acre tract of land, 84,000 square feet in Corona, California and 44,500 square feet in Dallas, Texas. 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. Airguard sales outlets with warehousing are located in Louisville, Kentucky; Cincinnati, Ohio; Toledo, Ohio; Nashville, Tennessee; Atlanta, Georgia; Columbus, Ohio; Birmingham, Alabama; Dallas, Texas; and Corona, California. During 1995 Airguard added distribution centers in Wallingford, Connecticut and New Albany, Indiana. 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. Hastings Filters' manufacturing and distribution facilities are located in Yankton, South Dakota and Knoxville, Tennessee. The Yankton facility has approximately 100,000 square feet of floor space on a 21 acre tract and the Knoxville facility has approximately 168,000 square feet of floor space on a 22 acre tract. An addition of 70,000 square feet to the Yankton facility was completed in 1996. Both facilities are owned by the Company. The Company leases various facilities in other countries for the manufacture and distribution of filtration products. Consumer Products. The following is a description of the principal properties owned by the Company in conducting its Consumer Products business: The Company's J. L. Clark, Rockford, Illinois plant, located on 34 acres, consists of one-story manufacturing buildings, the first of which was constructed in 1910. Since then a number of major additions have been constructed and an injection molding plant was constructed in 1972. Approximately 429,000 square feet of floor area are devoted to manufacturing, warehouse and office use. Of the 34 acres, approximately 12 are vacant. A 25,000 square foot addition to the injection molding facility was completed in January 1996. A J. L. Clark plant is located in Lancaster, Pennsylvania on approximately 11 acres. It consists of a two-story office building containing approximately 7,500 square feet of floor space and a manufacturing plant and warehouse containing 236,000 square feet of floor space, most of which is on one level. These buildings were constructed between 1924 and 1964. The J. L. Clark Tube Division's manufacturing plant is located in Downers Grove, Illinois on a 5-acre tract of land. The one-story building contains 58,000 square feet of floor space. The various properties owned by the Company are considered by it to be in good repair and well maintained. All of the manufacturing facilities are adequate for the current sales volume of the Company's products and can accommodate expansion of production levels before significant plant additions are required. 7 8 (ii) Function Filtration Products. Oil, air, fuel, hydraulic fluid and coolant filters are produced at the Baldwin and Hastings facilities in Kearney, and Gothenburg, Nebraska, Yankton, South Dakota and Knoxville, Tennessee. Much of the Baldwin plant equipment has been built or modified by Baldwin. The various processes of pleating paper, winding cotton and synthetic fibers, placing the filter element in a metal or fiber container and painting the containers are mechanized, but require manual assistance. The plants also maintain an inventory of special dies and molds for filter manufacture. Air filters for the industrial air and environmental markets are produced in the Airguard facilities. Oil, air and fuel filters, primarily for use in the railroad industry, are produced at Clark Filter in Lancaster, Pennsylvania. Consumer Products. The Company's metal and combination metal and plastic packaging products are produced at J. L. Clark plants located in Rockford, Illinois, and Lancaster, Pennsylvania. 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 high speed coating machines and lithographing presses connected with conveyor ovens. Decorated sheets are then cut to working sizes on shearing equipment, following which fabrication is completed by punch presses, can-forming and can-closing equipment and other specialized machinery for supplementary operations. Most tooling for fabricating equipment is designed and engineered by the Company's engineering staffs, and much of it is produced in the Company's tool rooms. Plastic packaging capabilities include printing and molding of irregular shaped plastic containers and customized plastic closures. J. L. Clark has the capability to mold and offset lithograph a one-piece irregular shaped semi-rigid plastic container with a living hinge cover. A growing area of specialty is custom-designed plastic closures for products which have tamper-evidence as well as convenience features. J. L. Clark's distinctive plastic closures include the combiTop(R) and the SST Series(TM) products. Collapsible metal tubes are produced at the J. L. Clark Tube Division plant in Downers Grove, Illinois from aluminum slugs on fully-automated production lines which consist of extrusion presses, trimming machines, annealing ovens, coating machines, printing presses and capping machines. When necessary for customer specifications, tubes can be internally waxed or lined in order to achieve chemical compatibility with products to be packed. Composite containers of both spiral and convolute construction, as well as some specialty items, are produced at J. L. Clark divisions in Rockford, Illinois and Lancaster, Pennsylvania. ITEM 3. LEGAL PROCEEDINGS. The Company is involved in legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material adverse effect on the Company's consolidated results of operations or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 8 9 ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
AGE AT YEAR ELECTED NAME 11/30/96 TO OFFICE - ---- -------- ------------ Lawrence E. Gloyd........................................... 64 1995 Chairman of the Board and Chief Executive Officer. Mr. Gloyd was elected President and Chief Operating Officer in 1986, President and Chief Executive Officer in 1988, Chairman, President and Chief Executive Officer in 1991, and Chairman of the Board and Chief Executive Officer in 1995. Norman E. Johnson........................................... 48 1995 President and Chief Operating 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, and President and Chief Operating Officer in 1995. Bruce A. Klein.............................................. 49 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........................................... 58 1994 Vice President-International/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 and Vice President-International/Corporate Development in 1994. David J. Lindsay............................................ 41 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. William F. Knese............................................ 48 1991 Vice President, Treasurer and Controller. Mr. Knese has been employed by the Company since 1979. He was elected Vice President, Treasurer and Controller in 1991. Peter F. Nangle............................................. 35 1994 Vice President-Information Services. Mr. Nangle has been employed by the Company since 1993. He was elected Vice President-Information Services in 1994. Marcia S. Blaylock.......................................... 40 1996 Vice President and Corporate Secretary. Ms. Blaylock has been an employee of the Company since 1974. She was elected Assistant Secretary in 1994, Corporate Secretary in 1995 and Vice President and Corporate Secretary in 1996.
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 following the Annual Meeting of Shareholders, and ends on the date of the next Annual Meeting of Shareholders or upon the due election and qualification of his or her successor. 9 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 2, 1996............................................... $22 3/4 $19 $.1600 June 1, 1996................................................ 22 1/4 18 5/8 .1600 August 31, 1996............................................. 25 1/8 19 .1600 November 30, 1996........................................... 22 5/8 20 3/8 .1625 ------ Total Dividends............................................. $.6425 ======
MARKET PRICE ---------------- QUARTER ENDED HIGH LOW DIVIDENDS - ------------- ---- --- --------- March 4, 1995............................................... $21 1/4 $18 1/8 $.1575 June 3, 1995................................................ 21 5/8 19 .1575 September 2, 1995........................................... 23 3/4 21 1/2 .1575 December 2, 1995............................................ 27 21 3/8 .1600 ------ Total Dividends............................................. $.6325 ======
The approximate number of holders of record of Common Stock of the Company as at February 1, 1997 is 1,800. 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 38 and 39 of the Annual Report under the caption "11-Year Financial Summary," is incorporated herein by reference and is filed as Exhibit 13a(ix) to this 1996 Form 10-K. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required hereunder is set forth on pages 18 through 23 of the Annual Report under the caption "Financial Review," is incorporated herein by reference and is filed as Exhibit 13a(x) to this 1996 Form 10-K. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Consolidated Financial Statements, the Notes thereto and the report thereon of Coopers & Lybrand L.L.P, independent accountants, required hereunder with respect to the Company and its consolidated subsidiaries are set forth on pages 24 through 36, inclusive, of the Annual Report, are incorporated herein by reference and are filed as Exhibits 13(a)(ii) through 13(a)(vii) to this 1996 Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 10 11 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 18, 1997 (the "Proxy Statement") for the Annual Meeting of Shareholders to be held on March 25, 1997 under the caption "Election of Directors -- Nominees for Election to the Board" and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required hereunder is set forth on pages 6 through 14 inclusive, of the Proxy Statement under the caption "Compensation of Executive Officers and Other Information" and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required hereunder is set forth on pages 4 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. None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements The following financial information is incorporated herein by reference to the Company's Annual Report to Shareholders for the fiscal year ended November 30, 1996: *Consolidated Balance Sheets at November 30, 1996 and 1995 *Consolidated Statements of Earnings for the years ended November 30, 1996, 1995 and 1994 *Consolidated Statements of Shareholders' Equity for the years ended November 30, 1996, 1995 and 1994 *Consolidated Statements of Cash Flows for the years ended November 30, 1996, 1995 and 1994 *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 1996 Form 10-K 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) The Company filed a Current Report on Form 8-K dated September 25, 1996 to report its signing of a definitive agreement to acquire United Air Specialists, Inc. On January 6, 1997 the Company filed a Current Report on Form 8-K to report its fourth quarter and fiscal year-end 1996 results. 11 12 (c) Exhibits 2.1 Agreement and Plan of Merger dated as of September 23, 1996, among CLARCOR Inc., CUAC Inc. and United Air Specialists, Inc. Incorporated by reference to Exhibit 2.1 to the Company's registration statement on Form S-4 (registration no. 333-19735) filed on January 14, 1997 (the "Registration Statement"). 3.1 The registrant's Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1983. 3.1(a) Amendment to ARTICLE NINTH of Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1(a) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1988 (the "1988 10-K"). 3.1(b) Amendment changing name of Registrant to CLARCOR Inc. Incorporated by reference to Exhibit 3.1(b) to the 1988 10-K. 3.1(c) Amendment to ARTICLE FOURTH of the Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1(c) to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1990. 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. 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. 4.2 The 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. 10.1* The registrant's Deferred Compensation Plan for Directors. 10.2* The registrant's Supplemental Retirement Plan. 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. 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) Form of Employment Agreement with each of David J. Anderson, Marcia S. Blaylock, Bruce A. Klein and Peter F. Nangle.
12 13 10.5 The registrant's 1994 Incentive Plan. Incorporated by reference to Exhibit A to the Company's Proxy Statement dated February 24, 1994 for the Annual Meeting of Share- holders held on March 31, 1994. 11 Computation of Per Share Earnings. 13 (a) The following items incorporated by reference herein from the Company's 1996 Annual Report to Shareholders ("1996 Annual Report"), are filed as Exhibits to this Annual Report Form 10-K: (i) Business segment information for the fiscal years 1994 through 1996 set forth on page 35 of the 1996 Annual Report (included in Exhibit 13(a)(vi) -- Note P of Notes to Consolidated Financial Statements); (ii) Consolidated Balance Sheets of the Company and its Subsidiaries at November 30, 1996 and 1995 set forth on page 24 of the 1996 Annual Report; (iii) Consolidated Statements of Earnings of the Company and its Subsidiaries for the years ended November 30, 1996, 1995 and 1994 set forth on page 25 of the 1996 Annual Report; (iv) Consolidated Statements of Shareholders' Equity for the Company and its Subsidiaries for the years ended November 30, 1996, 1995 and 1994 set forth on page 26 of the 1996 Annual Report; (v) Consolidated Statements of Cash Flows of the Company and its Subsidiaries for the years ended November 30, 1996, 1995 and 1994 set forth on page 27 of the 1996 Annual Report; (vi) Notes to Consolidated Financial Statements set forth on pages 28 through 35 of the 1996 Annual Report; (vii) Report of Independent Accountants set forth on page 36 of the 1996 Annual Report; (viii) Management's Report on Responsibility for Financial Reporting set forth on page 37 of the 1996 Annual Report; (ix) Information under the caption "11-Year Financial Summary" set forth on pages 38 and 39 of the 1996 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 18 through 23 of the 1996 Annual Report. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 27 Financial Data Schedule.
