CLARCOR Reports Second Quarter 2006 Results.FRANKLIN, Tenn. -- CLARCOR Inc. (NYSE NYSE See: New York Stock Exchange : CLC (The Computer Language Company Inc.) The publisher of this Encyclopedia. See About this product. ):
Unaudited Fiscal Second Quarter and Six Months 2006 Highlights
(Amounts in thousands, except per share data and percentages)
Quarter Ended % Six Months Ended %
6/3/06 5/28/05 Change 6/3/06 5/28/05 Change
----------------------------------------------------------------------
Net Sales $227,076 $219,786 3.3 $440,259 $416,047 5.8
Operating Profit $26,221 $27,553 (4.8) $52,094 $48,633 7.1
Net Earnings $16,805 $17,346 (3.1) $33,006 $30,500 8.2
Diluted Earnings
Per Share $0.32 $0.33 (3.0) $0.63 $0.58 8.6
----------------------------------------------------------------------
Second Quarter and Six Months 2006 Operating Review CLARCOR Inc. (NYSE: CLC) reported today that second quarter 2006 sales increased by 3% and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. declined by 5% compared to the same quarter in 2005. Second quarter 2006 net earnings and earnings per share decreased by 3% compared to the same period in 2005. Operating profit for the quarter was impacted by two items, both affecting the Industrial/Environmental segment. First, a $3 million charge was recorded arising from a refusal by a customer to pay for products which the customer had ordered and used. CLARCOR also recorded a $400 thousand charge to reflect the costs to restructure a European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. manufacturing operation. Excluding those charges, operating profit rose 7.1% for the second quarter of 2006 and operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved to 13.0% from 12.5% in the second quarter of 2005. Norm Johnson
A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon reported strong results for the second quarter, but overall we were affected by two items, one of which was completely unexpected. As we noted in a press release two weeks ago, a customer has refused to pay for products which the customer had specifically ordered and used. We have initiated legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and we are seeking recovery for the unpaid amounts and for inventories we had manufactured or acquired specifically for this customer. "Over the last several years, we have worked towards improving the operating results of our Industrial/Environmental segment. Though we have made significant progress and operating margins have increased over this period, margins have not improved as quickly as we expected. We now believe that we need to be much more aggressive in our restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). efforts. Therefore, we recorded a charge of $400 thousand in this quarter to merge two manufacturing facilities and expect that annual savings from this restructuring will be approximately $1.5 million beginning in fiscal 2007. We will record further charges later this year to recognize additional costs we will incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. in rationalizing more facilities. Our goal is to reach at least a 10% operating margin in our $400 million Industrial/Environmental segment. We expect to complete our analysis and finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... the details of our plans during the next few months and expect to provide further information in a press release during our third fiscal quarter. "Engine/Mobile Filtration filtration: see sewerage; water supply. Filtration The separation of solid particles from a fluidsolids suspension of which they are a part by passage of most of the fluid through a septum or membrane that retains most of the solids sales rose by over 8% from last year's second quarter, and operating profit improved by 14%. Sales to most markets and channels were strong in the second quarter of 2006, including sales of heavy-duty heav·y-dut·y adj. Made to withstand hard use or wear. heavy-duty Adjective made to withstand hard wear, bad weather, etc. Adj. 1. and railroad railroad or railway, form of transportation most commonly consisting of steel rails, called tracks, on which freight cars, passenger cars, and other rolling stock are drawn by one locomotive or more. filtration products. Sales were driven by continuing strong growth in aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. filter distribution, but we also experienced good demand in direct sales to OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and markets and sales to other filter companies. Operating margins in the quarter improved from 20.9% last year to 22.1% this year. Demand, both domestic and international, continues to be good so far in our third quarter, and we expect our Engine/Mobile segment will finish 2006 in a similar manner to the first six months, with increased sales and operating margins compared to 2005. "Second quarter sales in our Industrial/Environmental Filtration segment were down 3% from 2005. Sales in the second quarter include $3.6 million from acquisitions completed in the last half of 2005 or earlier this year. While certain markets showed strong growth, particularly dust collector cartridges
