CLARCOR Inc. (NYSE: CLC):
Unaudited Fourth Quarter and Full Year
2016 Highlights
(Amounts in millions, except per share
data and percentages)
Fourth Quarter Ended Full Year Ended
12/3/16 11/28/15
Change 12/3/16 11/28/15
Change Net sales $ 376.9 $ 372.5
1% $ 1,389.6 $ 1,481.0 -6%
Operating profit 44.4 49.4 -10% 180.9 197.9 -9% Net earnings — CLC
29.0 33.1 -12% 139.3 134.7 3% Diluted EPS $ 0.59 $ 0.67 -12% $ 2.84
$ 2.67 6% Operating margin 11.8% 13.3%
-1.5 pts
13.0%
13.4%
-0.4 pts
CLARCOR Inc. (NYSE: CLC) reported that its fourth
quarter diluted earnings per share were $0.59, an $0.08 reduction
from the fourth quarter of 2015. Fourth quarter 2016 diluted
earnings per share were negatively impacted by approximately $0.12
from expenses associated with the pending Parker-Hannifin
transaction. In addition, the fourth quarters of 2016 and 2015 were
negatively impacted by approximately $0.03 and $0.07, respectively,
from upfront expenses for cost reduction initiatives. Excluding the
aggregate impact of these items, non-GAAP adjusted diluted earnings
per share for the fourth quarter of 2016 were flat compared to the
fourth quarter of 2015, as reflected in the table on the next page.
Our fiscal fourth quarter of 2016 included an additional or
fourteenth week while our fiscal fourth quarter 2015 included
thirteen weeks. We estimate that the additional week in the fourth
quarter of 2016 positively influenced net sales by approximately 8%
compared to the fourth quarter of 2015.
To allow investors to better compare and evaluate our historical
financial performance, we are presenting non-GAAP adjusted
financial results in the table following this paragraph. Non-GAAP
adjusted financial results for the fourth quarter of 2016 exclude
$7.4 million of expenses associated with the pending
Parker-Hannifin transaction and $2.3 million of upfront expenses
for cost reduction initiatives as referenced above. Non-GAAP
adjusted financial results for the fourth quarter of 2015 exclude
$5.6 million of upfront expenses for cost reduction initiatives.
Please refer to pages 11 through 14 of this earnings release for
reconciliations and additional information with respect to non-GAAP
adjusted financial results for the fourth quarter and full year
2015 and 2016.
Non-GAAP Adjusted Financial
Results:
Fourth Quarter Ended Full Year Ended
12/3/16 11/28/15
Change 12/3/16 11/28/15
Change Adjusted net sales $ 376.9 $
372.5 1% $ 1,389.6 $ 1,440.1
-4% Adjusted operating profit 54.2
55.0
-2% 192.7 201.4 -4% Adjusted net earnings — CLC 36.3
36.7
-1% 129.8 133.6 -3% Adjusted diluted EPS $ 0.74
$
0.74
0% $ 2.65 $ 2.65 0% Adjusted operating margin 14.4%
14.8%
-0.4 pts 13.9% 14.0% -0.1
pts
Fourth quarter 2016 consolidated net sales increased $4 million,
or 1%, from last year’s fourth quarter. Higher fourth quarter net
sales were primarily driven by the additional fiscal week in this
year’s fourth quarter compared to the fourth quarter of 2015 which
contained thirteen weeks. The net sales benefit from this
additional fiscal week was partially offset by continued weakness
in our natural gas filtration business and lower net sales in
several of our heavy-duty engine filtration markets when adjusted
for the additional fiscal week, as well as changes in average
foreign currency exchange rates which negatively impacted
consolidated net sales by $6 million, or 2%. We also recognized
higher incentive compensation expense pursuant to our company-wide
annual cash incentive program in the fourth quarter of 2016 in
comparison to last year’s fourth quarter as the result of us
achieving a higher payout level under this program in fiscal 2016
than fiscal 2015, which negatively impacted operating profit by
$6.8 million, diluted earnings per share by $0.09 and operating
margin by 1.8 percentage points in the fourth quarter of 2016
compared to last year’s fourth quarter.
