-----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, E4pZVmJjlt9RpSXpYiY++aXTSANwP08NWN39SC4IDjiENHsxtOX0VT45DacSBJWj QFU51FoZ9ScamB+RhJ8GFg== 0000950137-99-004272.txt : 19991124 0000950137-99-004272.hdr.sgml : 19991124 ACCESSION NUMBER: 0000950137-99-004272 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991123 ITEM INFORMATION: FILED AS OF DATE: 19991123 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: 8-K/A SEC ACT: SEC FILE NUMBER: 001-11024 FILM NUMBER: 99763052 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 8-K/A 1 FORM 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ------- FORM 8-K/A CURRENT REPORT ------- Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 ------- November 23, 1999 (September 10, 1999) ------------------------------------------------------------------ Date of Report (Date of earliest event reported) CLARCOR Inc. ------------------------------------------------------------------ (Exact name of registrant as specified in its charter) Commission File Number 1-11024 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 ---------------- No Change - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) 2 Item 7. Financial Statements and Exhibits As previously reported in a Current Report on Form 8-K, dated September 10, 1999 and filed with the Securities and Exchange Commission on September 17, 1999, the registrant acquired substantially all the assets used in the design, manufacture, marketing and distribution of a complete line of filtration products (the "Industrial Filter Business") from Mark IV Industries, Inc., Facet Holding Co., Inc., Purolator Products Air Filtration Company, George W. Dahl Company, Inc., and Mantronics Limited on September 10, 1999. In connection therewith, the registrant hereby files the following financial statements and reports regarding this acquisition: (a) Financial Statements of Businesses Acquired Industrial Filter Business 1. Report of Independent Accountants 2. Combined Balance Sheets as of February 28, 1999 and 1998 3. Combined Statements of Income and Net Assets for years ended the last day of February 1999, 1998, and 1997 4. Combined Statements of Cash Flows for the years ended the last day of February 1999, 1998, and 1997 5. Combined Statements of Comprehensive Income for the years ended the last day of February 1999, 1998, and 1997 6. Notes to Combined Financial Statements 7. Unaudited Combined Balance Sheet as of August 31, 1999 and Combined Statements of Income and of Cash Flows for the interim six months ended August 31, 1999 and 1998 8. Notes to Unaudited Combined Financial Statements (b) Pro Forma Financial Information CLARCOR Inc. and Industrial Filter Business Combined 1. Pro Forma Financial Information - Introduction 2. Unaudited Pro Forma Combined Condensed Balance Sheet as of August 28, 1999 and Notes thereto 3. Unaudited Pro Forma Combined Condensed Statement of Earnings for the fiscal year ended November 30, 1998 and Notes thereto 4. Unaudited Pro Forma Combined Condensed Statement of Earnings for the nine-month interim period ended August 28, 1999 and Notes thereto (c) Exhibits 1. Consent letter from PricewaterhouseCoopers LLP 3 Item 7(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED 1. Report of Independent Accountants To the Management of the Industrial Filter Business In our opinion, the accompanying combined balance sheets and the related combined statements of income and net assets, comprehensive income and cash flows present fairly, in all material respects, the financial position of the Industrial Filter Business (the "Company") as of February 28, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended February 28, 1999, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP Rochester, New York October 22, 1999 4 Item 7(a)2. INDUSTRIAL FILTER BUSINESS COMBINED BALANCE SHEETS FEBRUARY 28, 1999 AND 1998 (dollars in thousands) ASSETS 1999 1998 -------- -------- Current Assets: Accounts receivable, net $ 30,800 $ 27,500 Inventories, net 30,500 28,200 Other current assets 1,300 700 -------- -------- Total Current Assets 62,600 56,400 Fixed assets, net 24,500 24,100 Cost in excess of net assets acquired 62,700 62,200 -------- -------- Total Assets $149,800 $142,700 ======== ======== LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 14,100 $ 12,300 Compensation related liabilities 4,200 3,700 Accrued expenses and other liabilities 3,600 1,400 Income taxes payable 900 700 -------- -------- Total Current Liabilities 22,800 18,100 Non-current liabilities 1,400 1,200 Deferred taxes 2,900 3,000 -------- -------- Total Liabilities 27,100 22,300 Net Assets 122,700 120,400 -------- -------- Total Liabilities and Net Assets $149,800 $142,700 ======== ======== The accompanying notes are an integral part of these financial statements. 1 5 Item 7(a)3. INDUSTRIAL FILTER BUSINESS COMBINED STATEMENTS OF INCOME AND NET ASSETS YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997 (dollars in thousands) 1999 1998 1997 -------- -------- -------- Net sales $150,200 $141,200 $135,100 -------- -------- -------- Operating costs: Cost of products sold 102,600 94,400 90,900 Selling and administration 29,600 27,100 26,200 Research and development 2,000 1,700 1,600 Depreciation and amortization 4,300 3,700 3,300 -------- -------- -------- Total operating costs 138,500 126,900 122,000 -------- -------- -------- Operating income 11,700 14,300 13,100 Other income 1,200 - - -------- -------- -------- Income before taxes 12,900 14,300 13,100 Provision for income taxes 4,600 5,100 4,700 -------- -------- -------- NET INCOME 8,300 9,200 8,400 Net assets at the beginning of the year 120,400 115,700 114,400 Cash transfers to parent, net (6,000) (4,500) (7,100) -------- -------- -------- Net assets at the end of the year $122,700 $120,400 $115,700 ======== ======== ======== The accompanying notes are an integral part of these financial statements. 