CLARCOR Reports Third Quarter 2009 Results

• Press Release
• Source: CLARCOR Inc.
• On 4:08 pm EDT, Wednesday September 16, 2009

FRANKLIN, Tenn.--(BUSINESS WIRE)--CLARCOR Inc. (NYSE: CLC - News):

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Symbol	Price	Change
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Third Quarter and Nine Months 2009 Operating Review

CLARCOR Inc. (NYSE: CLC - News) reported today that third quarter 2009 net sales decreased by 17% and operating profit decreased by 21% compared to the same quarter in 2008. Net earnings decreased by 18% and diluted earnings per share declined by 16% compared to the third quarter of 2008. Foreign currency fluctuations decreased sales and operating profit by approximately $7 million and $1 million, respectively, for the quarter just ended.

Both operating profit and net earnings in the third quarter in 2009 increased by 27% compared to the second quarter of 2009, and by 134% and 142%, respectively, over first quarter 2009 results. Operating margins improved to 13.9% for the 2009 third quarter compared to 11.0% in the 2009 second quarter and 6.4% in the first quarter of 2009.

Norm Johnson, CLARCOR’s Chairman and Chief Executive Officer, said, “In large measure, the third quarter this year continued the trends we saw during the first and second quarters. Demand in most markets was still lower than in early 2008, and certainly 2007. The good news, however, is that, for the most part, the markets we sell to are not getting worse, though it would be premature to say that they are improving. We have been able to improve profits in each quarter this year compared to the preceding quarter primarily due to cost reduction efforts by our operating companies, new product introductions and new customer relationships. We expect this trend to continue for the fourth quarter this year, though operating profit will still be lower than in the fourth quarter of 2008.

“As has been true throughout 2009, the aftermarket for replacement filter products has proven much more resilient during this economic recession than sales to the new equipment and OEM markets. We are fortunate that over 80% of our filter sales are to the aftermarket. Indeed, for sales in our Engine/Market Filtration segment the aftermarket percentage is over 90%.

“Overall, sales demand within the U.S. was roughly the same as sales outside the U.S., though demand differed significantly by market and geography. Heavy-duty engine filter sales were stronger in the U.S. and Asia than in Europe. The decline in natural gas systems and filter sales were approximately the same within and outside the U.S. Aviation fuel filter sales were clearly stronger outside the U.S. than in the U.S. Dust collector systems and cartridge sales declined more in Europe and Asia than they did in the U.S.

“Engine/Mobile Filtration segment sales decreased 18%, and operating profit declined by 24% in this year’s third quarter compared to last year’s third quarter. Over-the-road truck utilization and mileage continued to be at lower levels in the U.S. compared to early 2008. Similarly, the utilization of off-road equipment in agriculture, construction and mining markets remained depressed with no signs of an upturn during the third quarter. Internationally, heavy-duty engine filter sales were down approximately 20%. Sales of railroad filtration products were down about 10% in the third quarter of 2009 compared to the third quarter of 2008. We expect the commercial rail industry to remain soft for the rest of this year and into 2010 as economic pressures continue in three sectors important to the railroad industry: housing, coal and automotive. Engine/Mobile’s operating margin was 22.7% for the third quarter of 2009. We are very pleased at being able to maintain operating margins in the 22% to 23% range despite the 18% drop in sales for the quarter.

“Sales in our Industrial/Environmental Filtration segment decreased by 17%, overall, in the third quarter of 2009 compared to the same period in 2008. As usual, sales demand varied widely depending on the market. Aviation fuel filter sales increased during the third quarter compared to last year due to new and expanded fuel filtration systems at airports throughout the world. Filter sales in most other markets declined, including oil drilling, plastics and resins, natural gas, HVAC and aerospace. Overall, operating margins declined from 7.5% to 6.9% for the third quarter. Even though lower than in 2008, the operating margin in our Industrial/Environmental Filtration segment in this year’s third quarter is still higher, despite the drop in sales, than the 5.8% operating margin recorded in the third quarter of 2007 as we continue to make progress towards our goal of at least a 10% operating margin for the segment.