- ------------------------------ * Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1984, in which each Exhibit had the same number as herein. 13 14 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 19, 1997 CLARCOR Inc. (Registrant) By: /s/ LAWRENCE E. GLOYD -------------------------------------- Lawrence E. Gloyd Chairman of the Board & 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 19, 1997 By: /s/ LAWRENCE E. GLOYD ------------------------------------------------ Lawrence E. Gloyd Chairman of the Board & Chief Executive Officer and Director Date: February 19, 1997 By: /s/ BRUCE A. KLEIN ------------------------------------------------ Bruce A. Klein Vice President -- Finance & Chief Financial Officer Date: February 19, 1997 By /s/ WILLIAM F. KNESE ------------------------------------------------ William F. Knese Vice President, Treasurer, Controller & Chief Accounting Officer Date: February 19, 1997 By /s/ J. MARC ADAM ------------------------------------------------ J. Marc Adam Director Date: February 19, 1997 By /s/ MILTON R. BROWN ------------------------------------------------ Milton R. Brown Director Date: February 19, 1997 By /s/ CARL J. DARGENE ------------------------------------------------ Carl J. Dargene Director Date: February 19, 1997 By /s/ DUDLEY J. GODFREY, JR. ------------------------------------------------ Dudley J. Godfrey, Jr. Director
14 15 Date: February 19, 1997 By /s/ NORMAN E. JOHNSON ------------------------------------------------ Norman E. Johnson Director Date: February 19, 1997 By /s/ STANTON K. SMITH, JR. ------------------------------------------------ Stanton K. Smith, Jr. Director Date: February 19, 1997 By /s/ DON A. WOLF ------------------------------------------------ Don A. Wolf Director 15 16 REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois Our report on the consolidated financial statements of CLARCOR Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from page 36 of the 1996 Annual Report to Shareholders of CLARCOR Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed on page 11 (index of exhibits) of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. Chicago, Illinois January 3, 1997 F-1 17 CLARCOR INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED NOVEMBER 30, 1996, 1995 AND 1994 (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 - ------------------------------------- ---------- ---------- ---------- ---------- ---------- 1996: Allowance for losses on accounts receivable......................... $1,557 $629 $ -- $402(A) $1,784 ====== ==== ==== ==== ====== 1995: Allowance for losses on accounts receivable......................... $1,580 $386 $ -- $409(A) $1,557 ====== ==== ==== ==== ====== 1994: Allowance for losses on accounts receivable......................... $1,544 $474 $288(B) $726(A) $1,580 ====== ==== ==== ==== ======
NOTES: (A) Bad debts written off during year, net of recoveries. (B) Due to acquisition addition in 1993 adjusted due to SFAS 109 adoption in 1994. F-2 EX-10.4(A) 2 FORM OF EMPLOYMENT AGREEMENT 1 EXHIBIT 10.4(a) FORM OF EMPLOYMENT AGREEMENT AGREEMENT by and between CLARCOR Inc., a Delaware corporation (the "Corporation") and ______________________ (the "Executive") dated as of June 13, 1996. The Corporation and the Executive hereby agree as follows: Factual Background The Corporation wishes to attract and retain well-qualified executive and key personnel and to assure both itself and the Executive of continuity of management in the event of any actual or threatened Change of Control (as defined in Section 2) of the Corporation. To achieve this purpose, the Compensation Committee of the Board of Directors of the Corporation has considered and recommends that agreements should be entered into with such personnel and in accordance with that recommendation the Board of Directors has approved this Agreement as being in the best interests of the Corporation and its shareholders. 1. Operation of Agreement. The "effective date of this Agreement" shall be the date on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Corporation is terminated or the Executive ceases to be an officer of the Corporation prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment or cessation of status as an officer (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with 2 or anticipation of the Change of Control, then for all purposes of this Agreement the "effective date of this agreement" shall mean the date immediately prior to the date of such termination of employment or cessation of status as an officer. 2. Change of Control. For the purpose of this Agreement, a "Change of Control" shall mean: (a) The acquisition (other than from the Corporation) by any person, entity or "group", within the meaning of Section 13(d) (3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 15% or more of either the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities entitled to vote generally in the election of directors; provided, however, no Change of Control shall be deemed to have occurred for any acquisition by any corporation with respect to which, following such acquisition, more than 60% of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the then outstanding shares of common stock or the combined voting power of the Corporation's then outstanding voting securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Corporation's then outstanding common stock and then outstanding voting securities, as the case may be; or (b) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or 2 3 (c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation, in each case, with respect to which persons who were the shareholders of the Corporation immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 60% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation's then outstanding voting securities, or a liquidation or dissolution of the Corporation or of the sale of all or substantially all of the assets of the Corporation. 3. Employment. The Corporation hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Corporation, for the period commencing on the effective date of this Agreement and ending on the earlier to occur of the third anniversary of such date or the Executive's normal retirement date under the Corporation's retirement plans (the "employment period"), to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive during the 90-day period immediately prior to the effective date of this Agreement, which services shall be performed at the location where the Executive was employed immediately prior to the effective date of this Agreement. During the employment period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Corporation and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the employment period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) 3 4 deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Corporation in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the effective date of this Agreement, the continued conduct of such activities (or conduct of activities similar in nature and scope thereto) subsequent to the effective date of this Agreement shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. 4. Compensation, Compensation Plans, Benefits and Perquisites. During the employment period, the Executive shall be compensated as follows: (a) He shall receive an annual salary at a monthly rate at least equal to the highest monthly base salary paid or payable to the Executive by the Corporation during the 36 calendar months immediately prior to the effective date of this Agreement, with the opportunity for increases, from time to time thereafter, which are in accordance with the Corporation's regular practices. Annual salary shall not be reduced after any such increase and the term "salary" as utilized in this Agreement shall refer to such annual salary as increased. (b) He shall be eligible to participate on a reasonable basis in the Corporation's Stock Option Plan, Key Management Incentive Plan, Long Range Performance Share Plan and other bonus and incentive compensation plans (whether now or hereinafter in effect) which provide opportunities to receive compensation which are the greater of the opportunities provided by the Corporation for executives with comparable duties or the opportunities under any such plans in which he was participating during the 90-day period immediately prior to the effective date of this Agreement. (c) He shall be entitled to receive employee benefits and perquisites which are the greater of the employee benefits and perquisites provided by the Corporation to executives 4 5 with comparable duties or the employee benefits and perquisites to which he was entitled during the 90-day period immediately prior to the effective date of this Agreement. Such benefits and perquisites shall include, but not be limited to, the benefits and perquisites included under the following: CLARCOR Pension Trust Retirement Savings Plan and Trust Supplemental Retirement Plan Dental Plan Health Care Plan Life Insurance Plan/Supplemental Life Insurance Plan Disability Plan Automobile Plan 5. Termination. The term "termination" shall mean termination by the Corporation of the employment of the Executive with the Corporation for any reason other than death, disability or cause (as defined below), or resignation of the Executive upon the occurrence of any of the following events: (a) An adverse change in the nature or scope of the Executive's authority, duties or responsibilities from those referred to in Section 3, as determined in good faith by the Executive, a change in location from that referred to in Section 3, a reduction in total compensation, compensation plans, benefits or perquisites from those provided in Section 4, or the breach by the Corporation of any other provision of this Agreement; or (b) A good-faith determination by the Executive that as a result of a Change of Control and a change in circumstances thereafter significantly affecting his position, he is unable to exercise the authorities, powers, function or duties attached to his position and contemplated by Section 3 of the Agreement. For purposes of this Section 5, any good-faith determination made by the Executive shall be conclusive. The term "cause" means fraud, misappropriation or intentional material damage to the property or business of the Corporation or commission of a felony. 5 6 6. Termination Payments. In the event of a termination and subject to the provisions of Section 7 of this Agreement, the Corporation shall pay to the Executive and provide him with the following: (a) During the remainder of the employment period, the Corporation shall continue to pay the Executive his salary at the rate required by paragraph 4 (a) and in effect immediately prior to the date of termination plus the estimated amount of any incentive compensation or other bonuses to which he would have been entitled had he remained in the employ of the Corporation for the remainder of the employment period. (b) During the remainder of the employment period, the Executive shall continue to be treated as an employee under the provisions of the Corporation's plans referred to in 4(b). In addition, the Executive shall continue to be entitled to all benefits and service credits for benefits, programs and arrangements of the Corporation described in paragraph 4(c) as if he were still employed during such period under this Agreement. (c) If, despite the provisions of paragraph (b) above, benefits or service credits or the right to accrue further benefits or service credits under any plan referred to in Section 4(b) or (c) shall not be payable or provided under such plan to the Executive, or his dependents, beneficiaries and estate because he is no longer an employee of the Corporation, the Corporation itself shall, to the extent necessary, pay or provide for payment of such benefits and service credits for such benefits to the Executive, his dependents, beneficiaries and estate. 7. Non-Competition and Confidentiality. The Executive agrees that: (a) There shall be no obligation on the part of the Corporation to provide any further payments or benefits (other than benefits or payments already earned, accrued or paid) described in Section 6 or Section 9 if, (i) during the employment period, the Executive shall be employed by or otherwise engaged or be interested (other than as a passive investor in a publicly-owned entity) in any business which directly competes with any business of the Corporation or of any of its subsidiaries at such time and (ii) such employment or activity is likely to cause, or causes, serious damage to the Corporation or any of its subsidiaries at such time; and 6 7 (b) During and after the employment period, he shall retain in confidence any confidential information known to him concerning the Corporation and its subsidiaries and their respective businesses so long as such information is not publicly disclosed. Notwithstanding the foregoing, a breach by the Executive of this Section 7(b) shall not be used to set-off or delay amounts payable under this Agreement. 8. No Obligation to Mitigate Damages. The Executive shall not be obligated to seek other employment in mitigation of amounts payable or arrangements made under the provisions of this Agreement and the obtaining of such other employment shall in no event effect any reduction of the Corporation's obligations under this Agreement. 9. Severance Allowance. In the event of termination of the Executive during the employment period, the Executive may elect, within 60 days after such termination, to be paid a lump sum severance allowance, in lieu of the termination payments referred to in Section 6 above, in an amount which is equal to the sum of the amounts determined in accordance with the following paragraphs (a) and (b). (a) An amount equivalent to salary payments for 36 calendar months at the rate which he would have been entitled to receive in accordance with Section 6(a) plus a pro rata share of the estimated amount of any bonus which would have been payable for the bonus period which includes the termination date; and (b) An amount equivalent to 36 calendar months of bonus at the greater of (i) the highest monthly rate of the bonus payment for the bonus period in respect of the three fiscal years immediately prior to the fiscal year including his termination date, or (ii) the estimated amount of the bonus for the period which includes his termination date. In the event that the Executive makes an election pursuant to the preceding sentence of this Section 9 to receive a lump sum severance allowance of the amount described in paragraphs (a) and (b), then, in addition to such amount, he shall receive (i) in addition to the benefits provided under any pension benefit plan maintained by the Corporation, the pension benefits he would have accrued under such pension benefit plan if he had remained in the employ of the Corporation for 36 calendar months after his termination, which benefits will be paid in a lump sum concurrently with, and in addition to, the lump sum 7 8 payment of the benefits provided under such pension benefit plan, (ii) incentive compensation (including, but not limited to, the right to receive and exercise stock options and stock appreciation rights and other bonus and similar incentive compensation benefits) to which he would have been entitled under all incentive compensation plans maintained by the Corporation if he had remained in the employ of the Corporation for 36 calendar months after such termination, payable in a lump sum, and (iii) the employee benefits (including, but not limited to, coverage under any medical and insurance arrangements or programs) to which he would have been entitled under all employee benefit plans, programs or arrangements maintained by the Corporation if he had remained in the employ of the Corporation for 36 calendar months after his termination, or at the election of the Executive, the value of the amounts described in (i), (ii) and (iii) next preceding. The amount of the payments described in the preceding sentence shall be determined by the Accounting Firm (as defined in Section 10) and such payments shall be distributed as soon as reasonably possible but in no event later than 30 days after the election by the Executive pursuant to this Section 9. The Executive making an election pursuant to this Section 9 shall not be restricted by the provisions of paragraph 7(a). 