3 6 Item 7(a)4. INDUSTRIAL FILTER BUSINESS COMBINED STATEMENT OF CASH FLOWS YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997 (dollars in thousands) 1999 1998 1997 ------ ------ ------ Cash flows from operating activities: Net income $8,300 $9,200 $8,400 Less gain from asset sale (1,200) - - Items not affecting cash: Depreciation and amortization 4,300 3,700 3,300 Changes in assets and liabilities, net of effects of acquired business: Accounts receivable 700 (3,100) (2,100) Inventory (900) (1,500) (600) Other assets (500) 900 (200) Accounts payable and other liabilities (500) (2,000) 1,300 ------ ------ ------ Net cash provided by operating activities 10,200 7,200 10,100 Cash flows for investing activities, used to purchase fixed assets (2,400) (2,700) (3,000) Cash flows for investing activities - proceeds from asset sale 1,200 - - Cash flows used in acquisition (3,000) - - ------ ------ ------ Net cash transferred to parent $6,000 $4,500 $7,100 ====== ====== ====== The accompanying notes are an integral part of these financial statements. 2 7 Item 7(a)5. INDUSTRIAL FILTER BUSINESS COMBINED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED THE LAST DAY OF FEBRUARY 1999, 1998 AND 1997 (dollars in thousands) 1999 1998 1997 ------ ------ ------ Net Income $8,300 $9,200 $8,400 Balance sheet effects of foreign currency translation adjustments 100 (600) (900) ------ ------ ------ Comprehensive net income $8,400 $8,600 $7,500 ====== ====== ====== The accompanying notes are an integral part of these financial statements. 4 8 Item 7(a)6. INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS 1. THE INDUSTRIAL FILTER BUSINESS AND ITS SIGNIFICANT ACCOUNTING POLICIES Prior to September 1999, Mark IV Industries, Inc. (Mark IV) was the owner of a number of operating divisions and subsidiaries which made up its Industrial Filter Business (the Filter Business or the Company). Such operating divisions and subsidiaries included the following: * Facet Holdings Co., Inc. * Purolator Products Air Filtration Company * George W. Dahl Company, Inc. * G.S. Costa Mesa Inc. * Facet USA, Inc. * Foreign Operations The Foreign Operations represent Filter Business activities in Italy, the Netherlands, Germany, Australia, Switzerland, France, United Kingdom and Spain, with each operating as a subsidiary or division of a first or second-tier subsidiary of Mark IV. On September 10, 1999, all of the above business units were sold by Mark IV (or one of its affiliates) to Clarcor Inc. (Clarcor), or one of Clarcor's affiliates, in accordance with the terms of a purchase agreement between the parties (the "Purchase Agreement"). The accompanying combined balance sheets include the accounts of the Filter Business and all significant inter-company transactions have been eliminated. Such combined balance sheets have been prepared in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of such financial statements. It should be recognized that the actual results could differ from those estimates. The Filter Business' significant accounting policies are as follows: Cash All cash balances are controlled by Mark IV, and are based on Mark IV's cash management on a country-by-country basis. Therefore, the accompanying Combined Financial Statements exclude all cash balances for the periods presented. 5 9 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS Concentrations of Credit Risk Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of its trade accounts receivable. The credit risk associated with such receivables is minimal due to the Company's large customer base and ongoing control procedures which monitor the creditworthiness of customers. Inventories Inventories are stated at the lower of cost or market, with cost determined primarily on the Last-In, First-Out (LIFO) method. Property, Plant and Equipment Property, plant and equipment are presented at cost, net of accumulated depreciation. The cost of property, plant and equipment retired or otherwise disposed of, and the accumulated depreciation thereon, are eliminated from the asset and related accumulated depreciation accounts, and any resulting gain or loss is reflected in income. The Filter Business provides for depreciation of plant and equipment primarily on the straight-line method to amortize the cost of such plant and equipment over its useful life. Cost in Excess of Net Assets Acquired Cost in excess of net assets acquired (goodwill) is amortized on the straight-line method over 40 years. The Company continually evaluates the existence of goodwill impairment on the basis of whether the goodwill is fully recoverable from projected, undiscounted net cash flows of the related business. Foreign Currency The assets and liabilities of the Filter Business' foreign operations have been translated at exchange rates in effect as of the balance sheet date, and resulting gains and losses have been included as a part of net assets. Foreign currency transactions are included in income as realized. Income Taxes Mark IV accounts for income taxes under Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes. This statement requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The Company's provision for income taxes has been calculated on the separate return basis. The tax management of the U.S. operations of the Filter Business is controlled by Mark IV, and is based on Mark IV's U.S. tax planning strategies on a consolidated U.S. basis. As a result, the accompanying Combined Balance Sheets and net asset positions exclude an income tax payable liability related to the Filter Businesses' U.S. operations, as such the liability remains the responsibility of Mark IV. 6 10 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS 2. ACQUISITIONS In August 1998 the Company acquired the net assets of Cosema International ("Cosema"), an Italian filtration company, for a cash purchase price of $3.0 million. 