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CLARCOR Reports Record Fourth Quarter and Full Year Results

CLARCOR Inc. (NYSE: CLC):

   

Unaudited Fourth Quarter and Full Year 2011 Highlights

(Amounts in millions, except per share data and percentages)

 

Quarter Ended

Year Ended
12/3/11   11/27/10   Change   12/3/11   11/27/10   Change
Net sales $ 307.5   $ 275.7   12 % $ 1,126.6   $ 1,011.4   11 %
Operating profit 54.7 43.8 25 % 181.3 144.6 25 %
Net earnings – CLARCOR 37.2 29.0 28 % 124.0 96.1 29 %
Diluted earnings per share $ 0.73 $ 0.57 28 % $ 2.42 $ 1.88 29 %
Operating margin   17.8 %     15.9 %   1.9 pts     16.1 %     14.3 %   1.8 pts
 

CLARCOR Inc. (NYSE: CLC) reported its financial results for the fourth quarter and full year 2011. Diluted earnings per share for 2011 grew by 29% from 2010 to a record high of $2.42, driven by an 11% increase in net sales and a 1.8 percentage point improvement in operating margin. Significant full year financial and strategic highlights for 2011 include the following:

  • 16.1% operating margin and 34.0% gross margin were highest in twenty years
  • Industrial/Environmental segment operating margin of 11.1% was highest in over thirty years
  • Engine/Mobile segment operating margin exceeded 20.0% for eleventh consecutive year
  • China heavy-duty engine filter sales increased by almost 30% from 2010
  • Generated $119 million of cash from operations and returned $51 million to shareholders
  • Purchased TransWeb to enhance internal development of media technology
  • Committed $28.0 million to invest in additional heavy-duty engine filter capacity

The Company’s fourth quarter 2011 diluted earnings per share increased 28% from last year to a record quarterly high of $0.73, exceeding the previous high by 14%. This increase in diluted earnings per share from the fourth quarter of 2010 was driven by a 12% increase in net sales and a 1.9 percentage point improvement in operating margin. Changes in average foreign currency exchange rates positively influenced net sales by $0.5 million and had no significant impact on operating profit in the fourth quarter of 2011 compared with the fourth quarter of 2010. Changes in average foreign currency exchange rates positively influenced net sales by $12.5 million and operating profit by $2.3 million for the full year 2011 compared with the full year 2010. In addition, our fiscal year 2011 included fifty-three weeks while our fiscal year 2010 included fifty-two weeks. We estimate that the additional week in 2011 positively influenced net sales growth from 2010 by approximately 1.5%.

Chris Conway, CLARCOR’s Chief Executive Officer, commented, “We capped off another successful year with record fourth quarter results. We are particularly proud of our 17.8% operating margin in the fourth quarter—almost two percentage points higher than last year’s fourth quarter and our highest quarterly operating margin since 1991. This operating margin improvement combined with our continued sales growth facilitated our fourth quarter being the eighth consecutive quarter where we exceeded our previous year’s quarterly diluted earnings per share by at least 15%. Once again, this consistent success is a result of the continued execution of our long-term strategy including a commitment to sustainable sales growth, cost containment and continuous improvement.

“All of our reporting segments contributed to our strong full year 2011 financial performance. Supported by the continued strength of our Baldwin heavy-duty engine filter business, our Engine/Mobile Filtration segment grew sales 14% and improved its operating margin 1.4 percentage points. Our Industrial/Environmental Filtration segment increased sales 11% and exceeded its 2011 operating margin goal of 10% by more than a full percentage point. Our Packaging segment improved its operating margin by 1.7 percentage points despite relatively flat sales. The stronger performance at each of our reporting segments enabled our consolidated operating margin to improve to 16.1%, the highest level in twenty years.

“This 2011 success would not have been possible without our continued focus on profitable growth. Our sales growth in 2011 was geographically balanced—U.S. sales grew 12% and foreign sales grew 11%. Our foreign sales growth was driven by a 19% increase in sales in our Engine/Mobile Filtration segment in part due to increased sales in China. Despite a temporary reduction in heavy-duty engine filter sales in the third quarter of 2011, sales in China returned to expected levels in the fourth quarter and increased by 29% for the full year. Going forward, we intend to continue to focus on growth both in the U.S. and abroad through the introduction of new filtration solutions while leveraging the strength of our existing products and technologies.