Fourth quarter 2016 net sales in our Engine/Mobile Filtration
segment increased $5 million, or 3%, from last year’s fourth
quarter including relatively flat domestic sales and a $4 million,
or 9%, increase in international net sales. Changes in average
foreign currency exchange rates negatively impacted net sales in
this reporting segment by $2 million, or 1%. In addition to the
impact of the extra week in the fourth quarter of 2016, higher
international net sales compared to last year’s fourth quarter were
primarily driven by an increase in heavy-duty engine first-fit
filtration sales to our largest customer in China and higher export
sales of off-road fuel filtration products to the agricultural and
construction equipment markets primarily the result of several new
first-fit product introductions. Domestic net sales in this
reporting segment were relatively flat compared to last year’s
fourth quarter--despite the additional fiscal week in this year’s
fourth quarter--as a 5% increase in heavy-duty engine filtration
sales to our U.S. independent aftermarket was offset by a 22%
decline in sales to other filtration companies and a 10% reduction
in sales to a large retail customer that was referenced in our
earnings release for the prior quarter. We believe lower fourth
quarter net sales to this large retail customer continue to be
driven by a strategic reorganization taking place at this
customer.
Fourth quarter 2016 net sales in our Industrial/Environmental
Filtration segment were relatively flat compared to last year’s
fourth quarter. The net sales benefit of the extra fiscal week was
offset by changes in average foreign currency exchange rates which
negatively impacted net sales in this reporting segment by $4
million, or 2%. Higher year-over-year fourth quarter HVAC
filtration product sales and $3 million additional sales from our
first quarter 2016 acquisition of TDC Filter Manufacturing were
offset by lower natural gas filtration sales. Sales of HVAC
filtration products increased $6 million, or 21%, from last year’s
fourth quarter primarily due to continued higher sales into the
Middle East. Natural gas filtration sales declined approximately $9
million, or 12%, from last year’s fourth quarter driven by a 30%
reduction in capital vessel sales which was partially offset by a
9% increase in aftermarket filtration sales, reflecting continued
focus within this business on growing the aftermarket despite
continued difficult end-market conditions.
Our fourth quarter operating margin of 11.8% declined 1.5
percentage points from last year’s fourth quarter. This decline was
driven by a 1.8 percentage point increase in selling and
administrative expenses as a percentage of net sales partially
offset by a 0.3 percentage point improvement in gross margin
percentage. Selling and administrative expenses increased $7
million in the fourth quarter of 2016 from last year’s fourth
quarter primarily driven by expenses pursuant to the pending
Parker-Hannifin transaction and higher incentive compensation
expense pursuant to our company-wide annual cash incentive program,
partially offset by lower upfront expenses for cost reduction
initiatives and a reduction in bad debt expense due to continued
improvement in our collection of past due accounts receivable. The
higher gross margin percentage compared to last year’s fourth
quarter was primarily due to improvement in our Engine/Mobile
Filtration segment driven by lower material and direct labor costs
as a percentage of net sales, partly offset by lower absorption of
fixed manufacturing costs. The reduction in material cost as a
percentage of net sales was primarily the result of favorable sales
mix and our company-wide purchasing cost reduction initiative.
In fiscal year 2016 we generated $285 million of net cash from
operating activities, a $132 million increase from fiscal year
2015. Approximately $18 million of this increase resulted from the
3M patent litigation award received during the second quarter of
fiscal 2016. The remaining improvement in operating cash generation
was primarily the result of our ongoing focus on optimizing the
components of working capital by employing several Lean techniques.
For example, we lowered inventory $37 million from year-end 2015
while maintaining the same strong delivery and service levels to
our aftermarket customers, and we lowered accounts receivable by
$33 million as we successfully reduced past due customer balances
while concurrently benefiting from a $6 million year-over-year
reduction in bad debt expense.