3. ACCOUNTS RECEIVABLE Accounts receivable are reflected net of an allowance for doubtful accounts of approximately $1.4 million and $1.0 million at February 28, 1999 and 1998, respectively. 4. INVENTORY Inventory consists of the following as of February 28, 1999 and 1998 (dollars in thousands): 1999 1998 ------- ------- Purchased materials and parts $13,000 $10,800 Work in process 3,100 2,700 Finished goods 14,400 14,700 ------- ------- Net inventory $30,500 $28,200 ======= ======= As a result of the fair value determination of inventories required by the purchase method of accounting for acquired companies as of the acquisition date, LIFO costs exceed historical FIFO costs by approximately $3.3 million and $3.4 million at February 28, 1999 and 1998, respectively. 5. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and consist of the following as of February 28, 1999 and 1998 (dollars in thousands): 1999 1998 ------- -------- Land and improvements $ 1,900 $ 1,900 Buildings and improvements 8,500 7,800 Machinery and equipment 21,900 19,900 ------- -------- Total property, plant and equipment 32,300 29,600 Less accumulated depreciation 7,800 5,500 ------- -------- Property, plant and equipment, net $24,500 $ 24,100 ======= ======== Depreciation expense was approximately $2.5 million, $2.0 million and $1.6 million in fiscal 1999, 1998 and 1997, respectively. In fiscal 1999, the Filter Business sold land with a nominal carrying value, for a cash purchase price of approximately $1.2 million. The resulting gain has been recognized in other income in the Combined Statements of Income for the fiscal year ended February 28, 1999. 7 11 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS 6. COST IN EXCESS OF NET ASSETS ACQUIRED Cost in excess of net assets acquired is presented net of accumulated amortization of approximately $7.6 million and $5.8 million at February 28, 1999 and 1998, respectively. Cost in excess of net assets acquired at February 28, 1999 reflects approximately $2.3 million related to the Company's acquisition of Cosema in fiscal 1999. Amortization expense was approximately $1.8 million, $1.7 million and $1.7 million in fiscal 1999, 1998 and 1997. 7. LONG-TERM DEBT The Filter Business' Foreign Operations in Italy have debt outstanding in the amount of $2.2 million at February 28, 1999. The amount of such indebtedness is controlled by Mark IV, and is based on Mark IV's financing plans on a consolidated country by country basis. As a result, the accompanying Combined Financial Statements exclude all such indebtedness and related interest expense for the periods presented. 8. INCOME TAXES The related provision for income taxes for fiscal 1999, 1998 and 1997 consists of the following (dollars in thousands): Income before provision for taxes: 1999 1998 1997 ------- ------- ------- United States $ 9,600 $11,100 $ 9,400 International 3,300 3,200 3,700 ------- ------- ------- Total $12,900 $14,300 $13,100 ======= ======= ======= Provision for taxes: Currently payable: United States $ 3,800 $ 3,800 $ 3,200 International 1,300 1,200 1,400 ------- ------- ------- Total currently payable $ 5,100 $ 5,000 $ 4,600 ======= ======= ======= Deferred: United States $ (400) $ 200 $ 200 International (100) (100) (100) ------- ------- ------- Total deferred (500) 100 100 ------- ------- ------- Total provision for taxes $ 4,600 $ 5,100 $ 4,700 ======= ======= ======= 8 12 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS The provision for taxes for fiscal 1999, 1998 and 1997 differs from the amount computed using the United States statutory income tax rate as follows (dollars in thousands): 1999 1998 1997 ---- ---- ---- Expected tax at United States statutory income tax rate $4,500 $5,000 $4,600 State and local income taxes 400 400 400 International tax rate differences and other items, net (300) (300) (300) ------ ------ ------- Total provision for taxes $4,600 $5,100 $4,700 ====== ====== ====== The tax effects of temporary differences which give rise to deferred tax assets (liabilities) consist of the following at February 28, 1999 and 1998 (dollars in thousands): 1999 1998 ---- ----- Current: Accounts receivable $ 300 $ - Inventories (700) (800) Compensation related liabilities 500 500 Other items - 100 -------- -------- Net current deferred tax asset/(liability) (included in other current assets) $ 100 $ (200) ======== ======== Non-current: Fixed and intangible assets $ (3,100) $ (3,200) Post-retirement health-care liability 200 200 -------- -------- Net non-current deferred tax liability $ (2,900) $ (3,000) ======== ======== The undistributed earnings of the Company's international subsidiaries have been reinvested in each country, and are not expected to be remitted back to the parent company. 9. LEASES The Company has operating leases with, in some instances, cost escalation and renewal privileges. Total rental expense under operating leases was approximately $1.2 million, $1.2 million and $1.3 million in fiscal 1999, 1998 and 1997, respectively. Future minimum rental payments under operating leases (for fiscal years ended the last day of February) are approximately: 2000 - $1.2 million; 2001 - $1.0 million; 2002 - $.9 million; 2003 - $.6 million; 2004 - $.2 million; and 2005 and thereafter - $.2 million. 