10. Certain Additional Payments by the Corporation. The Corporation agrees that: (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Corporation to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax 8 9 imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. (b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Coopers & Lybrand (the "Accounting Firm") which shall provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Corporation. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this Section 10, shall be paid by the Corporation to the Executive within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Corporation and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section 10(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for the benefit of the Executive. (c) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives 9 10 such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Corporation any information reasonably requested by the Corporation relating to such claim, (ii) take such action in connection with contesting such claim as the Corporation shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation, (iii) cooperate with the Corporation in good faith in order effectively to contest such claim, and (iv) permit the Corporation to participate in any proceedings relating to such claim; provided, however, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 10(c), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; provided, however, that if the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation's control of the 10 11 contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 10(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Corporation's complying with the requirements of Section 10(c)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 10(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 11. Full Settlement. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. The Corporation agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Corporation, the Executive or others of the validity of enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872 (f) (2) (A) of the Code. 11 12 12. Notices. Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at _____________, or at the last address he has filed in writing with the Corporation or, in the case of the Corporation, at its principal executive offices. 13. Non-Alienation. The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or the laws of descent and distribution. 14. Governing Law. The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois. 15. Amendment. This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and, so long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this agreement or the subject matter hereof. 16. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Corporation shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns. (c) The Corporation will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. As used in this Agreement, "Corporation" shall mean the Corporation as hereinbefore defined and any successor to its business 12 13 and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. Any failure by the Corporation to comply with and satisfy this Section 16(c) shall constitute a termination as provided in Section 5 of this Agreement, provided that such successor has received at least ten days prior written notice from the Corporation or the Executive of the requirements of this Section 16(c). 17. Severability. In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect. 18. "At Will". The Executive and the Corporation acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Corporation, the employment of the Executive by the Corporation is "at will" and, prior to the effective date of this Agreement and except as otherwise provided herein, may be terminated by either the Executive or the Corporation at any time. Moreover, if prior to the effective date of this Agreement, (i) the Executive's employment with the Corporation terminates or (ii) the Executive ceases to be an officer of the Corporation, then the Executive shall have no further rights under this Agreement. 13 14 IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written. ---------------------------- the Executive CLARCOR Inc. By ---------------------------- Its Chief Executive Officer ATTEST: - -------------------------- Secretary (Seal) 14 EX-11 3 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 CLARCOR INC. EXHIBIT 11--COMPUTATION OF PER SHARE EARNINGS FOR THE FIVE YEARS ENDED NOVEMBER 30, 1996 (DOLLARS IN THOUSANDS)
FISCAL YEARS ENDED NOVEMBER 30, -------------------------------------------------------------- AVERAGE SHARES OUTSTANDING 1996 1995 1994 1993 1992 -------------------------- ---------- ---------- ---------- ---------- ---------- 1. Average number of shares outstanding................ 14,859,252 14,800,872 14,813,925 14,837,741 14,972,639 2. Net additional shares resulting from assumed exercise of stock options*................... 293,656 316,630 225,599 213,725 230,202 ---------- ---------- ---------- ---------- ---------- 3. Adjusted average shares outstanding for fully diluted computation (1 plus 2)......................... 15,152,908 15,117,502 15,039,524 15,051,466 15,202,841 ========== ========== ========== ========== ========== Earnings per share of common stock: Primary...................... $1.68 $1.48 $1.43 $1.16 $0.94 ========== ========== ========== ========== ========== Assuming full dilution....... $1.65 $1.45 $1.41 $1.15 $0.93 ========== ========== ========== ========== ==========
- ------------------------------ * Assumes proceeds from exercise of stock options used to purchase treasury shares at the greater of the year-end or the average market price during the period. EX-13.(A) 4 FINANCIAL STATEMENTS 1 EXHIBIT 13(a) CONSOLIDATED BALANCE SHEETS November 30, 1996 and 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
ASSETS 1996 1995 - -------------------------------------------------------------------------------- Current assets: Cash and short-term cash investments .................... $ 17,372 $ 18,769 Accounts receivable, less allowance for losses of $1,784 for 1996 and $1,557 for 1995 ............... 52,509 50,034 Inventories ............................................. 49,773 42,972 Prepaid expenses ........................................ 1,476 2,018 Deferred income taxes ................................... 3,249 3,777 -------- -------- Total current assets ........................ 124,379 117,570 -------- -------- Marketable securities, at fair value .................... 3,292 4,696 Investment in affiliates, at cost ....................... 530 -- Plant assets, at cost less accumulated depreciation ..... 78,586 67,036 Excess of cost over fair value of assets acquired, less accumulated amortization ........................ 15,120 14,893 Pension assets .......................................... 12,453 11,218 Other assets ............................................ 9,604 7,849 -------- -------- Total assets ................................ $243,964 $223,262 ======== ======== LIABILITIES - -------------------------------------------------------------------------------- Current liabilities: Current portion of long-term debt ....................... $ 6,928 $ 7,596 Accounts payable and accrued liabilities ................ 34,976 32,851 Income taxes ............................................ 3,252 2,013 -------- -------- Total current liabilities ................... 45,156 42,460 -------- -------- Long-term debt, less current portion ...................... 35,522 34,417 Postretirement health care benefits ....................... 1,914 2,908 Long-term pension liabilities ............................. 6,607 5,226 Deferred income taxes ..................................... 7,798 6,228 Other liabilities ......................................... -- 867 Minority interests ........................................ 908 341 Contingencies SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- Capital stock: Preferred, par value $1, authorized 1,300,000 shares, issuable in series, none issued .............. -- -- Common, par value $1, authorized 30,000,000 shares, issued 14,874,969 in 1996 and 14,825,296 in 1995 ................................... 14,875 14,825 Capital in excess of par value .......................... 1,393 1,121 Foreign currency translation adjustments ................ (1,858) (1,607) Unrealized holding gain on marketable equity securities, net of taxes ............................. 992 1,285 Retained earnings ....................................... 130,657 115,191 -------- -------- Total shareholders' equity .................. 146,059 130,815 -------- -------- Total liabilities and shareholders' equity .. $243,964 $223,262 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 24 2 CONSOLIDATED STATEMENTS OF EARNINGS for the years ended November 30, 1996, 1995 and 1994 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
1996 1995 1994 - -------------------------------------------------------------------------------------- Net sales ....................................... $333,388 $290,194 $ 270,123 Cost of sales ................................... 239,119 209,653 192,456 ------------------------------ Gross profit ................................. 94,269 80,541 77,667 Selling and administrative expenses ............. 53,739 45,176 45,301 ------------------------------ Operating profit ............................. 40,530 35,365 32,366 ------------------------------ Other income (expense): Interest expense ............................... (3,243) (2,693) (2,788) Interest and dividend income ................... 1,130 1,076 548 Gain on sale of investment ..................... 1,675 -- 4,166 Other, net ..................................... (73) 459 (2,689) ------------------------------ (511) (1,158) (763) ------------------------------ Earnings before income taxes, equity in net earnings of affiliate, minority interests, and cumulative effect of change in accounting method ............ 40,019 34,207 31,603 Provision for income taxes ...................... 14,896 12,182 11,935 ------------------------------ Earnings before equity in net earnings of affiliate, minority interests, and cumulative effect of change in accounting method ................... 25,123 22,025 19,668 Equity in net earnings of affiliate ............. -- -- 959 Minority interests in earnings of subsidiaries .. (145) (71) (2) ------------------------------ Earnings before cumulative effect of change in accounting method ............ 24,978 21,954 20,625 Cumulative effect of change in accounting method ........................... -- -- 630 ------------------------------ Net earnings .................................... $ 24,978 $ 21,954 $ 21,255 ============================== Net earnings per common share: Earnings before cumulative effect of change in accounting method ........................ $1.68 $ 1.48 $1.39 Cumulative effect of change in accounting method ....................... -- -- 0.04 ------------------------------ $1.68 $ 1.48 $1.43 ==============================
The accompanying notes are an integral part of the consolidated financial statements. 25 3 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended November 30, 1996, 1995 and 1994 (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
Common Stock ---------------------------------------- Issued In Treasury Foreign -------------------- ----------------- Capital in Currency Unrealized Number Number Excess of Translation Holding Retained of Shares Amount of Shares Amount Par Value Adjustments Gain Earnings - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1993 ...... 14,819,199 $14,819 -- $ -- $ 328 $(1,465) $ -- $ 90,959 Net earnings .................... -- -- -- -- -- -- -- 21,255 Purchase of treasury stock ...... -- -- 72,900 1,327 -- -- -- -- Retirement of treasury stock .... (30,000) (30) (30,000) (487) (457) -- -- -- Stock options exercised ......... 5,775 6 -- -- 78 -- -- -- Issuance of stock under award plans ................... 8,814 9 -- -- 234 -- -- -- Cash dividends -- $.6225 per common share .............. -- -- -- -- -- -- -- (9,201) Unrealized holding gain on marketable equity securities .. -- -- -- -- -- -- 911 -- Translation adjustments ......... -- -- -- -- -- 856 -- -- - ------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1994 ...... 14,803,788 14,804 42,900 840 183 (609) 911 103,013 Net earnings .................... -- -- -- -- -- -- -- 21,954 Retirement of treasury stock .... (42,900) (43) (42,900) (840) (351) -- -- (446) Stock options exercised ......... 28,849 29 -- -- 547 -- -- -- Issuance of stock under award plans ................... 35,559 35 -- -- 742 -- -- -- Cash dividends -- $.6325 per common share .............. -- -- -- -- -- -- -- (9,330) Unrealized holding gain on marketable equity securities .. -- -- -- -- -- -- 374 -- Translation adjustments ......... -- -- -- -- -- (998) -- -- - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1995 ...... 14,825,296 14,825 -- -- 1,121 (1,607) 1,285 115,191 Net earnings .................... -- -- -- -- -- -- -- 24,978 Purchase of treasury stock ...... -- -- 21,900 22 -- -- -- -- Retirement of treasury stock .... (21,900) (22) (21,900) (22) (408) -- -- -- Stock options exercised ......... 58,641 59 -- -- 133 -- -- -- Issuance of stock under award plans ................... 12,932 13 -- -- 547 -- -- -- Cash dividends -- $.6425 per common share .............. -- -- -- -- -- -- -- (9,512) Unrealized holding gain on marketable securities ......... -- -- -- -- -- -- 653 -- Realized gain on sale of marketable securities ......... -- -- -- -- -- 72 (946) -- Translation adjustments ......... -- -- -- -- -- (323) -- -- - -------------------------------------------------------------------------------------------------------------------------- Balance, November 30, 1996 ...... 14,874,969 $14,875 -- $ -- $1,393 $(1,858) $ 992 $130,657 ==========================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 26 4 CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended November 30, 1996, 1995 and 1994 (DOLLARS IN THOUSANDS)