Pending Parker-Hannifin
Transaction
On December 1, 2016, CLARCOR Inc. (the “Company”) entered into
an Agreement and Plan of Merger with Parker-Hannifin Corporation
(“Parker-Hannifin”) and Parker Eagle Corporation, a wholly owned
subsidiary of Parker-Hannifin (“Merger Sub”), pursuant to which,
upon the closing of the merger, Merger Sub will cease to exist, and
the Company will survive as a wholly owned subsidiary of
Parker-Hannifin (the “pending Parker-Hannifin transaction”). Upon
the closing of this merger, each share of the Company’s common
stock, par value $1.00 per share (other than treasury stock and any
shares of the Company’s common stock owned by the Company,
Parker-Hannifin, Merger Sub, any of their wholly owned
subsidiaries, or any person who properly demands statutory
appraisal of their shares) will be converted into the right to
receive an amount in cash equal to $83.00 without interest. Upon
the completion of the merger, the Company’s common stock will no
longer be publicly traded and will be delisted from the New York
Stock Exchange.
The pending Parker-Hannifin transaction is subject to customary
closing conditions, including approval of the merger by the
Company’s stockholders and receipt of applicable regulatory
approvals.
Conference Call
Information/Guidance
In light of the pending Parker-Hannifin transaction, the Company
is not holding a conference call in connection with this earnings
release and is not providing 2017 guidance in connection with this
earnings release.
The Company is based in Franklin, Tennessee, and is a
diversified marketer and manufacturer of mobile, industrial and
environmental filtration products sold in domestic and
international markets. Common shares of the Company are traded on
the New York Stock Exchange under the symbol CLC.
Additional Information and Where to Find
It
In connection with the pending Parker-Hannifin transaction, the
Company has filed a preliminary proxy statement on Schedule 14A
with the SEC. In addition, a definitive proxy statement will be
filed by the Company and provided to the Company’s stockholders.
THE COMPANY’S STOCKHOLDERS ARE ENCOURAGED TO READ THE PRELIMINARY
PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS, INCLUDING THE
DEFINITIVE PROXY STATEMENT (WHEN FILED), FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY NOW AND WHEN FUTURE FILINGS BECOME
AVAILABLE BECAUSE THEY DO AND WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PENDING PARKER-HANNIFIN TRANSACTION. Investors and
security holders will be able to obtain the documents free of
charge at the SEC’s website, www.sec.gov, or from the Company’s
website at www.clarcor.com under the heading “Investor Information”
or by emailing the Company at investor@clarcor.com.
Participants in Solicitation
Parker-Hannifin, the Company and their respective directors and
executive officers and other members of management and employees
may be deemed to be participants in the solicitation of proxies in
respect of the pending Parker-Hannifin transaction. Information
concerning Parker-Hannifin’s directors and executive officers is
set forth in the proxy statement, filed September 26, 2016, for
Parker-Hannifin’s 2016 annual meeting of shareholders as filed with
the SEC on Schedule 14A and in its most recent Annual Report on
Form 10-K for the fiscal year ended June 30, 2016 as filed with the
SEC on August 26, 2016. Information concerning the Company’s
directors and executive officers is set forth in the proxy
statement, filed February 19, 2016, for the Company’s 2016 annual
meeting of stockholders as filed with the SEC on Schedule 14A and
in its most recent Annual Report on Form 10-K for the fiscal year
ended November 28, 2015 as filed with the SEC on January 22, 2016.