9 13 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS 10. PENSION AND RETIREMENT SAVINGS PLANS The Filter Business' U.S. employees participate in a defined-benefit pension plan which is funded and administered by Mark IV. Such plan provides retirement benefits based upon the employees' earnings and years of service. The plan is a part of Mark IV's Master Defined Benefit Plan, and the funded position and responsibility for benefit payments to retirees for service through February 28, 1999 remains with Mark IV and its related Master Defined Benefit Plan Trust. The service cost associated with the Filter Business' employees in each of fiscal 1999, 1998 and 1997 was approximately $.5 million, and such amounts have been recognized as an expense in the accompanying Combined Statements of Income. The Filter Business' U.S. employees also participate in a defined contribution (401(k)) plan which is also funded and administered by Mark IV. Mark IV's contribution match to the 401(k) plan was in the form of Mark IV common stock and the accompanying combined statements of income in fiscal 1999, 1998 and 1997 reflects an expense of approximately $.7 million, $.6 million and $.6 million, respectively. Once Clarcor has established a Trust for the benefit of the Filter Business employees, it is anticipated that all applicable funds held in Mark IV's Trust will be transferred over to Clarcor's Trust. 11. POST-RETIREMENT BENEFITS The Filter Business U. S. operations currently have a number of active employees who may receive health and life insurance benefits upon their retirement. The following table sets forth the liability for the cost of these benefits included in the Combined Balance Sheets at February 28, 1999 and 1998 (dollars in thousands): Accumulated post-retirement benefit obligation (APBO): 1999 1998 ----- ---- Active employees fully eligible for benefits $ 100 $ 100 Active employees not yet fully eligible for benefits 300 300 ------ ------ Post-retirement benefit liability recognized in the Combined Balance Sheets $ 400 $ 400 ====== ====== The Filter Business also has a number of retired employees who receive such benefits. Since the funded position and responsibility for paying such benefits remains with Mark IV, the related cost of such benefits have been excluded from these Financial Statements. The Company's post-retirement benefit expense on the accrual method for fiscal 1999, 1998 and 1997, associated with active employees of the Filter Business was approximately $.1 million, respectively. Such amounts have been recognized as an expense in the accompanying Combined Statements of Income. 10 14 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS The APBO was calculated using a discount rate of 7.0%, and assumes an initial health- care cost trend rate of approximately 7.0%, trending down ratably to an ultimate rate of 4.5%. A one-percentage-point increase in such trend rate would not have a significant effect on the Company's obligations or annual expense. 12. GEOGRAPHIC INFORMATION The Company's operations outside the United States are located primarily in Europe. Information concerning the Company's operations by geographic area for fiscal 1999, 1998 and 1997 are as follows (dollars in thousands): Net Sales to Customers: 1999 1998 1997 -------- -------- -------- United States $117,300 $111,200 $102,100 International 32,900 30,000 33,000 -------- -------- -------- Total Combined $150,200 $141,200 $135,100 ======== ======== ======== Identifiable Long-Lived Assets: United States $ 69,300 $ 70,400 $ 71,400 International 17,900 15,900 16,200 -------- -------- -------- Total Combined $ 87,200 $ 86,300 $ 87,600 ======== ======== ======== 13. LEGAL AND ENVIRONMENTAL MATTERS The Filter Business is involved in various legal and environmental matters. In the opinion of Mark IV management, the ultimate cost to resolve these matters will not have a material adverse effect on the Filter Business' financial position, results of operations or cash flows. 14. ANCILLARY AGREEMENTS AND COMMITMENTS As a part of the sale transaction between Mark IV and Clarcor, a transition services agreement was entered into in order to formalize shared activities and/or commitments. These agreements provide for the following arrangements: * Transition Services have been established to facilitate each party's ability to operate in the post-closing environment with the least amount of disruption, with the intention for the Filter Business to be completely self-sufficient at the earliest possible date. Such agreement provided for payroll processing services, employee benefits administration, provision of leased vehicles, long distance telephone services, and various administrative and accounting services. The costs for all such services are assessed on a monthly basis, to the extent remaining in place, 11 15 INDUSTRIAL FILTER BUSINESS NOTES TO COMBINED FINANCIAL STATEMENTS and are expected to result initially in a net payment to Mark IV of approximately $5,000 per month. It is anticipated that substantially all of such shared arrangements will be eliminated in less than six months from the acquisition date. The accompanying Combined Statements of Income for the three year period ended February 28, 1999 reflects the cost of the above arrangements as if such formal agreements were in effect on March 1, 1996, the beginning of such period. 