1996 1995 1994 - ------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net earnings and cumulative effect of accounting change .. $ 24,978 $ 21,954 $ 21,255 Adjustments to reconcile net earnings to net cash provided by operations: Depreciation .......................................... 9,276 7,736 6,778 Amortization .......................................... 509 508 514 Equity in net earnings of affiliate ................... -- -- (959) Gain on sale of investment ............................ (1,675) -- (4,166) Minority interests in earnings of subsidiaries ........ 145 71 2 Net (gain) loss on dispositions of plant assets ....... (243) (177) 1,862 Cumulative effect of accounting change ................ -- -- (630) Changes in assets and liabilities: Accounts receivable ................................ (2,314) (8,030) (1,981) Inventories ........................................ (6,306) (6,316) (2,863) Prepaid expenses ................................... 579 899 (1,786) Accounts payable and accrued liabilities ........... (2,702) 4,522 4,021 Pension assets and liabilities, net ................ 185 (1,713) 681 Income taxes ....................................... 1,444 87 (137) Deferred income taxes .............................. 2,295 (81) 2,012 ------------------------------- Net cash provided by operating activities ....... 26,171 19,460 24,603 ------------------------------- Cash flows from investing activities: Proceeds from sale of investment ......................... 3,067 -- 10,731 Business acquisitions, net of cash acquired .............. (1,298) (14,125) (1,512) Investment in affiliate .................................. (530) -- -- Dividends from marketable securities ..................... (302) (246) -- Dividends from affiliate, net of reinvestments ........... -- (327) 363 Additions to plant assets ................................ (21,652) (13,910) (11,416) Dispositions of plant assets ............................. 2,290 72 331 Other, net ............................................... -- (63) 1,034 ------------------------------- Net cash used in investing activities ........... (18,425) (28,599) (469) ------------------------------- Cash flows from financing activities: Borrowing under long-term debt ........................... 8,410 25,000 -- Reduction of long-term debt .............................. (8,016) (7,579) (7,946) Sales of capital stock, stock option plan ................ 421 278 69 Purchases of treasury stock .............................. (430) -- (1,327) Cash dividends paid ...................................... (9,512) (9,330) (9,201) ------------------------------- Net cash provided by (used in) financing activities ......................... (9,127) 8,369 (18,405) ------------------------------- Net effect of exchange rate changes on cash ................ (16) (28) -- ------------------------------- Net change in cash and short-term cash investments ......... (1,397) (798) 5,729 Cash and short-term cash investments, beginning of year .... 18,769 19,567 13,838 ------------------------------- Cash and short-term cash investments, end of year .......... $ 17,372 $ 18,769 $ 19,567 ===============================
The accompanying notes are an integral part of the consolidated financial statements. 27 5 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 which are more than 50% owned and controlled. Investments in nonconsolidated companies which are at least 20% owned are carried at cost plus equity in undistributed earnings since acquisition. Minority interests represent an outside shareholder's 10% ownership of the common stock of Filtros Baldwin de Mexico (FIBAMEX), an outside shareholder's 30% ownership of Baldwin-Unifil S.A., and an outside shareholder's 50% ownership of Baldwin Filters (Aust.) Pty. Limited. 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 and credited or charged directly to a separate component of shareholders' equity. INVESTMENTS IN MARKETABLE SECURITIES On November 30, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, (SFAS 115) "Accounting for Certain Investments in Debt and Equity Securities." The Company's marketable securities, with an average cost basis, have been classified as available-for-sale. 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. It is the policy of the Company to capitalize renewals and betterments and to charge to expense the cost of current maintenance and repairs. EXCESS OF COST OVER FAIR VALUE OF ASSETS ACQUIRED The excess of cost over fair value of assets acquired is being amortized over a forty-year period, using the straight-line method subject to impairment write-offs determined by underlying cash flows. Accumulated amortization was $6,422 and $5,913 at November 30, 1996 and 1995, respectively. STATEMENTS OF CASH FLOWS All highly liquid investments purchased with an original maturity of three months or less are considered to be short-term cash investments. The carrying amount approximates fair value. The Company has certain noncash transactions related to stock option and award plans which are described in Note M. CONCENTRATIONS OF CREDIT Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of short-term cash investments and trade receivables. The Company places its short-term cash investments with high credit quality financial institutions and in high grade municipal securities. At November 30, 1996 and 1995, the Company held short-term securities with a total cost of $15,780 and $17,225, respectively. Concentrations of credit risk with respect to trade receivables are limited due to the Company's large number of customers and their dispersion across many different industries and locations. INCOME TAXES As of December 1, 1993, the Company adopted 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. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. REVENUE RECOGNITION Revenue is recognized upon shipment of goods to customers. 28 6 - ------------------------------------------------------------------------------ NET EARNINGS PER COMMON SHARE Net earnings per common share is based on the weighted average number of common shares outstanding during the respective years. USE OF MANAGEMENT'S ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles 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. ACCOUNTING PERIOD The Company's fiscal year ends on the Saturday closest to November 30. The fiscal years ended November 30, 1996, December 2, 1995, and December 3, 1994, were comprised of fifty-two, fifty-two, and fifty-three 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. RECLASSIFICATION Certain reclassifications have been made to conform prior years' data to the current presentation. B. ACQUISITIONS During 1996, Baldwin-Unifil South Africa, in which the Company owns a 70% equity interest, was incorporated in South Africa. Baldwin-Unifil South Africa acquired certain assets from Unifil (Pty.) Ltd. for $1,298 in cash. The acquisition did not have a significant impact on the results of the Company. During 1996, the Company also entered into a joint venture in China with a $530 investment, called Baldwin-Weifang Filters Ltd., and accounts for its investment on a cost basis. The acquisition did not have a significant impact on the results of the Company The Company purchased certain assets comprising the filtration business of Hastings Manufacturing Company on September 4, 1995 for $14,125 in cash, including acquisition expenses. The business is a manufacturer of automotive and light truck filter products. The acquisition has been accounted for by the purchase method of accounting and the operating results of the business are included in the Company's consolidated statement of earnings from the date of the acquisition. The following unaudited pro forma amounts are presented as if the Hastings acquisition had occurred at the beginning of the period presented immediately preceding the acquisition and does not purport to be indicative of what would have occurred had the acquisition been made as of those dates or of results which may occur in the future. Unaudited pro forma net sales for the Company would have been $320,194 and $310,493 for the years ended November 30, 1995, and 1994, respectively. Net earnings and earnings per share for these periods would not have been significantly affected. During 1994, FIBAMEX, in which the Company owns a 90% equity interest, was incorporated in Mexico. FIBAMEX acquired certain assets from Filtros Continental, S.A. de C.V. for $1,512 in cash. The acquisition did not have a significant impact on the results of the Company. C. INVESTMENT IN MARKETABLE SECURITIES In October 1994, the Company sold 75% of its 20% interest in G.U.D. Holdings Limited, recognizing a pretax gain on the sale of $4,166. In November 1996, the Company sold 50% of its 5% interest in G.U.D. Holdings Limited, recognizing a pretax gain on the sale of $1,675. The remaining 2.5% has been classified as available for sale under the provisions of SFAS 115. The quoted market value of the investment was $3,292 and $4,696 as of November 30, 1996 and 1995, respectively, which includes unrealized holding gains, net of deferred income taxes, of $992, $1,285, and $911 as of November 30, 1996, 1995, and 1994, respectively. The 1996, 1995, and 1994 unrealized holding gains, net of deferred income taxes, have been included as a component of shareholders' equity at November 30. Subsequent to the end of the year, the Company sold its remaining 2.5% investment, recognizing a pretax gain on the sale of $1,706. 29 7 - ------------------------------------------------------------------------------ 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 57% and 62% of the Company's inventories at November 30, 1996 and 1995, respectively, and by the first-in, first-out (FIFO) method for all other inventories. The FIFO method would approximate the current cost. The inventories are summarized as follows:
1996 1995 ------- ------- Raw materials ........... $16,315 $14,285 Work-in-process ......... 9,943 8,392 Finished products ....... 25,882 23,051 ------- ------- Total at FIFO .......... 52,140 45,728 Less excess of FIFO cost over LIFO values .. 2,367 2,756 ------- ------- $49,773 $42,972 ======= =======
During 1994, LIFO inventory quantities were reduced resulting in a partial liquidation of the LIFO bases, the effect of which increased net earnings by approximately $480. E. PLANT ASSETS Plant assets at November 30, 1996 and 1995 were as follows:
1996 1995 -------- -------- Land ............................. $ 2,173 $ 2,483 Buildings and building fixtures .. 44,784 42,670 Machinery and equipment .......... 106,773 90,034 Construction-in-process .......... 8,593 8,176 -------- -------- 162,323 143,363 Less accumulated depreciation .... 83,737 76,327 -------- -------- $ 78,586 $ 67,036 ======== ========
F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at November 30, 1996 and 1995 were as follows:
1996 1995 ------- ------- Accounts payable ............. $18,509 $20,378 Accrued salaries, wages and commissions ............ 5,900 3,537 Compensated absences ......... 2,744 2,726 Accrued pension liabilities .. 996 996 Other accrued liabilities .... 6,827 5,214 ------- ------- $34,976 $32,851 ======= =======
G. LONG-TERM DEBT Long-term debt at November 30, 1996 and 1995 consists of the following:
Promissory note, interest payable quarterly at 9.71% ........ $ 6,416 $13,416 Promissory note, interest payable semi-annually at 6.69% .... 25,000 25,000 Industrial Revenue Bonds, variable interest rate ..... 8,410 -- Other obligations, at 7% to 9% interest rates. 2,624 3,597 ------- ------- 42,450 42,013 Less current portion ........ 6,928 7,596 ------- ------- $35,522 $34,417 ======= =======
The promissory notes mature March 31, 1997 (9.71%) and July 25, 2004 (6.69%), but the Company is required to prepay, without premium, certain principal amounts as stated in the agreements. A fair value estimate of $42,913 and $41,389 for the long-term debt, in 1996 and 1995, respectively, is based on the current interest rates available to the Company for debt with similar remaining maturities. Under the note agreements, the Company must meet certain restrictive covenants. The primary covenants include maintaining minimum consolidated net worth at $100,000, limiting new borrowings, and certain restrictions regarding changes in ownership as stipulated in the agreement. On February 1, 1996, the Company, in cooperation with the South Dakota Economic Development Finance Authority, issued $8,410 of Industrial Revenue Bonds. The bonds are due February 1, 2016, with a variable rate of interest which is reset weekly. In conjunction with the issuance of the Industrial Revenue Bonds, the Company holds in trust certain investments restricted and committed for the acquisition of plant equipment. At November 30, 1996, the restricted asset balance of $2,780 is included in other assets. Other obligations include a 15 year capital lease for a manufacturing facility acquired in 1991 from the Community Development Authority of the City of Gothenburg, Nebraska, and debt acquired in the acquisitions of Airguard Industries and Guardian/U.E.L., including an industrial revenue bond due in 2003. 30 8 - ------------------------------------------------------------------------------ The Company has a $25,000 revolving credit facility with a financial institution, against which $9,421 letters of credit have been issued at November 30, 1996. The agreement related to this obligation includes certain restrictive covenants that are similar to the promissory notes. The agreement expires in 2000. Principal maturities of long-term debt for the next five fiscal years ending November 30, approximates: $6,928 in 1997, $384 in 1998, $186 in 1999, $5,210 in 2000 and $5,230 in 2001 and $24,512 thereafter. Interest paid totaled $3,399, $2,226, and $2,916 during 1996, 1995 and 1994, respectively. H. RETIREMENT PLANS The Company has defined benefit pension plans covering nonemployee directors and most of its employees. Plan benefits are principally based upon years of service, compensation, and social security benefits. The Company's funding policy is to contribute annually the maximum amount that can be deducted for federal income tax purposes. The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheet at November 30:
1996 1995 ------------------------------------------------------ Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets ----------- ----------- ----------- ----------- Accumulated benefit obligation, including vested benefits of $47,269 and $49,294 in 1996 and 1995, respectively ............ $48,628 $7,603 $46,120 $ 6,222 ===================================================== Plan assets at fair value ........... $66,857 $ - $62,647 $ - Less projected benefit obligation for service rendered to date ........ 54,266 8,785 51,374 7,011 ----------------------------------------------------- Plan assets in excess of (less than) projected benefit obligation ...... 12,591 (8,785) 11,273 (7,011) Unrecognized net loss from past experience different from that assumed ....... 4,214 1,988 5,385 1,398 Unrecognized net asset being recognized over approximately 15 years .. (4,352) - (5,440) - Recognition of additional minimum liability ....... - (806) - (609) ----------------------------------------------------- Accrued pension asset (liability) for defined benefit plans ... $12,453 $(7,603) $11,218 $(6,222) =====================================================
In addition to the plan assets related to qualified plans, the Company has funded approximately $2,829 and $2,800 at November 30, 1996 and 1995, respectively, in a restricted trust for its nonqualified plans. This trust is included in other long-term assets in the Company's consolidated balance sheets. The net pension expense includes the following components for the three years ended November 30:
1996 1995 1994 ------- ------- ------- Service cost - benefits earned during the period ............... $ 1,986 $ 1,789 $ 1,979 Interest cost on projected benefit obligation ............... 4,394 4,139 4,046 Actual return on assets .. (7,232) (8,791) (298) Net amortization and deferral ............. 1,062 3,208 (4,646) --------------------------- Net pension expense ...... $ 210 $ 345 $ 1,081 ===========================
The projected benefit obligation has been determined with a weighted average discount rate of 7.5% in 1996 and 1995, and a rate of increase in future compensation of 5.0% for both years. The expected weighted average long-term rate of return was 9.0% in 1996 and 1995. Plan assets consist of group annuity insurance contracts, corporate stocks, bonds and notes, certificates of deposit and U.S. Government securities. The defined benefit pension plan covering the Company's nonemployee directors was terminated as of December 1, 1996. The payment of the net present value of the Company's obligation for directors' retirement benefits was deferred and will be paid to the directors at their normal retirement date. The Company also has various defined contribution plans. The Company recognized expense related to these plans of $707, $476 and $499 in 1996, 1995 and 1994, respectively. I. POSTRETIREMENT HEALTH CARE BENEFITS The Company provides certain health care benefits for certain of the Company's retired employees. These employees become eligible for benefits if they meet minimum age and service requirements and are eligible for retirement benefits. The Company has the right to modify or terminate these benefits. 31 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) - ------------------------------------------------------------------------------ The following table sets forth the plan's obligation and cost at November 30, 1996 and 1995:
1996 1995 -------------- Accumulated postretirement benefit obligation: Retirees ................................. $2,063 $2,260 Fully eligible active plan participants .. 13 12 Other active plan participants ........... 147 606 -------------- Accumulated postretirement benefit obligation ....................... 2,223 2,878 Unrecognized gain ......................... - 327 -------------- Accrued postretirement benefit liability .. 2,223 3,205 Less current portion, included in accrued liabilities ........ 309 297 -------------- $1,914 $2,908 ==============
The net periodic postretirement benefit cost includes the following components for the three years ended November 30:
1996 1995 1994 ------------------- Service cost-benefits attributed to service during the period ............. $ 11 $ 25 $ 28 Interest cost on accumulated postretirement benefit obligations ....... 236 218 216 ------------------- Net periodic postretirement benefit cost .. $ 247 $ 243 $ 244 ===================
During 1996, the Company entered into an irrevocable agreement with the Healthcare Financing Administration (HCFA), the Federal agency that oversees Medicare, whereby certain employees and retirees of the Company's locations in Pennsylvania relinquished their rights to receive Medicare and accepted healthcare insurance from an insurance carrier. The HCFA entered into a contract with the insurance carrier to administer the healthcare claims and Medicare for these employees and retirees. This agreement terminated the Company's primary responsibility to provide for the postretirement benefit obligation and eliminated significant risks related to the obligation and plan assets related to those employees and retirees. The Company recognized a pretax gain of $672 on the curtailment of its postretirement healthcare plan for certain employees and retirees as defined above. Substantially all future health care benefit cost increases will be assumed by the participants, and therefore, future increases in health care costs will not increase the postretirement benefit obligation or cost to the Company. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5% in 1996 and 1995. J. INCOME TAXES The provision for income taxes consists of:
1996 1995 1994 -------------------------- Current: Federal ... $11,215 $11,000 $ 8,886 State ..... 1,356 1,372 1,577 Foreign ... 225 135 84 Deferred .. 2,100 (325) 1,388 -------------------------- $14,896 $12,182 $11,935 ==========================
Income taxes paid, net of refunds, totaled $10,723, $11,868, and $10,087 during 1996, 1995 and 1994, respectively. The components of the net deferred tax liability as of November 30, 1996 and 1995 were as follows:
1996 1995 ------------------ Deferred tax assets: Deferred compensation ........... $ 1,457 $ 1,352 Other postretirement benefits ... 855 1,191 Foreign net operating loss carryforward ........... 939 1,132 Other items ...................... 2,441 2,617 ------------------ Total gross deferred tax assets .. 5,692 6,292 ------------------ Deferred tax liabilities: Pensions ........................ (2,107) (2,216) Plant assets .................... (6,503) (5,210) Other items ..................... (1,631) (1,317) ------------------ Total gross deferred tax liabilities ................. (10,241) (8,743) ------------------ Net deferred tax liability ....... $ (4,549) $(2,451) ==================
Deferred tax assets, including foreign net operating loss carryforwards, are expected to be realized through reversal of taxable temporary differences and future earnings. The cumulative effect of adopting SFAS 109 in the first quarter of 1994 was $630. Earnings before income taxes, equity in net earnings of affiliates, minority interests, and cumulative effect of change in accounting method included the following components: 32 10 - -----------------------------------------------------------------------------
1996 1995 1994 ------- ------- ------- Domestic income ........ $39,309 $33,683 $32,554 Foreign income (loss) .. 710 524 (951) ------- ------- ------- Total .................. $40,019 $34,207 $31,603 ======= ======= =======
The provision for income taxes resulted in effective tax rates which differ from the statutory federal income tax rates. The reasons for these differences are as follows:
Percent of Pretax Earnings ----------------------------- 1996 1995 1994 ----- --------------- ----- Statutory U.S. tax rates .......... 35.0% 35.0% 35.0% State income taxes, net of federal benefit ........... 2.3 2.6 3.2 Reduction of previously established accruals ............. - - (1.4) Capital loss utilization .......... - - (1.3) Foreign tax credit (utilization) .. - (0.1) - Foreign net operating loss (utilization) ............... - (3.3) 1.3 Other, net ........................ (0.1) 1.4 1.0 ---- -------- ---- Consolidated effective income tax rate .................. 37.2% 35.6% 37.8% ==== ======== ====
K. CONTINGENCIES The Company is involved in legal actions arising in the normal course of business. After taking into consideration legal counsel's evaluation of such actions, management is of the opinion that their outcome will not have a material adverse effect on the Company's consolidated results of operations or financial position. L. PREFERRED STOCK PURCHASE RIGHTS In March 1996, the Board of Directors of the Company 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 consumation 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. Once the rights become exercisable, each right will entitle the holder, other than the acquiring individual 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. M. INCENTIVE PLAN In 1994, the shareholders of the Company 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, including the 1984 Stock Option Plan, the 1987 Long Range Performance Share Plan, and the 1990 Directors' Restricted Stock Compensation Plan. At the inception of the 1994 Incentive Plan there were 1,000,000 shares authorized for future grants. At November 30, 1996 and 1995, respectively, there were 494,349 and 689,039 shares reserved for future grants, of which 183,260 and 180,258 shares were granted in December 1996 and 1995, respectively. The remaining ungranted shares expire in December 2003. The following is a description and a summary of key provisions related to this plan. STOCK OPTIONS 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 an exercise price less than the fair market value at the date of grant. 33 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) - ------------------------------------------------------------------------------ Shares under nonqualified stock options are as follows:
1996 1995 1994 --------- --------- --------- Outstanding at beginning of year ...................... 1,252,906 1,112,269 862,206 Granted (prices ranging from $18.25 to $21.875 per share).. 208,500 195,250 261,500 Exercised/surrendered ......... (126,606) (54,613) (11,437) --------- --------- --------- Outstanding at end of year (prices ranging from $9.33 to $21.875 per share) ........ 1,334,800 1,252,906 1,112,269 ========== ========= ========= Exercisable at end of year .... 744,175 726,000 572,033 ========== ========= =========
On October 23, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). SFAS 123 encourages, but does not require, companies to adopt a fair value based method for determining expense related to stock based compensation. Companies who do not adopt the provisions of SFAS 123 for recognition purposes must disclose pro forma effects as if the fair value based method of accounting had been applied. The Company does not intend to adopt the new recognition aspects of SFAS 123 but will provide required disclosure of pro forma information beginning in 1997. The pro forma impact has not yet been determined. LONG RANGE PERFORMANCE 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. During the performance period, officers and key employees are permitted to vote the restricted stock and receive compensation equal to dividends declared on common shares. The Company accrues compensation expense for the performance opportunity ratably during the performance cycle. Compensation expense for the plan totaled $522, $446 and $284 in 1996, 1995 and 1994, respectively. Distribution of Company common stock and cash for the performance periods ended November 30, 1996, 1995 and 1994 were $350, $312 and $237, respectively. DIRECTORS' RESTRICTED STOCK COMPENSATION The 1994 Incentive Plan grants all nonemployee directors, in lieu of cash, shares of common stock equal to five years directors' annual retainer. The directors' rights to the shares vest 20% on date of grant and 20% annually during the next four years. The directors are entitled to receive dividends and exercise voting rights with respect to all shares prior to vesting. Any unvested shares are forfeited if the director ceases to be a nonemployee director for any reason. Compensation expense for the plan totaled $165, $104 and $125 in 1996, 1995 and 1994, respectively. During 1996 and 1995, $5 and $26 of Company common stock were issued under the plan. N. SUBSEQUENT EVENT In September, 1996, the Company announced the signing of a definitive agreement to acquire United Air Specialists, Inc. (UAS), a manufacturer of air quality equipment based in Cincinnati, Ohio. Subsequent to year-end, the Company filed a registration statement in connection with this transaction with the Securities and Exchange Commission. The transaction is structured as a merger under which the Company will issue common stock in exchange for each fully diluted share of UAS common stock. It is expected that the acquisition will be accounted for as a pooling of interests. As a result of the acquisition, UAS will become a subsidiary of the Company. Consummation of the merger is subject, among other things, to approval by the shareholders of UAS. O. UNAUDITED QUARTERLY FINANCIAL DATA The unaudited quarterly data for 1996 and 1995 are as follows:
First Second Third Fourth Quarter Quarter Quarter Quarter Total ------------------------------------------------------------- 1996: NET SALES ..... $72,084 $81,574 $88,925 $90,805 $333,388 GROSS PROFIT .. 19,976 23,537 24,836 25,920 94,269 NET EARNINGS .. 3,937 5,803 6,526 8,712 24,978 NET EARNINGS PER COMMON SHARE ........ $ 0.27 $ 0.39 $ 0.44 $ 0.58 $ 1.68 1995: Net sales ..... $62,137 $70,478 $71,829 $85,750 $290,194 Gross profit .. 17,692 20,099 20,480 22,270 80,541 Net earnings .. 3,972 4,906 5,886 7,190 21,954 Net earnings per common share ........ $ 0.27 $ 0.33 $ 0.40 $ 0.48 $ 1.48
34 12 - ------------------------------------------------------------------------------ P. SEGMENT INFORMATION The Company operates in two principal product segments: Filtration Products and Consumer Products. Filtration Products manufactures and markets a complete line of filters used in the filtration of internal combustion engines, commercial and industrial buildings, residences, clean rooms, and lubrication oils, air, fuel, coolant, hydraulic and transmission fluids in both the domestic and international markets, including Europe, Australia, Mexico, South Africa and the Far East. Consumer Products manufactures and markets plastic closures, custom designed lithographed metal and metal-plastic containers, and collapsible metal tubes in both domestic and international markets, including Canada and Germany. Net sales represent sales to unaffiliated customers, as reported in the consolidated statements of earnings. Intersegment sales were not material. Assets are those assets used in each business segment. Corporate assets consist of cash and short-term cash investments, deferred income taxes, world headquarters facility, pension assets and various other assets which are not specific to an industry segment. The segment data for the years ended November 30, 1996, 1995 and 1994 are as follows:
1996 1995 1994 - ---------------------------------------------------------- Net sales: Filtration Products ...... $259,617 $221,034 $199,793 Consumer Products ........ 73,771 69,160 70,330 ---------------------------- Total ................... $333,388 $290,194 $270,123 ============================ - ---------------------------------------------------------- Operating profit: Filtration Products ...... $ 33,149 $ 28,698 $ 26,597 Consumer Products ........ 7,381 6,667 5,769 ---------------------------- Total ................... $ 40,530 $ 35,365 $ 32,366 ============================ - ---------------------------------------------------------- Assets: Filtration Products ...... $154,252 $138,706 $114,501 Consumer Products ........ 41,334 39,853 32,386 Corporate ................ 48,378 44,703 41,561 ---------------------------- Total ................... $243,964 $223,262 $188,448 ============================ - ---------------------------------------------------------- Additions to plant assets: Filtration Products ...... $ 12,637 $ 8,142 $ 6,715 Consumer Products ........ 4,275 5,591 4,157 Corporate ................ 4,740 177 544 ---------------------------- Total ................... $ 21,652 $ 13,910 $ 11,416 ============================ - ---------------------------------------------------------- Depreciation: Filtration Products ...... $ 5,969 $ 4,742 $ 3,840 Consumer Products ........ 2,946 2,787 2,763 Corporate ................ 361 207 175 ---------------------------- Total ................... $ 9,276 $ 7,736 $ 6,778 ============================ - ----------------------------------------------------------
The following details sales volume by class of product for Consumer Products segment for those classes of products which contributed 10% or more to total Corporate revenue.