run-off n (in contest, election) → systems, hydraulic fluid hydraulic fluid toxic because of its high content of industrial triaryl phosphate. filtration systems and aerospace filtration products, other markets were weak, particularly oil and gas and HVAC (Heating Ventilation Air Conditioning) In the home or small office with a handful of computers, HVAC is more for human comfort than the machines. In large datacenters, a humidity-free room with a steady, cool temperature is essential for the trouble-free filter sales. The loss late last year of $11 million in annual sales to a customer who decided to begin manufacturing certain HVAC filter products outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. affected our second quarter results. I should point out that we still sell this customer over $20 million of filters annually. Further, we are currently in discussions for a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. sales contract Sales Contract Contract between a seller and buyer for the sale of goods, services, or both. with this company. We have also terminated the contract with the customer I noted earlier that had refused to pay us. This customer had purchased $10 million annually of mostly HVAC filters, and the termination of this contract also affected second quarter sales. "As I noted, our goal for our Industrial/Environmental segment is to reach an overall 10% operating margin as quickly as possible. Several of our operations within this segment have already exceeded this goal, but there are others which have not yet reached 10%. We plan to start a more aggressive restructuring plan which will primarily involve rationalizing and relocating production facilities. We also plan to eliminate certain unprofitable product lines and stop selling to certain customers where our margins are unacceptable. We plan to begin these efforts during the second half of 2006 after we have completed our analysis and planning and have received approval from our Board of Directors. "Packaging segment sales improved by 12% this quarter compared to last year, and operating profit increased by 29%. Operating margins increased to 10.0% this quarter from 8.7% in the second quarter last year. Margin improvement was driven primarily by sales of higher margin products and cost reduction initiatives implemented over the last several years. Sales of both metal and plastic packaging products increased during the quarter. This segment's sales have become much less seasonal over the last few years as its sales mix sales mix See product mix. has changed from promotional products sold largely in the last half of the year to products sold on a continual basis throughout the year. We anticipate further growth in the second half of 2006 and continued margin improvement compared to 2005. "There was little change in other income compared to last year's second quarter. Our tax rate was approximately 35.5% compared to 36.3% last year. We expect our tax rate to stay between 35.5% and 36.0% for the rest of 2006. Fluctuations in currencies had little impact on operating results for the quarter. We also finalized See finalization. the acquisition of the remaining 20% of our Baldwin Baldwin, cities, United States Baldwin. 1 Uninc. city (1990 pop. 22,719), Nassau co., SE N.Y., on the south shore of Long Island, on Baldwin Bay; settled 1640s. A fishing center and summer resort, it has varied manufactures. Filters joint venture in South Africa South Africa, Afrikaans Suid-Afrika, officially Republic of South Africa, republic (2005 est. pop. 44,344,000), 471,442 sq mi (1,221,037 sq km), S Africa. , which is now completely owned by CLARCOR. "Capital expenditures were $7 million for the six-month period just ended compared to $11 million in the six-month period a year earlier. We expect capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. will significantly increase during the second half of the year and will total $25 million to $30 million for 2006 compared to $24 million in 2005. Similar to last year, we are continuing to invest this year in new technologies, particularly new filter media development; new product development such as a new line of mobile hydraulic filters which we recently introduced to the market; and productivity improvement projects in all our operating segments. Later this year, we will move our Weifang Weifang (Simplified Chinese: 潍坊; Pinyin: Wéifāng) is a prefecture-level city in central Shandong province, People's Republic of China. , China manufacturing plant to a new location which will double its size and production capacity. Also, our recently completed aviation fuel filter testing center in Greensboro, North Carolina “Greensboro” redirects here. For other uses, see Greensboro (disambiguation). Greensboro, North Carolina (IPA: [ɡɹiːnsbʌɹəʊ]) is a city in the U.S. state of North Carolina. is in its final stages of testing and is expected to be operational in the third quarter. "Cash flow continues to be strong. Though cash from operations declined to $19 million in the 2006 six-month period from $38 million last year, this is because, under accounting rules, we are required to present the purchase of short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments as a use of cash and a reduction of cash from