15. OTHER RELATED PARTY TRANSACTIONS Mark IV provided or coordinated treasury, tax, audit, legal, medical and risk insurance, and employee benefits administration services to the various operating locations of the Filter Business in the U.S. Insurance, legal, audit and direct employee benefits-related costs are charged specifically to the Filter Business. An allocation of Mark IV's costs for tax, treasury and other administrative work performed in the U.S. is not made, as they are not believed to be significant. All inter-company accounts with Mark IV, and other affiliates outside of the Filter Business, have been included as a part of net assets. The Company's financing needs are established primarily through inter-company borrowing arrangements with Mark IV or one of its affiliates outside of the Filter Business. No interest costs have been allocated to the Filter Business for any of such financing needs; therefore, the accompanying Combined Statements of Income do not reflect any costs for interest expense. 12 16 Item 7(a)7. INDUSTRIAL FILTER BUSINESS COMBINED BALANCE SHEET (dollars in thousands) Unaudited August 31, ASSETS 1999 ---------- Current Assets: Cash $ 4,314 Accounts receivable, net 30,825 Inventories, net 30,426 Other current assets 1,773 -------- Total Current Assets 67,338 Fixed assets, net 23,985 Other noncurrent assets 4 Cost in excess of net assets acquired 61,800 -------- Total Assets $153,127 ======== LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 12,658 Compensation related liabilities 4,300 Accrued expenses and other liabilities 2,584 Income taxes payable 629 -------- Total Current Liabilities 20,171 Deferred taxes 2,297 Non-current liabilities 2,527 -------- Total Liabilities 24,995 Net Assets 128,132 -------- Total Liabilities and Net Assets $153,127 ======== See Notes to Unaudited Combined Financial Statements 17 Item 7(a)7. INDUSTRIAL FILTER BUSINESS COMBINED STATEMENTS OF INCOME (dollars in thousands except per share data) (Unaudited) _________ Six Months Ended ------------------------ August 31, August 31, 1999 1998 Net sales $ 77,600 $ 74,200 -------- -------- Operating costs: Cost of products sold 53,100 50,700 Selling and administration 14,700 14,900 Research and development 900 1,000 Depreciation and amortization 2,300 2,100 -------- -------- Total operating costs 71,000 68,700 -------- -------- Operating income 6,600 5,500 Other income (100) - -------- -------- Income before taxes 6,500 5,500 Provision for income taxes 2,300 2,000 -------- -------- NET INCOME $ 4,200 $ 3,500 ======== ======== See Notes to Unaudited Combined Financial Statements 18 Item 7(a)7. INDUSTRIAL FILTER BUSINESS COMBINED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited) ________ Six Months Ended ----------------------- August 30, August 30, 1999 1998 ---------- ---------- Cash flows from operating activities: Net income $4,200 $3,500 Items not affecting cash: Depreciation and amortization 2,300 2,100 Changes in assets and liabilities, net of effects of acquired business: Accounts receivable (25) (200) Inventory 74 800 Other assets (766) (400) Accounts payable and other liabilities (2,864) 700 ---------- ---------- Net cash provided by operating activities 2,919 6,500 Cash flows for investing activities, used to purchase fixed assets (885) (800) Cash flows for investing activities, change in parent company's investment for advances and withdrawals 2,280 (5,700) ---------- ---------- Net increase in cash $4,314 $ - ========== ========== See Notes to Unaudited Combined Financial Statements 19 Item 7(a) 8. Industrial Filter Business Notes to Unaudited Combined Financial Statements 1. BASIS OF PRESENTATION The financial statements should be read in conjunction with the Industrial Filter Business historical financial statements for the years ended on the last day of February 1999, 1998, and 1997. The financial statements reflect all adjustments, which in the opinion of management, are necessary for a fair presentation of Industrial Filter Business financial position at August 31, 1999 and its results of operations and cash flows for the six-month periods ended August 31, 1999 and 1998. The accompanying financial statements may not necessarily be indicative of the financial position, results of operations or cash flows of Industrial Filter Business for the full year or what the financial position, results of operations or cash flows would have been had Industrial Filter Business been a separate independent company during the periods presented. 2. LEGAL AND ENVIRONMENTAL MATTERS The Industrial Filter Business is involved in various legal and environmental matters. In the opinion of Mark IV management, the ultimate cost to resolve these matters will not have a material adverse effect on the Filter Business' financial position, results of operations or cash flows. 20 Item 7(b) PRO FORMA FINANCIAL INFORMATION 1. Pro Forma Financial Information - Introduction The accompanying unaudited pro forma condensed combined financial statements (pro forma statements) present the effect of the acquisition of the Industrial Filter Business on the financial position and results of operations of CLARCOR Inc. (hereinafter referred to as CLARCOR or the Company). The unaudited pro forma condensed combined balance sheet as of August 28, 1999 is based upon the unaudited historical balance sheets of CLARCOR as of August 28, 1999 and of Industrial Filter Business as of August 31, 1999 and assumes the acquisition took place on August 28, 1999. The unaudited pro forma condensed combined statement of earnings for the year ended November 30, 1998 is based on the audited historical statements of earnings of CLARCOR for the fiscal year ended November 30, 1998 and of Industrial Filter Business for the fiscal year ended February 28, 1999 and has been prepared assuming the acquisition took place December 1, 1997. The unaudited pro forma condensed combined statement of earnings for the interim nine month period ended August 28, 1999 is based on the unaudited historical statements of earnings of CLARCOR for the interim nine month period ended August 28, 1999 and of Industrial Filter Business for the interim nine month period ended August 31, 1999 and