1996 1995 1994 - -------------------------------------------------------- Containers.......................... 17% 18% 20%
No class of products within the Company's Filtration Products segment accounted for as much as 10% of the total sales of the Company Financial data relating to the geographic areas in which the Company operates are shown for the years ended November 30, 1996, 1995, and 1994. Net sales by geographic area are based on sales to final customers within that segment.
1996 1995 1994 -------------------------------------------------- Net sales: Sales within the United States ..... $283,633 $251,483 $242,830 Export Sales to Other Countries ... 34,134 25,760 21,159 Sales within Other Countries .. 15,621 12,951 6,134 -------- -------- -------- $333,388 $290,194 $270,123 ======== ======== ======== -------------------------------------------------- Operating profit: On Sales within the United States ..... $ 34,101 $ 32,381 $ 31,154 On Export Sales to Other Countries ... 5,488 2,505 1,895 On Sales within Other Countries .. 941 479 (683) -------- -------- -------- $ 40,530 $ 35,365 $ 32,366 ======== ======== ======== -------------------------------------------------- Identifiable Assets: United States .... $231,123 $211,315 $178,969 Other Countries .. 12,841 11,947 9,479 -------- -------- -------- $243,964 $223,262 $188,448 ======== ======== ========
35 13 REPORT OF INDEPENDENT ACCOUNTANTS ================================================================================ The Board of Directors and Shareholders CLARCOR Inc. Rockford, Illinois We have audited the accompanying consolidated balance sheets of CLARCOR Inc. and Subsidiaries as of November 30, 1996 and 1995, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended November 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CLARCOR Inc. and Subsidiaries as of November 30, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended November 30, 1996, in conformity with generally accepted accounting principles. As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for income taxes, effective December 1, 1993 and changed its method of accounting for certain investments in debt and equity securities, effective November 30, 1994. Coopers & Lybrand L.L.P. Chicago, Illinois January 3, 1997 14 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/ Lawrence E. Gloyd /s/ Bruce A. Klein /s/ William F. Knese Lawrence E. Gloyd Bruce A. Klein William F. Knese Chairman of the Board & Vice President-Finance & Vice President, Chief Executive Officer Chief Financial Officer Treasurer & Controller January 3, 1997 15 11-YEAR FINANCIAL SUMMARY ================================================================================
1996 1995 1994 1993 - -------------------------------------------------------------------------------- PER SHARE DATA Equity ................................. $ 9.82 $ 8.82 $ 7.96 $ 7.06 Earnings from Continuing Operations .... 1.68 1.48 1.39 1.16 Net Earnings ........................... 1.68 1.48 1.43 1.16 Dividends .............................. 0.6425 0.6325 0.6225 0.610 Price: High ............................ 25.13 27.00 22.38 20.00 Low ............................. 18.63 18.13 15.88 16.00 - -------------------------------------------------------------------------------- EARNINGS DATA ($000) Net Sales .............................. $333,338 $290,194 $270,123 $225,319 Operating Profit ....................... 40,530 35,365 32,366 29,067 Interest Expense ....................... 3,243 2,693 2,788 3,525 Pretax Income (1) ...................... 40,019 34,207 31,603 27,078 Income Taxes ........................... 14,896 12,182 11,935 9,827 Earnings from Continuing Operations .... 24,978 21,954 20,625 17,251 Earnings from Discontinued Operations .. -- -- -- -- Net Earnings ........................... 24,978 21,954 21,255 17,251 Average Shares Outstanding ............. 14,859 14,801 14,814 14,838 - -------------------------------------------------------------------------------- EARNINGS ANALYSIS Operating Margin ....................... 12.2% 12.2% 12.0% 12.9% Pretax Margin .......................... 12.0% 11.8% 11.7% 12.0% Effective Tax Rate ..................... 37.2% 35.6% 37.8% 36.3% Net Margin-Continuing Operations ....... 7.5% 7.6% 7.6% 7.7% Net Margin ............................. 7.5% 7.6% 7.9% 7.7% Return on Assets ....................... 11.2% 11.6% 12.2% 10.7% Return on Equity ....................... 19.1% 18.7% 20.3% 17.3% Dividend Payout to Net Earnings ........ 38.1% 42.5% 43.3% 52.4% - -------------------------------------------------------------------------------- BALANCE SHEET DATA ($000) Current Assets ......................... $124,379 $117,570 $ 98,450 $ 86,161 Plant Assets, net ...................... 78,586 67,036 52,615 47,636 Total Assets ........................... 243,964 223,262 188,448 173,567 Current Liabilities .................... 45,156 42,460 39,461 33,288 Long-Term Debt ......................... 35,522 34,417 17,013 24,617 Shareholders' Equity ................... 146,059 130,815 117,462 104,641 - -------------------------------------------------------------------------------- BALANCE SHEET ANALYSIS ($000) Debt to Capitalization ................. 19.6% 20.8% 12.7% 19.0% Working Capital ........................ $ 79,223 $ 75,110 $ 58,989 $ 52,873 Quick Ratio ............................ 1.5:1 1.6:1 1.6:1 1.6:1 - -------------------------------------------------------------------------------- CASH FLOW DATA ($000) From Operations ........................ $ 26,171 $ 19,460 $ 24,603 $ 19,992 For Investment ......................... (18,425) (28,599) (469) (1,193) From/(for) Financing ................... (9,127) 8,369 (18,405) (20,012) Change in Cash & Equivalents ........... (1,397) (798) 5,729 (1,213) Capital Expenditures ................... 21,652 13,910 11,416 10,218 Depreciation ........................... 9,276 7,736 6,778 5,816 Dividends Paid ......................... 9,512 9,330 9,201 9,036 Interest (Income)/Expense .............. 2,415 1,863 2,240 2,650 Income Taxes Paid ...................... 10,723 11,868 10,087 9,860 - -------------------------------------------------------------------------------- CASH FLOW ANALYSIS ($000) Operating Cash Flow (2) ................ $ 39,309 $ 33,191 $ 36,930 $ 32,502 Net Cash Flow (3) ...................... 17,657 19,281 25,514 22,284 Elective Cash Flow (4) ................. (4,993) (3,780) 3,986 738 - --------------------------------------------------------------------------------
(1) Pretax income in 1995 and 1994 was restated to reflect minority interests in earnings of subsidiaries and the equity in net earnings of affiliate as separate line items after tax in the statements of earnings. (2) From operations before interest income/expense and taxes paid. (3) Operating Cash Flow less capital expenditures. (4) Net Cash Flow less dividends +(-) interest income/expense and less taxes paid. 16
==================================================================== 1992 1991 1990 1989 1988 1987 1986 - -------------------------------------------------------------------- $ 6.64 $ 6.42 $ 5.57 $ 4.83 $ 6.99 $ 6.36 $ 5.76 1.10 1.24 1.29 0.69 1.02 0.95 0.90 0.94 1.26 1.37 0.42 1.15 1.04 0.96 0.600 0.550 0.520 0.480 0.453 0.431 0.418 22.50 22.67 17.83 18.92 14.59 16.89 14.17 15.00 13.00 11.83 11.75 9.75 9.25 10.09 - -------------------------------------------------------------------- $188,625 $179,538 $170,279 $156,530 $149,468 $146,225 $135,319 27,630 30,853 30,832 22,128 27,287 29,045 25,032 3,803 3,682 3,675 1,327 151 176 192 25,305 28,543 30,204 22,084 28,833 30,378 29,769 8,796 10,068 10,999 10,474 10,647 13,270 13,566 16,509 18,475 19,205 11,610 18,186 17,108 16,203 -- 297 1,200 (4,493) 2,412 1,672 1,165 14,139 18,772 20,405 7,117 20,598 18,780 17,368 14,973 14,873 14,843 17,040 17,926 18,121 18,094 - -------------------------------------------------------------------- 14.6% 17.2% 18.1% 14.1% 18.3% 19.9% 18.5% 13.4% 15.9% 17.7% 14.1% 19.3% 20.8% 22.0% 34.8% 35.3% 36.4% 47.4% 36.9% 43.7% 45.6% 8.8% 10.3% 11.3% 7.4% 12.2% 11.7% 12.0% 7.5% 10.5% 12.0% 4.5% 13.8% 12.8% 12.8% 8.9% 13.0% 15.6% 4.9% 15.3% 15.3% 14.9% 14.8% 22.7% 28.1% 5.7% 17.9% 18.0% 18.4% 63.4% 43.5% 37.8% 116.5% 39.4% 41.6% 43.5% - -------------------------------------------------------------------- $ 93,627 $ 75,207 $ 72,623 $ 58,019 $ 70,028 $ 67,523 $ 75,457 35,584 45,712 42,748 44,223 42,063 39,828 32,431 161,255 157,999 144,127 131,009 143,842 134,877 122,779 25,272 20,570 20,758 21,405 14,244 15,899 13,153 29,325 35,834 35,810 32,634 1,116 1,507 1,634 99,551 95,662 82,689 72,662 125,012 115,015 104,186 - -------------------------------------------------------------------- 22.8% 27.3% 30.2% 31.0% 0.9% 1.3% 1.5% $ 68,355 $ 54,637 $ 51,865 $ 36,614 $ 55,784 $ 51,624 $ 62,304 2.5:1 2.1:1 2.1:1 1.4:1 3.3:1 2.9:1 4.2:1 - -------------------------------------------------------------------- $ 22,807 $ 18,343 $ 25,284 $ 17,791 $ 18,545 $ 22,015 $ 16,330 (7,185) (14,719) (4,973) (8,251) (1,374) (16,231) (7,923) (10,200) (8,805) (10,316) (23,915) (11,105) (8,374) (7,767) 5,422 (5,181) 9,995 (14,375) 6,066 (2,590) 640 7,450 8,128 8,638 8,334 6,137 5,086 9,720 7,044 6,707 6,619 6,321 6,287 6,008 4,384 8,958 8,165 7,708 8,290 8,121 7,814 7,560 3,505 2,560 3,143 53 (946) (911) (1,876) 10,982 9,474 10,068 11,234 13,313 14,502 13,117 - -------------------------------------------------------------------- $ 37,294 $ 30,377 $ 38,495 $ 29,078 $ 30,912 $ 35,606 $ 27,571 29,844 22,249 29,857 20,744 24,775 30,520 17,851 6,399 2,050 8,938 1,167 4,287 9,115 (950) - --------------------------------------------------------------------
17 FINANCIAL REVIEW - ---------------- (SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) =============================================================================== In 1996, CLARCOR reported its third consecutive year of record performance in sales, operating profit, net earnings and earnings per share. This performance was achieved on the strength of new records in sales and operating profit in the Filtration Products segment, augmented by a strong performance by the Consumer Products segment. The information presented in this financial review should be read in conjunction with other financial information presented throughout this 1996 Annual Report. CLARCOR's business segment information is shown on page 35, and this financial review should be read in conjunction with that segment information and other information presented elsewhere in this report. Operating results for the current and prior years are shown in comparative form in the table below.