“Our culture of managing costs prudently while supporting our profitable growth was evident in our 2011 financial results. Sales grew 11%, but selling and administrative expenses increased only 4%. As a result, our selling and administrative expenses as a percentage of sales declined 1.3 percentage points. We believe our current cost structure positions us well to capitalize on our anticipated growth initiatives moving into 2012.”

Fourth Quarter Results:

Engine/Mobile Filtration Segment

Net sales at our Engine/Mobile Filtration segment increased 17% compared with the fourth quarter of 2010. This increase was primarily related to higher volume of heavy-duty engine filter sales in the U.S. and abroad. Overall, the higher net sales were the result of 13% growth domestically and 26% growth outside the U.S. Domestic growth was driven by higher aftermarket sales including market share gains. Foreign growth was aided by 31% higher sales in China compared with last year’s fourth quarter. This foreign sales growth was also supported by higher export sales from the U.S. and an increase in our heavy-duty engine filter sales in Europe.

Operating profit at our Engine/Mobile Filtration segment increased 28% from the fourth quarter of 2010. This increase was primarily the result of higher heavy-duty engine filter sales. Our operating margin improved 2.0 percentage points from last year’s fourth quarter to 23.1%. This higher operating margin was primarily the result of our ability to leverage our manufacturing overhead and selling and administrative costs.

Industrial/Environmental Filtration Segment

Net sales at our Industrial/Environmental Filtration segment increased 11% from the fourth quarter of 2010. Net sales in the U.S. rose 22% while net sales outside the U.S. declined 12%. Our growth in domestic sales was the result of higher natural gas vessel sales, increased sales of new air filtration products and incremental sales from our acquisition of TransWeb, which was completed at the end of December 2010. The reduction in sales outside the U.S. was heavily influenced by a reduction in Asian sales primarily due to several large natural gas vessel projects completed in the fourth quarter of 2010 that did not repeat in the fourth quarter this year.

Operating profit at our Industrial/Environmental Filtration segment increased 31% from the fourth quarter of 2010. This increase was across the broad markets we serve in this reporting segment including $1.3 million as a result of our acquisition of TransWeb. Our 14.4% operating margin in the fourth quarter increased 2.2 percentage points from last year including a 1.6 percentage point improvement in gross margin percentage and a 0.6 percentage point reduction in selling and administrative costs as a percentage of sales. This 14.4% operating margin in the fourth quarter propelled our 2011 operating margin in this reporting segment to 11.1%—exceeding our full year 10% operating margin goal.

Packaging Segment

Net sales at our Packaging segment declined $2.4 million, or 9%, from the fourth quarter of 2010. This reduction was primarily the result of lower sales of decorated flat sheet metal including lower holiday promotional sales. As a result of these lower sales, operating profit in our Packaging segment declined $1.2 million, or 38%, and operating margin decreased 3.6 percentage points from the fourth quarter of 2010. However, for the full year 2011, operating profit increased $1.5 million, or 17%, and operating margin increased 1.7 percentage points from last year.”

2012 Guidance

Chris Conway commented on 2012 guidance: “We expect 2012 to be another record year where we will build upon our foundation of success and continue to develop our core strategic initiatives including growing the top-line through the introduction of innovative products while leveraging our technology and media development capabilities. As always, we intend to continue to advance our deeply engrained culture of cost containment and continuous improvement in support of our profitable growth.

“We anticipate continued growth in our Engine-Mobile Filtration segment in 2012 primarily from higher sales of heavy-duty engine filters in both the U.S. and foreign markets. We expect that our foreign growth will be higher than our domestic growth due to increased sales in China and export sales to South America and the Middle East. We expect our operating margin in our Industrial-Environmental Filtration segment to continue to expand in 2012. This expansion should be driven by an increased sales mix of higher margin process liquid filtration products and improved margins in our air filtration markets. We anticipate some challenges in our Packaging segment in 2012, but we still expect a strong 2012 operating margin in this segment with a mid-point projection of 10%. On a consolidated basis, we expect our organic sales growth in 2012 to be between 6% and 8%, or between 7.5% and 9.5% excluding the impact of the fifty-third week in 2011.”