Additional information regarding the interests of such participants
in the solicitation of proxies in respect of the pending
Parker-Hannifin transaction are included in the preliminary proxy
statement and other relevant materials filed with the SEC, and will
be included in the definitive proxy statement and other relevant
materials to be filed with the SEC when they become available
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. 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, but not
limited to, risks associated with global and national macroeconomic
pressures, trends with respect to the health of the markets we
serve including with respect to challenging market conditions in
various markets in the Engine/Mobile Filtration segment and the
Industrial/Environmental Filtration segment, our ability to execute
upon long-term strategic growth initiatives, our ability to execute
upon any cost savings and/or restructuring initiatives (including
that the costs associated with such initiatives may be greater than
anticipated, that we may be unable to realize anticipated cost
savings or other contemplated benefits, and that such initiatives
may adversely impact our business), customer concentration issues
in certain geographic locations and in respect of certain of our
businesses, our ability to integrate the businesses we have
acquired, currency fluctuations, particularly increases or
decreases in the U.S. dollar against other currencies, commodity
price increases and/or limited availability of raw materials and
component products, including steel, compliance costs associated
with environmental laws and regulations, political factors, our
international operations, highly competitive markets, governmental
laws and regulations, potential information systems
interruptions and intrusions, potential global events resulting in
instability and unpredictability in the world’s markets, including
financial bailouts of sovereign nations, political changes,
military and terrorist activities, health outbreaks and other
factors, changes in accounting standards or adoption of new
accounting standards, adverse effects of natural disasters, legal
challenges with respect to intellectual property, product liability
exposure, changes in tax rates or exposure to additional income tax
liabilities, potential labor disruptions, the impact on our
business and results of operations from developments related to the
potential exit of the United Kingdom from the European Union, our
potential inability to realize the anticipated benefits of the
strategic supply partnership with GE, the risks discussed in the
“Risk Factors” section of the Company’s Annual Report on Form 10-K
for the fiscal year 2015 filed on January 22, 2016, and other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission. In addition, there are various
risks and uncertainties associated with the pending Parker-Hannifin
transaction, including but not limited to, the occurrence of any
event, change or other circumstances that could delay the closing
of the pending Parker-Hannifin transaction; the possibility of
non-consummation of the pending Parker-Hannifin transaction and
termination of the merger agreement; the risk that the Company
could be required to pay a termination fee of $113 million to
Parker-Hannifin under certain circumstances pursuant to the terms
of the merger agreement; the failure to obtain Company stockholder
approval of the pending Parker-Hannifin transaction or to satisfy
any of the other conditions to the merger agreement; the
possibility that a governmental entity may prohibit, delay or
refuse to grant a necessary regulatory approval in connection with
the pending Parker-Hannifin transaction; the risk that stockholder
litigation in connection with the pending Parker-Hannifin
transaction may affect the timing or occurrence of the pending
Parker-Hannifin transaction or result in significant costs of
defense, indemnification and liability; the significant transaction
costs which have been and may continue to be incurred by the
Company related to the pending Parker-Hannifin transaction; and
other potential risks to the Company associated with any failure to
close the Parker-Hannifin transaction, including the potential
distraction of employee and management attention during the
pendency of the merger, uncertainty about the effect of the pending
Parker-Hannifin transaction on the Company’s relationships with
employees, potential and existing customers and suppliers and other
parties, and the impact that the failure of the pending
Parker-Hannifin transaction to close could have on the trading
price of shares of Company common stock and the Company’s operating
results. 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 or other statements included in this press release,
whether as a result of new information, future events, changed
circumstances or any other reason.