OPERATING RESULTS 1996 VS. 1995 1995 VS. 1994 CHANGE CHANGE -------------------------------- --------------------------------- $1996 %SALES $ % $1995 % SALES $ % -------------------------------- --------------------------------- Net Sales ..................................... $333.4 100.0% $43.2 14.9% $290.2 100.0% $20.1 7.4% Cost of Sales ................................. 239.1 71.7% 29.5 14.1% 209.6 72.2% 17.2 8.9% Selling & Administrative Expenses ............ 53.8 16.1% 8.6 19.0% 45.2 15.6% (0.1) (0.3%) Operating Profit .............................. 40.5 12.2% 5.1 14.6% 35.4 12.2% 3.0 9.3% Other Income (Deductions) ..................... (0.5) (0.2%) 0.7 -- (1.2) (0.4%) (0.4) -- Earnings Before Taxes, Equity in Net Earnings of Affiliate, Minority Interests, and Cumulative Effect of Accounting Change ....... 40.0 12.0% 5.8 17.0% 34.2 11.8% 2.6 8.2% Income Taxes .................................. 14.9 4.5% 2.8 22.3% 12.1 4.2% 0.2 2.1% Earnings Before Equity in Net Earnings of Affiliate, Minority Interests and Cumulative Effect of Accounting Change ............................ 25.1 7.5% 3.0 14.1% 22.1 7.6% 2.4 12.0% Equity in Net Earnings of Affiliate and Minority Interests ....................... (0.1) -- -- -- (0.1) -- (1.1) -- Cumulative Effect of Accounting Change ........ -- -- -- -- -- -- (0.6) -- Net Earnings .................................. $ 25.0 7.5% $ 3.0 13.8% $ 22.0 7.6% $ 0.7 3.3% ================================ ================================= Earnings Per Share ............................ $1.68 $0.20 13.5% $1.48 $0.09 6.5% Cumulative Effect of Accounting Change ........ -- -- -- -- ($0.04) -- Total ...................................... $1.68 $0.20 13.5% $1.48 $0.05 3.5% Average Shares Outstanding .................... 14.9 14.8 ====================================================================================================================
SALES Consolidated net sales of $333.4 set a new CLARCOR record, the seventh consecutive year of record sales. Net sales in 1996 were 14.9% higher than sales of $290.2 reported in fiscal year 1995. Fiscal 1996 included a full year of sales from the 1995 Hastings Filters acquisition, compared to one quarter of Hastings sales included in fiscal 1995. Excluding Hastings sales, the Company's net sales increased 5.5% in 1996. Sales growth came from both the Filtration Products and Consumer Products segments. Net sales of $290.2 for the 1995 fiscal year were 7.4% higher than sales in 1994 and reflected higher Filtration Products segment and lower Consumer Products segment sales. The 1995 sales benefited from the inclusion of sales from the fourth quarter acquisition of Hastings Filters, Inc. Sales at Baldwin Filters and Clark Filter increased, while lower sales were recorded at Airguard Industries in 1995. Comparative net sales information related to CLARCOR's operating segments is shown in the tables below.
1996 VS. 1995 CHANGE NET SALES 1996 % TOTAL $ % - -------------------------------------------------------- Filtration Products .. $259.6 77.9% $38.6 17.5% Consumer Products .... 73.8 22.1% 4.6 6.7% -------------------------------- Total .............. $333.4 100.0% $43.2 14.9% ================================
1995 VS. 1994 CHANGE NET SALES 1995 % TOTAL $ % - --------------------------------------------------------- Filtration Products .. $221.0 76.2% $21.2 10.6% Consumer Products .... 69.2 23.8% (1.1) (1.7%) --------------------------------- Total .............. $290.2 100.0% $20.1 7.4% =================================
18 ================================================================================ The Filtration Products segment reported 1996 sales of $259.6, an increase of 17.5% over sales of $221.0 in 1995. The increase was principally the result of the inclusion in the current year of a full year of sales from the acquisition of Hastings Filters, Inc., compared to three months of sales included in 1995, the year of acquisition. The 1996 sales also benefited from increased sales in each of the segment's filtration businesses. Sales from Baldwin's domestic plants increased over 6% from 1995. Worldwide sales of Baldwin's heavy duty filter products increased 5.4%. Sales of Airguard's industrial and environmental filter products increased 3.8% over the prior year. Clark Filter continued its growth in railroad locomotive filter products, recording a sales increase of 8.6% over 1995 levels. Filtration Products segment 1995 net sales of $221.0 increased 10.6% over sales of $199.8 in 1994, chiefly as a result of the fourth quarter acquisition of Hastings Filters, Inc., and strong sales growth from Baldwin Filters and Clark Filter, which more than offset a sales decline at Airguard Industries. Current year Consumer Products net sales totaled $73.8, and increased 6.7% over fiscal 1995 sales. Both plastics and metals sales increased over the prior year, 9.0% and 7.9%, respectively. The increase in metals sales resulted from new products and steady demand from traditional metals customers for flat sheet decorating, specialty containers and commemorative tins. In 1995, Consumer Products segment sales declined 1.7% to $69.2 from $70.3 in 1994. This decline was due principally to lower spice can sales, flat sheet decorating and promotional business in 1995 compared to 1994. Earnings For the third consecutive year, CLARCOR earned record consolidated operating profit. Fiscal 1996's operating profit totaled $40.5, and was up 14.6% over fiscal 1995. Both of the Company's business segments recorded double digit gains. In 1995, the Company achieved consolidated operating profit of $35.4. Fiscal 1995 operating profit increased 9.3% over operating profit of $32.4 recorded in 1994, with gains in both Filtration Products and Consumer Products. Comparative operating profit information related to the Company's business segments is as follows.
1996 vs. 1995 Change OPERATING PROFIT 1996 % Total $ % -------------------------------------------------------- Filtration Products .. $33.1 81.8% $4.4 15.5% Consumer Products .... 7.4 18.2% .7 10.7% -------------------------------- Total .............. $40.5 100.0% $5.1 14.6% ================================
1995 vs. 1994 Change OPERATING PROFIT 1995 % Total $ % -------------------------------------------------------- Filtration Products .. $28.7 81.1% $2.1 7.9% Consumer Products .... 6.7 18.9% .9 15.6% -------------------------------- Total .............. $35.4 100.0% $3.0 9.3% ================================
OPERATING PROFIT AS A PERCENT OF NET SALES 1996 1995 1994 ------------------------------------------- Filtration Products .. 12.8% 13.0% 13.3% Consumer Products .... 10.0% 9.6% 8.2% ------------------- Total .............. 12.2% 12.2% 12.0% ===================
Increased profits in the Filtration segment's businesses offset a loss recorded at Hastings, an operation acquired in 1995. Profit gains were led by Baldwin Filters' domestic operations, which increased operating profits over 12% through productivity improvements, cost reductions and new product introductions. Clark Filter increased operating profits over 20% on an 8.6% increase in sales. Airguard Industries recorded a dramatic improvement over its 1995 results as margins improved by over three percentage points on a sales increase of 3.8%. The Filtration segment's international business continues to grow. Profits were recorded in each of Baldwin's international operations, except in China. FIBAMEX, the segment's Mexican operation, recorded a small operating profit on flat sales in a weak Mexican economy. Baldwin's European operations, Baldwin Ltd. in England and Baldwin N.V. in Belgium, together reported an operating margin of over 7% on a combined 12% sales increase. Baldwin-Unifil, the South African operation acquired in early 1996, reported an operating margin of over 4%. Baldwin-Australia recorded an operating profit increase of over 50% on a 9% increase in sales. Baldwin-Weifang Filters Ltd., the start-up Chinese joint venture, began manufacturing filters for the Chinese market in late 1996 and is expected to be marginally profitable in 1997. 19 FINANCIAL REVIEW - ---------------- (SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) ================================================================================ Filtration Products segment operating profit totaled $28.7 in 1995, 7.9% higher than operating profit of $26.6 reported in the prior year. The increased 1995 operating profit reflected gains in the Baldwin heavy duty operations, both domestic and international. Profit at the segment's Airguard unit declined in 1995, the result of severe increases in raw material prices, a product failure caused by faulty media from an outside vendor, startup problems with a new distribution center and costs related to a new management information system. The September 4, 1995 acquisition of Hastings Filters, Inc. had an immaterial operating profit impact in 1995. Filtration operating profit as a percent of net sales was 12.8% in 1996, compared to 13.0% in 1995 and 13.3% in 1994. Operating profit in the Filtration segment represented 81.8% of the consolidated total, compared to 81.1% in 1995 and 82.2% in 1994. Operating profit in 1996 in the Consumer Products segment increased 10.7% over fiscal 1995 operating profit. Increased sales levels in both the metals and plastics businesses were the principal reasons for the increase. Sales of metals products increased following declines in recent years. Increased metals sales resulted from new product introductions and continuing demand for flat sheet decorating, specialty containers and commemorative tins. In plastics, specialty closures, particularly the combiTop(R) and SST Series(TM) closures, added to growth in the current year. Consumer Products segment operating profit in 1995 totaled $6.7. This was an increase of 15.6% from 1994 and primarily reflected cost reduction programs. Operating profit as a percent of sales increased to 10.0% in 1996 from 9.6% in 1995 and 8.2% in 1994. The 1996 profit was 18.2% of consolidated operating profit. This compares to 18.9% of the total in 1995 and 17.8% in 1994. Fiscal 1996 other expense totaled $.5, compared to a total of $1.2 in fiscal 1995. Interest expense in the current year was $3.2, up from $2.7 recorded in the prior year, and reflects CLARCOR's higher debt level for all of the current year, compared to the higher level for approximately one quarter of 1995. In the fourth quarter of 1995, long-term debt increased to finance the Hastings Filters acquisition. The 1995 interest expense approximated that of 1994. Interest income was virtually unchanged from 1995. In 1996, the Company recorded a gain of $1.7 on the liquidation of one half of the Company's remaining investment in the shares of G.U.D. Holdings Ltd. In 1994, CLARCOR sold 75% of its original investment in these shares and recorded a pretax gain of $4.2. Current year earnings before taxes, equity in net earnings of affiliate, minority interests and the cumulative effect of a change in accounting method totaled $40.0, up $5.8 from last year. This increase is the result of increased profitability in both of the Company's business segments. These earnings in 1995 totaled $34.2, up 8.2% from $31.6 in the prior year. The current year provision for income taxes totaled $14.9, due to increased profitability and the gain recorded on the sale of the G.U.D. shares. The 1995 provision for income taxes totaled $12.1 and was higher than the 1994 provision due principally to taxes on higher profits. In 1995, the Company recorded deferred tax assets on foreign net operating loss carryforwards that are expected to be realized which reduced the effective tax rate in 1995. CLARCOR's provision for income taxes in 1994 totaled $11.9. The effective tax rates were 37.2% for the current year, compared to 35.6% in 1995 and 37.8% for 1994. Fiscal 1996 earnings before equity in the net earnings of affiliate, minority interests and the cumulative effect of a change in accounting method totaled $25.1. In 1995, these earnings were $22.1, compared to $19.7 in 1994. In 1994, CLARCOR adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The adoption of this new standard contributed $.6 to earnings in the first quarter of the year of adoption. Record net earnings reached $25.0 in 1996, up 13.8% over net earnings of $22.0 in 1995. Net earnings in 1995 were 3.3% higher than 1994 net earnings of $21.3. Net earnings per share set a new CLARCOR record at $1.68, an increase of 13.5% over 1995 per share earnings of $1.48. Included in the 1996 earnings per share was a gain of $.07 related to the sale of the G.U.D. shares. The 1995 earnings reflected an increase of 6.5% over comparable earnings of $1.39 in 1994. In 1994, the cumulative effect of the income tax accounting change contributed an additional $.04 per share, resulting in 1994 total earnings per share of $1.43. On October 23, 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" (SFAS 123). SFAS 123 encourages, but does not require, companies to adopt a fair value 20 =============================================================================== based method for determining