Our guidance for 2012 diluted earnings per share is $2.55 to $2.70. Our guidance does not consider major global economic disruptions in 2012 including in Europe and the U.S. Anticipated sales growth from 2011 and operating margin by segment and on a consolidated basis are as follows:

   

2012 Estimated

Sales Growth

2012 Estimated

Operating Margin

 
Engine/Mobile Filtration 7.0% to 9.0% 22.0% to 23.0%
Industrial/Environmental Filtration 7.0% to 9.0% 11.0% to 12.0%
Packaging -7.0% to -5.0% 9.0% to 11.0%
CLARCOR 6.0% to 8.0% 16.0% to 17.0%
 

We project 2012 cash from operations to be between $130 million and $140 million, capital expenditures to be between $45 million and $55 million and our effective tax rate to be between 31.5% and 32.0%.

CLARCOR will be holding a conference call to discuss the fourth quarter 2011 results at 10:00 a.m. CST on January 19, 2012. Interested parties can listen to the conference call at www.clarcor.com or www.viavid.net. A replay will be available on these websites and also at 877-870-5176 or 858-384-5517 by providing confirmation code 6302094. The replay will be available through February 2, 2012 by telephone and for 30 days on the Internet.

CLARCOR is based in Franklin, Tennessee, and is a diversified 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 CLARCOR are traded on the New York Stock Exchange under the symbol CLC.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, 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 may be identified from use of the words “may,” “should,” “could,” “potential,” “continue,” “plan,” “forecast,” “estimate,” “project,” “believe,” “intent,” “anticipate,” “expect,” “target,” “is likely,” “will,” or the negative of these terms, and similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include, among other things: statements and assumptions relating to anticipated future growth and results of operations, including the anticipated 2012 performance of the Company and each of its segments, and our projections with respect to 2012 estimated sales growth and 2012 estimated operating margins for the Company and each of its segments; statements regarding management's short-term and long-term performance goals; statements regarding anticipated order patterns from our customers or the anticipated economic conditions of the industries and markets that we serve; statements related to the performance of the U.S. and other economies generally; statements relating to the anticipated effects on results of operations or financial condition from recent and expected developments or events; statements regarding the development of our core strategic initiatives, including growing our top-line through the introduction of innovative products while leveraging our technology and media development capabilities; statements regarding our ability to continue our culture of cost containment and ongoing improvement in support of profitable growth; statements regarding the introduction of new filtration solutions and leveraging the strength of our existing products and technologies; statements regarding our current cost structure positions and ability to capitalize on anticipated growth initiatives; 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. The Company's past results of operations do not necessarily indicate its future results. The Company’s future results may differ materially from the Company’s past results as a result of various risks and uncertainties, including the risk factors discussed in the “Risk Factors” section of the Company’s 2010 Form 10-K 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, including estimated sales growth and estimated operating margin levels for 2012 for the Company and its business segments, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.

TABLES FOLLOW

       
CLARCOR INC. 2011 UNAUDITED FOURTH QUARTER RESULTS
 
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in thousands except per share data)
 
Quarter Ended   Twelve Months Ended
December 3, November 27, December 3, November 27,
2011 2010 2011 2010
 
Net sales $ 307,529 $ 275,659 $ 1,126,601 $ 1,011,429
Cost of sales   200,397     183,461     743,180     673,022  
 
Gross profit 107,132 92,198 383,421 338,407
 
Selling and administrative expenses   52,397     48,349     202,154     193,758  
 
Operating profit   54,735     43,849     181,267     144,649  
 
Other income (expense):
Interest expense (117 ) (206 ) (469 ) (546 )
Interest income 203 102 649 288
Other, net   273     (386 )   (139 )   (968 )
 