“Our CLC Air business is now profitable, and we expect its operating profit to continue to improve in future quarters towards our target of an 8% operating margin in 2010. CLC Air’s pilot program to sell its high-end Purolator® brand HVAC residential filters to a large retail store chain continues, and we believe very successfully. On an annual basis, sales of our filters into the one pilot region are approximately $4 to $5 million. We expect to learn during the fourth quarter if we will be awarded additional regions.

“Over ten years ago, we began manufacturing, on a private label basis, high-end HVAC filters for 3M. Over the last several years, sales to 3M have steadily declined as it moved products we were manufacturing for them into their manufacturing facilities in Mexico. This drove our decision to enter the high-end retail HVAC filter market with our own Purolator® brand. The filter brand we replaced at the large retail store chain was the brand sold by 3M, and we were recently informed that 3M would no longer buy environmental air filters from us. Sales to 3M in the third quarter of 2009 dropped by 44% from the same quarter in 2008. Annual sales to 3M amounted to $15 to $18 million or less than 2% of our annual consolidated sales.

“Our Packaging segment sales declined slightly in the third quarter, but operating profit rose by more than 25%. Operating margins improved to 11.6% this quarter from 8.8% in the same quarter last year. We expect a stronger 2009 fourth quarter than in 2008, and also a better quarter than the third quarter this year.

“Other expense for the third quarter of 2009 included $0.3 million of interest expense. Interest income, also included in other expense, was not material for the quarter. Also included in other expense was a $0.3 million currency gain for the quarter. Our effective tax rate was 33.3% for the quarter, and we expect the rate to be approximately 32% to 33% for the fourth quarter.

“We continue to invest at higher levels than in prior years, even during an economic recession, for the development of new products and new filtration media and for expansion of our technical and research facilities, particularly in Asia. Capital expenditures were $15 million for the nine-month period just ended compared to $25 million in the nine-month period of 2008. We expect capital spending will be approximately $11 to $13 million for the fourth quarter of 2009.

“CLARCOR’s financial position is solid, and our cash flow continues to be strong. Cash flow from operations, excluding changes in our short-term investments, increased to $93 million in the 2009 nine-month period from $78 million last year. We repurchased 688,200 shares of our stock during the third quarter at an average purchase price of $28.72. Approximately $167 million remains outstanding under our current share repurchase authorization. We expect free cash flow to remain strong for the remainder of 2009 and into 2010.

“We are not expecting any significant improvement in the U.S. or world economies for the rest of this year. Our Asian business is stronger than our U.S. or European businesses, and we expect this difference to continue for the fourth quarter and into 2010. We are looking at several sales opportunities in South Asia and South America, but these will not have a material impact in the fourth quarter or in the first half of 2010. We expect the aftermarket to remain stronger than the OEM market for the rest of 2009 and throughout 2010. We also expect to report higher sales and operating profit in our fourth quarter this year than in any of the previous three quarters. Nevertheless, given the current U.S. and world economies, we have revised our previous earnings per share forecast and now expect diluted earnings per share for 2009 to be $1.30 to $1.40. As usual, we will provide guidance for 2010 when we issue our fourth quarter results in January 2010.”

CLARCOR will be holding a conference call to discuss its third quarter and nine-month results at 10:00 a.m. CDT on September 17, 2009. 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 888-203-1112 or 719-457-0820 using access code 4853161. The replay will be available through September 24, 2009 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 the Company 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 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 future growth, as well as 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 relating to the Company’s business and growth strategies; 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 2008 Form 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, including projected sales and profit levels for any business segment in any given quarter, whether as a result of new information, future events, changed circumstances or any other reason after the date of this press release.

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CLARCOR Inc.
Bruce A. Klein, Chief Financial Officer, 615-771-3100