operating activities. Cash, cash investments and short-term investments rose to $54 million from $29 million at year-end. Our investments are in auction rate securities and variable rate notes that are all rated AA or higher. "We did not repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. any of our common stock during the second quarter. Our remaining share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. authorization The right or permission to use a system resource; the process of granting access. See access control. is approximately $139 million and we will continue to review additional share repurchases based upon internal capital needs, acquisition opportunities and the price of our stock. We are actively evaluating a number of acquisition opportunities, and hope to complete several later this year. "Based on our first half results and current backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. , we expect 2006 sales to grow by approximately 5.5% from 2005. We also expect diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for 2006 to be $1.50 to $1.58. Our earnings per share estimate includes the two second quarter charges described above which amount to approximately $0.04 per share, but does not include any costs or benefits from our 2006 second half restructuring plans. This estimate also includes the impact of stock option expense which will be approximately $0.03 per share for all of 2006. Despite the second quarter charges, we remain confident that CLARCOR will have a record 2006 and post its 14th consecutive year of increased sales and earnings." CLARCOR will be holding a conference call to discuss its second quarter and six-month results at 10:00 a.m. CST CST abbr. 1. Central Standard Time 2. convulsive shock treatment CST Central Standard Time Noun 1. on June 22, 2006. Interested parties can listen to the conference call at www.clarcor.com or www.viavid.com. A replay will be available on these websites and also at 888-203-1112 or 719-457-0820 and providing confirmation code 6546222. The replay will be available through June 29, 2006 by telephone and for 30 days on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . CLARCOR is based in Franklin, Tennessee Franklin is the county seat of Williamson County, Tennessee, USA. The population was 41,842 at the 2000 census. The 2007 Census Bureau Estimate places the population at 55,870. , and is a diversified diversified (di·verˑ·s marketer and manufacturer of mobile, industrial and environmental filtration products and consumer and industrial packaging products sold in domestic and international markets. Common shares of the Company are traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol CLC. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. All statements made in this press release, other than statements of historical fact, are forward-looking statements. These statements are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements may include, among other things: statements and assumptions relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future growth, earnings, earnings per share and other financial performance measures, as well as management's short-term and long-term performance goals; statements relating to the anticipated affects on results of operations or financial condition from recent and expected developments or events; statements relating to the Company's business and growth strategies; statements related to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. in which the Company is presently or may become engaged; statements regarding anticipated results of the Company's intended restructuring of certain operations and rationalization rationalization, in psychology: see defense mechanism. of facilities; and any other statements or assumptions that are not historical facts. The Company believes that its expectations are based on reasonable assumptions. However, these forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the Company's actual results, performance or achievements, or industry results, to differ materially from the Company's expectations of future results, performance or achievements expressed or implied by these forward-looking statements. In addition, the Company's past results of operations do not necessarily indicate its future results. These and other uncertainties are discussed in the "Risk Factors'' section of the Company's 2005 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . The future results of the Company may fluctuate as a result of these and other risk factors detailed from time to time in the Company's filings with the Securities and Exchange Commission. You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release. Except as otherwise required by applicable laws, the Company undertakes no obligation to publicly update or revise any forward-looking statements or the risk factors described in this press release, whether as a result of new information, future events, changed circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or or any other reason after the date of this press release.
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
For periods ended Second Quarter Six Months
June 3, 2006 and ----------------------- -----------------------