expense related to stock based compensation. Companies which do not adopt the provisions of SFAS 123 for recognition purposes must disclose pro forma effects as if the fair value based method of accounting had been applied. The Company does not intend to adopt the new recognition aspects of SFAS 123, but will provide required disclosure of pro forma information at fiscal 1997 year-end. The effect of the pro forma impact has not been determined. FINANCIAL CONDITION CORPORATE LIQUIDITY The Consolidated Statements of Cash Flows are shown on page 27, and the discussion of corporate liquidity should be read in conjunction with information presented in those statements. In 1996, CLARCOR's cash flows included a new $8.4 borrowing through an industrial revenue bond to finance the construction of an addition to the Hastings Filters Yankton, South Dakota plant. Gross cash flow, consisting of net earnings plus non-cash charges of depreciation and amortization, reached $34.8. Net cash flows from operating activities grew to $26.2, fueled by higher net earnings and depreciation and amortization. The investment in working capital increased by $9.3 in 1996 compared to an increase in 1995 of $8.8 and an increase in 1994 of $2.7. Investing activities used $18.4 of cash in 1996, compared to $28.6 in 1995. The decrease resulted from a lower cash use for acquisitions in the current year than in 1995, plus cash proceeds from the sale of the G.U.D. shares, partially offset by a significant increase in plant assets from the previous year. The increase in plant assets was due to the Hastings plant expansion and related new equipment, completion of a new plastics facility at J. L. Clark and additional capital expenditures at Corporate. Cash flows from financing activities reflected net cash used of $9.1, compared to net cash provided of $8.4 in 1995. This change was reflective of the reduction in current borrowing in 1996 to $8.4, from $25.0 in 1995. The net change in cash and short-term cash investments was a reduction of $1.4, compared to a reduction of $.8 in the prior year. CLARCOR's cash flows in the year 1995 included a borrowing under a new $25.0 note to finance the Hastings Filters, Inc. acquisition. Fiscal 1995 net cash flows from operating activities totaled $19.5, down 20.9% from net cash flows which totaled $24.6 in 1994. Fiscal year 1995 operating activities included higher gross cash flow of $30.2 from net earnings and non-cash charges of depreciation and amortization. The higher gross cash flow was reduced by a net investment in assets and liabilities of $10.6 and asset additions from the Hastings acquisition. Cash flows used in investing activities in 1995 totaled $28.6, compared to $.5 in 1994. In 1995, the Hastings acquisition used $14.1, and $13.9 was used for investment in other plant assets. Cash was provided by financing activities in 1995, and totaled $8.4. This compares to $18.4 used in 1994. The 1995 total reflects cash inflows of $25.0 from the new note. Cash used in financing activities included $7.6 of payments on long-term debt and dividend payments of $9.3. In 1994, cash provided by operating activities totaled $24.6. Changes in the assets and liabilities in 1994 were a mix of increases and decreases which mostly offset each other. In 1994, cash of $10.7 was provided from the sale of G.U.D. stock, and cash of $1.7 was received from other sources. Cash used included $11.4 for plant additions and $1.5 for the acquisition of a business. In 1994, cash of $18.4 was used for financing activities, principally for dividend payments of $9.2, debt payments of $7.9, and treasury share purchases of $1.3. CLARCOR continues to generate sufficient cash to maintain current operating levels, to provide for the addition and replacement of necessary plant assets, and to service and repay long-term debt. Sufficient lines of credit remain available to fund the Company's current operations and planned future growth. CAPITAL RESOURCES CLARCOR's balance sheet continues to exhibit liquidity and financial strength, employing a mixture of equity and debt capital to finance its assets.
SUMMARY BALANCE 1996 1995 ---------------------------------------- SHEET $ % Change $ % Change ---------------------------------------- CURRENT ASSETS .......... $124.4 5.8% $117.6 19.4% Plant Assets, net ....... 78.6 17.2% 67.0 27.4% Excess Cost over Fair Value, net ........ 15.1 1.5% 14.9 (2.0%) Pension & Other Assets .. 25.9 8.9% 23.8 7.7% Total Assets ............ $244.0 9.3% $223.3 18.5% CURRENT LIABILITIES ..... $ 45.2 6.3% $ 42.5 7.6% Long-Term Debt .......... 35.5 3.2% 34.4 102.3% Pension & Other Liabilities 17.2 10.6% 15.6 8.3% Shareholders' Equity .... 146.1 11.7% 130.8 11.4% Total Liabilities & Shareholders' Equity ... $244.0 9.3% $223.3 18.5%
21 FINANCIAL REVIEW - ---------------- (SHARES AND DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) =============================================================================== At the end of fiscal 1996, CLARCOR's total assets reached $244.0, up $20.7 from year-end 1995 levels. Working capital increased to $79.2 from $75.1 in 1995. The current ratio remained unchanged from 1995 at 2.8:1. Current assets rose a modest $6.8, principally in inventories which were increased at Hastings to maintain customer service levels while production machinery was moved from Michigan to the Hastings plant in Yankton, South Dakota. Net plant assets totaled $78.6 at year-end 1996, and rose $11.6, reflecting the Hastings plant expansion and related new equipment, completion of a new plastics facility at J.L. Clark and additional capital expenditures at Corporate. Capital expenditures totaled $21.7 in 1996. Capital additions in 1997 are not anticipated to be at this level. With the exception of the industrial revenue bond used to finance the Hastings plant addition, the Company funded capital additions with internally generated funds. Net plant assets totaled $67.0 at the end of 1995, reflecting both the Hastings acquisition and normal asset additions. In 1996 and 1995, marketable equity securities reflected the Company's remaining 2.5% and 5.0% interest, respectively, in G.U.D. Holdings Limited which was classified as available-for-sale and valued at current market value under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Current liabilities increased modestly, to $45.2 in 1996, from $42.5 in the prior year. Long-term debt remained approximately constant, at $35.5, reflecting the additional debt from the IRB financing offset by scheduled repayment on the 9.71% promissory note. The long-term debt balance increased to $34.4 in 1995, and reflected the new promissory note, reduced by scheduled repayments on the old note. Shareholders' equity continued to grow, increasing 11.7% during 1996 to $146.1, from $130.8 at year-end 1995. The current year ratio of long-term debt to equity was 24.3% compared to 26.3% in 1995. Shareholders' equity represented 80.4% of total capitalization at year-end 1996 compared to 79.2% at the end of 1995.
1996 1995 ------------ Current Ratio .................. 2.8:1 2.8:1 Quick Ratio .................... 1.5:1 1.6:1 Long-Term Debt/Equity .......... 24.3% 26.3% Long-Term Debt/Capitalization .. 19.6% 20.8%
At November 30, 1996, CLARCOR had 14,874,969 shares of common stock outstanding at $1.00 par value, compared to 14,825,296 shares outstanding at the end of 1995. THE FUTURE The Company continues to be very optimistic about the future, and believes that sales, operating profit, and earnings will continue to increase in future years. CLARCOR's operations, Baldwin Filters, Airguard Industries, Clark Filter and J. L. Clark continue to demonstrate a superior ability to grow while maintaining strong operating margins. The strength of these operations is demonstrated by CLARCOR's ability to realize its 1996 earnings target while absorbing $2.2 in unanticipated losses from the Hastings Filters operation. The Hastings Filters business is expected to improve throughout 1997 and reach expected levels of profitability by 1999. Baldwin Filters will continue to be the principal driving force for CLARCOR. The primary focus at Baldwin will continue to be supplying the highest quality mobile filtration products to its customers and distributors. The combination of Hastings Filters with Baldwin provides CLARCOR with the widest product range and the largest distribution network of any company in the mobile filtration industry. Hastings Filters is expected to add to earnings per share in 1997 and will be a significant part of CLARCOR's future growth and profits. Both Airguard's sales and margins are expected to continue the improvement which began in 1996. Operating profit as a percent of sales is anticipated to progress toward its ultimate goal of 8% to 10%. On September 23, 1996 the Company announced the signing of a definitive agreement to acquire United Air Specialists, Inc. (UAS), based in Cincinnati, Ohio. Upon the completion of the transaction, UAS will become a wholly-owned subsidiary of CLARCOR. UAS is engaged in the design, manufacture and sale of commercial and industrial air cleaners, electrostatic fluid contamination and control equipment and high precision spraying equipment. For the fiscal year ended June 30, 1996, UAS had net sales of approximately $40.8 and net earnings of approximately $1.5. For the first quarter of fiscal 1997, its net sales were approximately $9.7 and net earnings approximately $.3. J. L. Clark will continue to invest resources in the expansion of its plastics business and expects to continue strong growth in sales and operating margins. In early 1996, J. L. Clark completed a 25,000 sq. ft. addition to its plastics manufacturing facility enabling it to continue meeting the increasing demand for its plastic products. Continued growth is anticipated in international sales, from nearly 15% of sales in 1996 to the Company's 22 =============================================================================== goal of 25% of sales in the year 2000. Continued profit growth is expected. The Company is exploring other acquisitions and alliances outside the United States and expects to announce additional ventures in the future. CLARCOR's plan for internal growth, coupled with anticipated future acquisitions and expected strategic alliances, will further the realization of the Company's sales, profits, and earnings objectives. The realization of these objectives will provide liquidity and financial strength and lead to an increase in shareholder value. FORWARD-LOOKING STATEMENTS Certain statements quoted in the body of this report, and statements in the "The Future" section of this review 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 timing and acceptance of new products and product enhancements by the Company or its competitors, changes in pricing, product life cycles, purchasing patterns of distributors and customers, competitive conditions in the industry, business cycles affecting the markets in which the Company's products are sold, extraordinary events, such as litigation or acquisitions, including related charges, and economic conditions generally or in various geographic areas. All of the foregoing are difficult to forecast. The future results of the Company may fluctuate as a result of these and the other risk factors detailed from time to time in the Company's Securities and Exchange Commission reports. Due to the foregoing items, it is possible that, in 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 5 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 CLARCOR INC. SUBSIDIARIES AS OF FEBRUARY 19, 1997
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% 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 70% Hastings Filters, Inc. Delaware 100% Hastings Filters Ltd. Canada Canada 100% Baldwin Filters (Aust.) Pty. Limited Australia 50% Clark Filter, Inc. Delaware 100% Filtros Baldwin de Mexico Mexico 90% CLARCOR International, Inc. Delaware 100% Baldwin-Weifang Filters Ltd. China 60% CLARCOR Foreign Sales Corporation Virgin Islands 100% CLARCOR Trading Company Delaware 100%*
- ------------------------------ * Direct or indirect EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in each Registration Statement of CLARCOR Inc. on Form S-8 (file numbers 33-5456, 33-38590, 33-39374, 33-53763 and 33-53899) and on Form S-4 (registration number 333-19735) of our reports dated January 3, 1997, on our audits of the consolidated financial statements of CLARCOR Inc. and Subsidiaries as of November 30, 1996 and 1995 and for the years ended November 30, 1996, 1995 and 1994, and the financial statement schedule for the years ended November 30, 1996, 1995, and 1994, which reports are included or incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND L.L.P. Chicago, Illinois February 19, 1997 EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 YEAR NOV-30-1996 DEC-03-1995 NOV-30-1996 17,372 0 54,293 1,784 49,773 124,379 162,323 83,737 243,964 45,156 35,522 0 0 14,875 131,184 243,964 333,388 333,388 239,119 239,119 0 629 3243 40,019 14,896 24,978 0 0 0 24,978 1.68 1.65
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