TABLES FOLLOW
CLARCOR INC. 2016 UNAUDITED FOURTH
QUARTER RESULTS
CONSOLIDATED STATEMENTS OF
EARNINGS
(Dollars in thousands, except share
data)
Quarter Ended Twelve Months Ended December 3,2016
November 28,2015 December 3,2016 November
28,2015 Net sales $ 376,947 $ 372,547 $ 1,389,573 $ 1,481,026 Cost
of sales 252,211 250,258 927,674 992,397
Gross profit 124,736 122,289 461,899 488,629
Selling and administrative expenses 80,290 72,900
281,011 290,682 Operating profit 44,446
49,389 180,888 197,947 Other income
(expense): Interest expense (1,794 ) (1,664 ) (7,538 ) (5,629 )
Interest income 156 104 551 443 Other, net (317 ) 93 27,705
5,204 (1,955 ) (1,467 ) 20,718 18
Earnings before income taxes 42,491 47,922 201,606 197,965
Provision for income taxes 13,447 14,828
62,216 63,052 Net earnings 29,044 33,094
139,390 134,913
Net earnings attributable to
noncontrolling interests, net of tax
(44
)
(41 ) (124 ) (209 ) Net earnings attributable to CLARCOR
Inc. $ 29,000 $ 33,053 $ 139,266 $ 134,704
Net earnings per share attributable to CLARCOR Inc. -
Basic $ 0.60 $ 0.67 $ 2.86 $ 2.70 Net
earnings per share attributable to CLARCOR Inc. - Diluted $ 0.59
$ 0.67 $ 2.84 $ 2.67 Weighted
average number of shares outstanding - Basic 48,591,862
49,359,491 48,690,560 49,981,118 Weighted
average number of shares outstanding - Diluted 49,015,276
49,613,346 49,059,758 50,429,454
Dividends paid per share $ 0.2500 $ 0.2200 $ 0.9100
$ 0.8200
CLARCOR INC. 2016 UNAUDITED FOURTH
QUARTER RESULTS, continued
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 3,2016
November 28,2015
ASSETS Current assets: Cash and cash equivalents $ 134,878 $
101,529 Accounts receivable, less allowance for losses of $10,593
and $14,765, respectively 229,762 258,280 Inventories 237,627
274,825 Income taxes receivable 1,237 3,781 Prepaid expenses and
other current assets 21,842 26,380 Total current
assets 625,346 664,795 Plant assets, at cost,
less accumulated depreciation of $306,202 and $286,335,
respectively 294,602 301,019 Assets held for sale 533 533 Goodwill
502,908 506,265 Acquired intangible assets, less accumulated
amortization 302,901 329,155 Deferred income taxes 3,157 3,651
Other noncurrent assets 9,645 13,038 Total assets $
1,739,092 $ 1,818,456
LIABILITIES Current
liabilities: Current portion of long-term debt $ 17,700 $ 7,788
Accounts payable 89,303 87,546 Accrued liabilities 94,894 106,410
Income taxes payable 1,913 1,956 Total current
liabilities 203,810 203,700 Long-term debt,
less current portion 267,753 397,368 Long-term pension and
postretirement healthcare benefits liabilities 37,175 31,577
Deferred income taxes 75,147 64,908 Other long-term liabilities
13,694 10,438 Total liabilities 597,579
707,991
SHAREHOLDERS' EQUITY Capital stock
48,567 49,111 Capital in excess of par value — — Accumulated other
comprehensive loss (122,662 ) (88,052 ) Retained earnings 1,214,922
1,148,510 Total CLARCOR Inc. equity 1,140,827
1,109,569 Noncontrolling interests 686 896
Total shareholders' equity 1,141,513 1,110,465 Total
liabilities and shareholders' equity $ 1,739,092 $ 1,818,456
CLARCOR INC. 2016 UNAUDITED FOURTH
QUARTER RESULTS, continued
CONSOLIDATED CASH FLOWS
(Dollars in thousands)
Twelve Months Ended
December 3,2016
November 28,2015
Cash flows from operating activities: Net earnings $ 139,390
$ 134,913 Depreciation 34,022 31,075 Amortization 24,580 25,528 Net