has been prepared assuming the acquisition took place December 1, 1997. The unaudited pro forma condensed combined financial statements do not purport to be indicative of the results of operations or financial position of CLARCOR that would have actually occurred had the acquisition been completed on December 1, 1997, or which may occur in the future. The acquisition will be accounted for by the purchase method of accounting. Under purchase accounting, the total purchase price will be allocated to the tangible and intangible assets and liabilities of Industrial Filter Business based upon their respective fair values as of the effective time of the acquisition based on valuations and other studies which are not yet complete. The initial purchase price was based on the net assets of the business acquired as shown on a February 28, 1999 balance sheet and is subject to a final adjustment based on the net assets of the businesses shown on a final balance sheet as of August 31, 1999 and the provisions of the purchase agreement. A preliminary allocation of the initial purchase price has been made to major categories of assets and liabilities in the accompanying pro forma statements based on available information and is currently subject to change. The allocation will be completed when CLARCOR receives a closing balance sheet in accordance with the purchase agreement from the seller, obtains a final appraisal of the assets acquired (which includes completing an assessment of the liabilities assumed), and finalizes the estimates associated with exit and other costs related to the acquisition. The actual allocation of the finalized purchase price and the resulting effect on income from operations may differ from the unaudited pro forma amounts included herein. The pro forma adjustments are described in the accompanying notes and represent CLARCOR's preliminary determination of purchase accounting adjustments based upon available information and certain assumptions that CLARCOR believes are reasonable. The accompanying unaudited pro forma statements should be read in connection with the separate historical financial statements and notes thereto of CLARCOR and Industrial Filter Business. 21 Item 7(b)2. Unaudited Pro Forma Condensed Combined Balance Sheet as of August 28, 1999 and Notes CLARCOR Inc. PRO FORMA CONDENSED COMBINED BALANCE SHEET As of August 28, 1999 (Dollars in thousands) (unaudited)
Industrial Acquisition ASSETS CLARCOR Filter Business Adjustments Pro Forma ---------------------------------------------------------------- Current assets: Cash and short-term cash investments $ 39,361 $ 4,314 $ $ 43,675 Accounts receivable, 72,397 32,633 105,030 less allowance for losses (3,019) (1,808) (4,827) Inventories 61,791 30,426 (1,826) a 87,055 (3,336) a Prepaid expenses 1,169 1,773 2,942 Other current assets 6,253 - 6,253 ----------- ------------ ------------ ----------- Total current assets 177,952 67,338 (5,162) 240,128 ----------- ------------ ------------ ----------- Plant assets, net 89,474 23,985 10,192 a 123,651 Excess of cost over fair value of assets acquired, less accumulated amortization 21,100 61,800 (61,800) a 51,869 30,769 a Pension assets 18,034 - 18,034 Other noncurrent assets 13,699 4 1,941 a 16,182 538 a Purchased intangible assets - - 42,959 a 42,959 ----------- ------------ ------------ ----------- $ 320,259 $ 153,127 $ 19,437 $ 492,823 =========== ============ ============ =========== LIABILITIES Current liabilities Current portion of long-term debt $ 5,435 $ - $ $ 5,435 Accounts payable 25,293 12,658 37,951 Income taxes 3,671 629 4,300 Accrued and other liabilities 28,151 6,884 1,540 a 36,575 ----------- ------------ ------------ ----------- Total current liabilities 62,550 20,171 1,540 84,261 ----------- ------------ ------------ ----------- Long-term debt, less current portion 31,504 - 146,029 b 177,533 Long-term pension liabilities 10,622 - 10,622 Deferred taxes 10,487 2,297 12,784 Other long-term liabilities 1,873 2,527 4,400 Minority interests 362 - 362 Contingencies SHAREHOLDERS' EQUITY Capital stock 23,980 23,980 Capital in excess of par value 591 591 Accumulated other comprehensive earnings (3,544) (3,544) Retained earnings 181,834 181,834 Parent company's net assets 128,132 (128,132) c - ----------- ------------ ------------ ----------- 202,861 128,132 (128,132) 202,861 ----------- ------------ ------------ ----------- $ 320,259 $ 153,127 $ 19,437 $ 492,823 =========== ============ ============ ===========
22 Notes to the Unaudited Pro Forma Condensed Combined Balance Sheet a Reflects the estimated purchase accounting adjustments for the acquisition based upon a preliminary appraisal of the asset and liabilities assumed. For purchase accounting, Industrial Filter Business assets have been recorded at estimated fair market value subject to adjustments based upon the results of a preliminary independent appraisal. The estimated amount recorded for assets and liabilities acquired are not expected to differ materially from the final assigned values. Purchase accounting adjustments were recorded as shown below. These adjustments are necessary to record these assets and liabilities at their estimated fair market values. The calculation of excess purchase cost over fair value of net assets acquired is as follows: Purchase price subject to final adjustments $ 143,550 Loan origination fees and expenses 538 Acquisition fees and expenses 1,941 ---------- Total preliminary purchase price 146,029 Book value of net assets acquired 128,132 ---------- Purchase price in excess of net assets acquired $ 17,897 ========== Preliminary allocation of purchase price in excess of book value of net assets acquired: Reduce inventory to estimated fair value $ (3,336) Incremental exit costs: Exit product lines $ (1,826) Rationalize manufacturing operations (1,540) (3,366) --------- Increase property, plant and equipment to estimated fair value 10,192 Increase trademarks, patents, and other intangible assets to estimated fair value 42,959 Eliminate existing unamortized goodwill (61,800) Record excess of purchase cost over fair value of assets acquired 30,769 Capitalized loan origination fees and expenses 538 Capitalized acquisition fees and expenses 1,941 ---------- $ 17,897 ==========