  359     (490 )   41     (1,226 )
 
Earnings before income taxes 55,094 43,359 181,308 143,423
 
Provision for income taxes   17,694     14,321     56,947     47,072  
 
Net earnings 37,400 29,038 124,361 96,351
 
Net earnings attributable to
noncontrolling interests, net of tax   (156 )   (34 )   (358 )   (270 )
 
Net earnings attributable to CLARCOR Inc $ 37,244   $ 29,004   $ 124,003   $ 96,081  
 
Net earning per share attributable to CLARCOR Inc. - Basic $ 0.74   $ 0.57   $ 2.46   $ 1.90  
Net earning per share attributable to CLARCOR Inc. - Diluted $ 0.73   $ 0.57   $ 2.42   $ 1.88  
 
Weighted average number of shares outstanding - Basic   50,316,699     50,614,269     50,501,842     50,678,617  
Weighted average number of shares outstanding - Diluted   50,995,657     51,189,705     51,191,435     51,156,229  
 
Dividends paid per share $ 0.1200   $ 0.1050   $ 0.4350   $ 0.3975  
 
   
CLARCOR INC. 2011 UNAUDITED FOURTH QUARTER RESULTS, continued
     
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 3, November 27,
2011 2010
ASSETS
Current assets:
Cash and cash equivalents $ 155,999 $ 117,022
Restricted cash 1,105 708
Accounts receivable, less allowance for losses
of $9,795 and $11,428, respectively 206,664 188,186
Inventories 200,274 182,384
Deferred income taxes 25,974 25,081
Income tax receivable 3,373 7,324
Prepaid expenses and other current assets   7,510     5,568  
Total current assets   600,899     526,273  
 
Property, plant and equipment, at cost,
less accumulated depeciation 184,992 181,175
Assets held for sale 2,000 2,000
Goodwill 235,530 228,105
Acquired intangible assets, less accumulated amortization 98,674 91,174
Deferred income taxes 749 1,000
Other noncurrent assets   12,089     12,684  
Total assets $ 1,134,933   $ 1,042,411  
 
LIABILITIES
Current liabilities:
Current portion of long-term debt $ 1,289 $ 146
Accounts payable and accrued liabilities 155,585 160,206
Income taxes payable   3,176     3,105  
Total current liabilities   160,050     163,457  
 
Long-term debt, less current portion 15,981 17,331
Long-term pension and postretirement healthcare benefits liabilities 74,524 66,124
Deferred income taxes 36,194 31,266
Other long-term liabilities   11,069     5,138  
Total liabilities   297,818     283,316  
 
Contingencies
Redeemable noncontrolling interests 1,557 1,568
 
SHAREHOLDERS' EQUITY
Capital stock 50,145 50,335
Capital in excess of par value 19,453 33,698
Accumulated other comprehensive loss (44,391 ) (35,041 )
Retained earnings   809,520     707,478  
Total CLARCOR Inc. equity   834,727     756,470  
Noncontrolling interests   831     1,057  
Total shareholders' equity   835,558     757,527  
Total liabilities and shareholders' equity $ 1,134,933   $ 1,042,411  
 
   
CLARCOR INC. 2011 UNAUDITED FOURTH QUARTER RESULTS, continued
     
CONSOLIDATED CASH FLOWS
(Dollars in thousands)
 
Twelve Months Ended
December 3, November 27,
2011 2010
Cash flows from operating activities:
Net earnings $ 124,361 $ 96,351
Depreciation 26,826 26,119
Amortization 5,609 4,802
Other noncash items 281 (101 )
Net loss on disposition of plant assets 452 337
Impairment of long-lived 87 276
Stock-based compensation expense 5,477 4,602
Excess tax benefit from stock-based compensation (5,100 ) (2,500 )
Changes in short-term investments - 32,171
Changes in assets and liabilities, excluding short-term investments   (38,544 )   (18,655 )
Net cash provided by operating activities   119,449     143,402  
 