May 28, 2005 2006 2005 2006 2005
-------------------------------------------------
Net sales $ 227,076 $ 219,786 $ 440,259 $ 416,047
Cost of sales 159,959 153,700 309,368 292,942
----------- ----------- ----------- -----------
Gross profit 67,117 66,086 130,891 123,105
Selling and
administrative
expenses 40,896 38,533 78,797 74,472
----------- ----------- ----------- -----------
Operating profit 26,221 27,553 52,094 48,633
Other income
(expense) 65 (95) 24 (407)
----------- ----------- ----------- -----------
Earnings before
income taxes and
minority
interests 26,286 27,458 52,118 48,226
Income taxes 9,332 9,973 18,852 17,509
----------- ----------- ----------- -----------
Earnings before
minority
interests 16,954 17,485 33,266 30,717
Minority interests
in earnings of
subsidiaries (149) (139) (260) (217)
----------- ----------- ----------- -----------
Net earnings $ 16,805 $ 17,346 $ 33,006 $ 30,500
=========== =========== =========== ===========
Net earnings per
common share:
Basic $ 0.32 $ 0.34 $ 0.64 $ 0.59
=========== =========== =========== ===========
Diluted $ 0.32 $ 0.33 $ 0.63 $ 0.58
=========== =========== =========== ===========
Average shares
outstanding:
Basic 52,006,685 51,631,794 51,902,894 51,528,689
Diluted 52,817,895 52,418,831 52,629,923 52,316,801
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
June 3, December 3,
2006 2005
----------- -----------
Assets
Current assets:
Cash and cash investments $ 25,936 $ 18,502
Short-term investments 27,850 10,400
Accounts receivable, net 150,970 152,755
Inventories 124,340 117,508
Other 24,894 25,768
----------- -----------
Total current assets 353,990 324,933
Plant assets, net 146,686 149,505
Acquired intangibles, net 170,341 168,176
Pension assets 22,401 22,069
Other assets 11,673 10,589
----------- -----------
$ 705,091 $ 675,272
=========== ===========
Liabilities
Current liabilities:
Current portion of long-term debt $ 223 $ 233
Accounts payable and accrued
liabilities 102,543 108,693
Income taxes 10,910 12,544
----------- -----------
Total current liabilities 113,676 121,470
Long-term debt 15,985 16,009
Long-term pension liabilities 18,798 16,287
Other liabilities 37,075 38,673
----------- -----------
185,534 192,439
Shareholders' Equity 519,557 482,833
----------- -----------
$ 705,091 $ 675,272
=========== ===========
SUMMARY CASH FLOWS
(Dollars in thousands)
Six Months
-------------------
2006 2005
--------- ---------
From Operating Activities
Net earnings $ 33,006 $ 30,500
Depreciation 10,846 10,336
Amortization 1,079 630
Stock compensation expense 1,422 446
Excess tax benefits from stock compensation (2,992) -
Changes in assets and liabilities (24,993) (4,344)
Other, net 159 118
-------- --------
Total provided (used) by operating activities 18,527 37,686
-------- --------
From Investing Activities
Plant asset additions (7,358) (10,562)
Business acquisitions (5,241) (3,508)
Other, net 471 614
-------- --------
Total provided (used) by investing activities (12,128) (13,456)
-------- --------
From Financing Activities
Net payments under line of credit - (7,500)
Payments on long-term debt (372) (830)
Cash dividends paid (7,016) (6,577)
Excess tax benefits from stock compensation 2,992 -
Other, net 4,483 (5,679)
-------- --------
Total provided (used) by financing activities 87 (20,586)
-------- --------
Effect of exchange rate changes on cash 948 (264)
-------- --------
Change in Cash and Cash Investments $ 7,434 $ 3,380
======== ========
QUARTERLY INCOME STATEMENT DATA BY SEGMENT
(Dollars in thousands)
2006
-----------------------------
Quarter Quarter
Ended Ended Six
March 4 June 3 Months
--------- --------- ---------
Net sales by segment:
Engine/Mobile Filtration $ 91,032 $101,429 $192,461
Industrial/Environmental Filtration 102,656 103,866 206,522
Packaging 19,495 21,781 41,276
-------- -------- --------
$213,183 $227,076 $440,259
======== ======== ========
Operating profit by segment:
Engine/Mobile Filtration $ 19,073 $ 22,446 $ 41,519
Industrial/Environmental Filtration 5,485 1,594 7,079
Packaging 1,315 2,181 3,496
-------- -------- --------
$ 25,873 $ 26,221 $ 52,094
======== ======== ========
Operating margin by segment:
Engine/Mobile Filtration 21.0% 22.1% 21.6%
Industrial/Environmental Filtration 5.3% 1.5% 3.4%
Packaging 6.7% 10.0% 8.5%
-------- -------- --------
12.1% 11.5% 11.8%
======== ======== ========
2005
-----------------------------
Quarter Quarter
Ended Ended Six
February 26 May 28 Months
--------- --------- ---------
Net sales by segment:
Engine/Mobile Filtration $ 83,129 $ 93,722 $176,851
Industrial/Environmental Filtration 97,198 106,668 203,866
Packaging 15,934 19,396 35,330
-------- -------- --------
$196,261 $219,786 $416,047
======== ======== ========
Operating profit by segment:
Engine/Mobile Filtration $ 16,778 $ 19,629 $ 36,407
Industrial/Environmental Filtration 3,969 6,234 10,203
Packaging 333 1,690 2,023
-------- -------- --------
$ 21,080 $ 27,553 $ 48,633
======== ======== ========
Operating margin by segment: 20.2% 20.9% 20.6%
Engine/Mobile Filtration 4.1% 5.8% 5.0%
Industrial/Environmental Filtration 2.1% 8.7% 5.7%
-------- -------- --------
Packaging 10.7% 12.5% 11.7%
======== ======== ========
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