The exit costs are estimated and subject to final determination at this time. These costs relate to exiting certain activities of the acquired companies. b Reflects the acquisition financing as if the total purchase price, loan origination fees and acquisition expenses were paid in cash with the proceeds of loans obtained by the Company pursuant to a Multicurrency Credit Agreement dated as of September 9, 1999. Interest rates for the borrowings under this revolving line of credit vary with the LIBOR rate. c Reflects the elimination of Industrial Filter Business' parent company's net assets. 23 Item 7(b)3. Unaudited Pro Forma Condensed Combined Statement of Earnings for fiscal year ended November 30, 1998 and Notes CLARCOR Inc. PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS For the year ended November 30, 1998 (Dollars in thousands except per share data) (Unaudited)
Industrial Acquisition CLARCOR Filter Business Adjustments Pro Forma -------------------------------------------------------------- Net sales $ 426,773 $ 150,200 $ $ 576,973 Cost of sales 291,537 104,242 1,075 a 396,854 ------------- ---------- ------------ ------------ Gross profit 135,236 45,958 (1,075) 180,119 Selling and administrative expenses 83,573 34,258 563 a 884 b 388 c 119,666 ------------- ---------- ------------ ------------ Operating profit 51,663 11,700 (2,910) 60,453 ------------- ---------- ------------ ------------ Other Income (expense): Interest expense (2,336) - (9,506) d (179) e (12,021) Interest income 1,283 - - 1,283 Other, net 737 1,200 - 1,937 ------------- ---------- ------------ ------------ (316) 1,200 (9,685) (8,801) ------------- ---------- ------------ ------------ Earnings before income taxes and minority interests 51,347 12,900 (12,595) 51,652 Provision for income taxes 19,262 4,600 (4,493) f 19,369 ------------- ---------- ------------ ------------ Earnings before minority interests 32,085 8,300 (8,102) 32,283 Minority interests in (earnings) of subsidiaries (6) - - (6) ------------- ---------- ------------ ------------ Net earnings $ 32,079 $ 8,300 $ (8,102) $ 32,277 ============= ========== ============ ============ Net earnings per common share: Basic $ 1.32 $ 1.33 ============= ============ Diluted $ 1.30 $ 1.31 ============= ============ Average number of common shares outstanding: Basic 24,268,250 24,268,250 ============= ============ Diluted 24,648,623 24,648,623 ============= ============
Notes to the Unaudited Pro Forma Condensed Combined Statement of Earnings for the year ended November 30, 1998. The Unuaudited Pro Forma Condensed Combined Statement of Earnings for the year ended November 30, 1998 reflects the combination of the audited Consolidated Statement of Earnings of the Company for the year ended November 30, 1998 and the audited Statement of Earnings of the Industrial Filter Business for the year ended February 28, 1999. It is presented as if the acquisition had occurred on December 1, 1997. a Reflects the estimated adjusted depreciation expense related to the acquired property, plant and equipment of the Industrial Filter Business assuming the acquisition had taken place on December 1, 1997. These assets have been restated at their estimated fair market values and depreciated using the Company's depreciation methods over the remaining useful lives of the assets. The increase in depreciation expense of $1,638, as compared to that recorded by the Industrial Filter 24 Business, was allocated to cost of sales and to selling and administrative expenses as indicated. b Reflects an increase in amortization expense of intangible assets and the excess of purchase price over assets acquired based on their preliminary appraised values, using the straight-line method and an estimated weighted average useful life of 37 years. The allocation to specific intangible assets is preliminary. c Estimated capitalized acquisition costs of $1,941, including professional fees for legal and accounting, will be amortized over a five-year life. Estimated pro forma amortization is $388 per year. d Reflects the additional interest expense incurred on the debt to finance the acquisition assuming the entire purchase price was paid in cash with the proceeds of loans obtained by the Company pursuant to a Multicurrency Credit Agreement dated as of September 9, 1999. Interest rates for the borrowings under this revolving line of credit vary with the LIBOR rate. The effective interest rate was approximately 6.51%. A 1/8% change in the rate would increase or decrease interest expense on the debt by approximately $180 annually. e Debt issue costs of $538, including loan underwriting fees and associated costs, are being amortized over a three-year life. Estimated pro forma amortization is $179 per year. f Reflects the tax effect of the pro forma adjustments using an effective tax rate of 37.5%. The amounts recorded relating to the acquisitions are currently subject to adjustment as the Company has not yet completed the final allocation of the purchase price. The unaudited pro forma condensed combined financial statements do not reflect any future benefits associated with integrating the Industrial Filter Business into CLARCOR. 25 Item 7(b)4. Unaudited Pro Forma Condensed Combined Statement of Earnings for the nine month interim period ended August 28, 1999 and Notes CLARCOR Inc. PRO FORMA CONDENSED STATEMENTS OF EARNINGS For the nine months August 28, 1999 (Dollars in thousands except per share data) (Unaudited)