Cash flows from investing activities:
Restricted cash 149 (1,119 )
Business acquisitions, net of cash acquired (16,758 ) -
Additions to plant assets (22,486 ) (23,371 )
Proceeds from disposition of plant assets 327 2,296
Investment in affiliates (496 ) (199 )
Proceeds from insurance claim   200     557  
Net cash used in investing activities   (39,064 )   (21,836 )
 
Cash flows from financing activities:
Net payments under multicurrency revolving credit agreement - (35,000 )
Payments on long-term debt (1,853 ) (164 )
Sale of capital stock under stock option and employee purchase plans 8,449 7,290
Acquisition of noncontrolling interests - (732 )
Purchase of treasury stock (29,317 ) (16,277 )
Excess tax benefits from stock-based compensation 5,100 2,500
Dividend paid to noncontrolling interests (321 ) -
Cash dividends paid   (21,961 )   (20,143 )
Net cash used in financing activities   (39,903 )   (62,526 )
 
Net effect of exchange rate changes on cash   (1,505 )   (1,295 )
 
Net change in cash and cash equivalents 38,977 57,745
 
Cash and cash equivalents, beginning of period   117,022     59,277  
 
Cash and cash equivalents, end of period $ 155,999   $ 117,022  
 
Cash paid during the period for:
Interest $ 300   $ 1,318  
Income taxes, net of refunds $ 37,959   $ 54,560  
 
         
CLARCOR INC. 2011 UNAUDITED FOURTH QUARTER RESULTS, continued
     
QUARTERLY INCOME STATEMENT DATA BY SEGMENT
(Dollars in thousands)
 
2011
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Twelve
February 26 May 28 August 27 December 3 Months
Net sales by segment:
Engine/Mobile Filtration $ 111,328 $ 131,276 $ 129,467 $ 137,941 $ 510,012
Industrial/Environmental Filtration 112,119 133,499 132,380 145,028 523,026
Packaging   22,273     23,758     22,972     24,560     93,563  
$ 245,720   $ 288,533   $ 284,819   $ 307,529   $ 1,126,601  
 
Operating profit by segment:
Engine/Mobile Filtration $ 21,202 $ 29,592 $ 30,175 $ 31,870 $ 112,839
Industrial/Environmental Filtration 7,248 16,179 13,650 20,951 58,028
Packaging   2,841     3,009     2,636     1,914     10,400  
$ 31,291   $ 48,780   $ 46,461   $ 54,735   $ 181,267  
 
 
Operating margin by segment:
Engine/Mobile Filtration 19.0 % 22.5 % 23.3 % 23.1 % 22.1 %
Industrial/Environmental Filtration 6.5 % 12.1 % 10.3 % 14.4 % 11.1 %
Packaging   12.8 %   12.7 %   11.5 %   7.8 %   11.1 %
  12.7 %   16.9 %   16.3 %   17.8 %   16.1 %
 
 
2010
Quarter Quarter Quarter Quarter
Ended Ended Ended Ended Twelve
February 27 May 29 August 28 November 27 Months
Net sales by segment:
Engine/Mobile Filtration $ 96,428 $ 113,434 $ 118,753 $ 117,489 $ 446,104
Industrial/Environmental Filtration 102,027 117,566 119,589 131,177 470,359
Packaging   16,676     26,869     24,428     26,993     94,966  
$ 215,131   $ 257,869   $ 262,770   $ 275,659   $ 1,011,429  
 
Operating profit by segment:
Engine/Mobile Filtration $ 17,862 $ 23,643 $ 25,937 $ 24,804 $ 92,246
Industrial/Environmental Filtration 4,283 10,371 12,887 15,974 43,515
Packaging   751     2,198     2,868     3,071     8,888  
$ 22,896   $ 36,212   $ 41,692   $ 43,849   $ 144,649  
 
Operating margin by segment:
Engine/Mobile Filtration 18.5 % 20.8 % 21.8 % 21.1 % 20.7 %
Industrial/Environmental Filtration 4.2 % 8.8 % 10.8 % 12.2 % 9.3 %
Packaging   4.5 %   8.2 %   11.7 %   11.4 %   9.4 %
  10.6 %   14.0 %   15.9 %   15.9 %   14.3 %
 

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