Industrial Acquisition CLARCOR Filter Business Adjustments Pro Forma ------------------------------------------------------------------- Net sales $ 321,739 $ 114,000 $ $ 435,739 Cost of sales 221,187 81,063 657 a 302,907 ------------ ----------- ------------- ------------ Gross profit 100,552 32,937 (657) 132,832 Selling and administrative expenses 62,988 23,437 345 a 276 b 291 c 87,337 ------------ ----------- ------------- ------------ Operating profit 37,564 9,500 (1,569) 45,495 ------------ ----------- ------------- ------------ Other income (expense): Interest expense (1,632) - (7,130) d (134) e (8,896) Interest income 1,061 - - 1,061 Other, net 1,699 1,109 - 2,808 ------------ ----------- ------------- ------------ 1,128 1,109 (7,264) (5,027) ------------ ----------- ------------- ------------ Earnings before income taxes and minority interests 38,692 10,609 (8,833) 40,468 Provision for income taxes 14,062 3,743 (3,115) f 14,690 ------------ ----------- ------------- ------------ Earnings before minority interests 24,630 6,866 (5,718) 25,778 Minority interests in (earnings) or subsidiaries (34) - - (34) ------------ ----------- ------------- ------------ Net earnings $ 24,596 $ 6,866 $ (5,718) $ 25,744 ============ =========== ============= ============ Net earnings per common share: Basic $ 1.03 $ 1.07 ============ ============ Diluted $ 1.01 $ 1.06 ============ ============ Average number of common shares outstanding: Basic 23,958,282 23,958,282 ============ ============ Diluted 24,315,706 24,315,706 ============ ============
Notes to the Unaudited Pro Forma Condensed Combined Statement of Earnings for the nine month interim period ended August 28, 1999. The Unaudited Pro Forma Condensed Combined Statement of Earnings for the nine month interim period ended August 28, 1999 reflects the combination of the unaudited Consolidated Statement of Earnings of the Company for the nine months ended August 28, 1999 and the unaudited Statement of Earnings of the Industrial Filter Business for the nine months ended August 31, 1999, which was derived by adding its unaudited results for the six months ended August 31, 1999 to the three months ended February 28, 1999. It is presented as if the acquisition had occurred on December 1, 1997. 26 a Reflects the estimated adjusted depreciation expense related to the acquired property, plant and equipment of the Industrial Filter Business assuming the acquisition had taken place on December 1, 1997. These assets have been restated at their estimated fair market values and depreciated using the Company's depreciation methods over the remaining useful lives of the assets. The increase in depreciation expense of $1,002, as compared to that recorded by the Industrial Filter Business, was allocated to cost of sales and to selling and administrative expenses as indicated. b Reflects an increase in amortization expense of intangible assets and the excess of purchase price over assets acquired based on their preliminary appraised values using the straight-line method and an estimated weighted average useful life of 37 years. The allocation to specific intangible assets is preliminary. c Estimated capitalized acquisition costs of $1,941, including professional fees for legal and accounting, will be amortized over a five-year life. Estimated pro forma amortization is $388 per year or $291 for nine months. d Reflects the additional interest expense incurred on the debt to finance the acquisition assuming the entire purchase price was paid in cash with the proceeds of loans obtained by the Company pursuant to a Multicurrency Credit Agreement dated as of September 9, 1999. Interest rates for the borrowings under this revolving line of credit vary with the LIBOR rate. The effective interest rate was approximately 6.51%. A 1/8% change in the rate would increase or decrease interest expense on the debt by approximately $180 annually or $135 for nine months. e Debt issue costs of $538, including loan underwriting fees and associated costs, are being amortized over a three-year life. Estimated pro forma amortization is $179 per year or $134 for nine months. f Reflects the tax effect of the pro forma adjustments using an effective tax rate of 36.3%. The amounts recorded relating to the acquisitions are currently subject to adjustment as the Company has not yet completed the final allocation of the purchase price. The unaudited pro forma condensed combined financial statements do not reflect any future benefits associated with integrating the Industrial Filter Business into CLARCOR. 27 Item 7(c) Exhibits 1. Consent of Independent Accountants We hereby consent to the incorporation by reference in the registration statements of CLARCOR Inc. on Form S-8 (file numbers 33-5456, 33-38590, 33-39374, 33-53763 and 33-53899) of our report, dated October 22, 1999, on our audits of the combined financial statements of the Industrial Filter Business as of February 28, 1999 and 1998, and for each of the three years in the period ended February 28, 1999, which appears in the Current Report on Form 8-K/A of CLARCOR Inc. dated November 23, 1999. PricewaterhouseCoopers LLP Rochester, New York November 23, 1999 28 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CLARCOR INC. (Registrant) November 23, 1999 By /s/ Bruce A. Klein - ----------------------- ---------------------------------------- (Date) Bruce A. Klein, Vice President - Finance and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----