(gain) loss on disposition of assets 927 (2,144 ) Net gain on
disposal of J.L. Clark — (12,132 ) Impairment of investments —
6,729 Stock-based compensation expense 6,507 9,093 Excess tax
benefit from stock-based compensation (2,194 ) (1,246 ) Other
noncash items (4,337 ) (268 ) Changes in assets and liabilities
86,503 (37,803 ) Net cash provided by operating activities
285,398 153,745
Cash flows from investing
activities: Restricted cash (143 ) — Business acquisitions, net
of cash acquired (19,299 ) (20,882 ) J.L. Clark disposition, net of
cash divested — 45,232 Additions to plant assets (30,924 ) (64,535
) Proceeds from disposition of plant assets 1,323 7,469 Investment
in affiliates — (525 ) Net cash used in investing activities
(49,043 ) (33,241 )
Cash flows from financing
activities: Net borrowings (payments) on revolving credit
facility (112,000 ) 197,000 Payments on term loan facility (7,500 )
(195,000 ) Payments on long-term debt (305 ) (8,665 ) Payment of
financing costs — (50 ) Sale of capital stock under stock option
and employee purchase plans 34,075 8,106 Acquisition of
noncontrolling interest — (1,239 ) Payments for repurchase of
common stock (73,901 ) (70,777 ) Excess tax benefit from
stock-based compensation 2,194 1,246 Dividend paid to
noncontrolling interests (172 ) (206 ) Cash dividends paid (44,375
) (40,972 ) Net cash used in financing activities (201,984 )
(110,557 ) Net effect of exchange rate changes on cash (1,022 )
(2,482 ) Net change in cash and cash equivalents 33,349 7,465 Cash
and cash equivalents, beginning of period 101,529 94,064
Cash and cash equivalents, end of period $ 134,878 $
101,529
Cash paid during the period for:
Interest $ 6,762 $ 4,874 Income taxes, net of refunds
$ 44,151 $ 70,146
CLARCOR INC. 2016 UNAUDITED FOURTH
QUARTER RESULTS, continued
QUARTERLY INCOME STATEMENT DATA BY
SEGMENT
(Dollars in thousands)
2016
QuarterEndedFebruary
27
QuarterEndedMay
28
QuarterEndedAugust
27
QuarterEndedDecember
3
TwelveMonths
Net sales by segment: Engine/Mobile Filtration $ 134,554 $
154,019 $ 144,710 $ 152,746 $ 586,029 Industrial/Environmental
Filtration 181,718 210,949 186,677 224,201
803,544 $ 316,272 $ 364,968 $ 331,387
$ 376,947 $ 1,389,573
Operating
profit by segment: Engine/Mobile Filtration $ 19,067 $ 29,501 $
29,337 $ 25,151 $ 103,056 Industrial/Environmental Filtration
12,892 24,283 21,361 19,295 77,832
$ 31,959 $ 53,784 $ 50,698 $ 44,446
$ 180,888
Operating margin by segment:
Engine/Mobile Filtration 14.2 % 19.2 % 20.3 % 16.5 % 17.6 %
Industrial/Environmental Filtration 7.1 % 11.5 % 11.4 % 8.6 % 9.7 %
10.1 % 14.7 % 15.3 % 11.8 % 13.0 %
2015
QuarterEndedFebruary
28
QuarterEndedMay
30
QuarterEndedAugust
29
QuarterEndedNovember
28
TwelveMonths
Net sales by segment: Engine/Mobile Filtration $ 144,458 $
161,290 $ 151,734 $ 147,992 $ 605,474 Industrial/Environmental
Filtration 190,916 218,676 200,496 224,555 834,643 Packaging 15,749
19,833 5,327 — 40,909 $ 351,123
$ 399,799 $ 357,557 $ 372,547 $
1,481,026
Operating profit by segment:
Engine/Mobile Filtration $ 24,746 $ 30,564 $ 27,728 $ 25,221 $
108,259 Industrial/Environmental Filtration 14,008 26,604 22,765
24,168 87,545 Packaging 439 1,775 (71 ) —
2,143 $ 39,193 $ 58,943 $ 50,422 $
49,389 $ 197,947
Operating margin by
segment: Engine/Mobile Filtration 17.1 % 18.9 % 18.3 % 17.0 %
17.9 % Industrial/Environmental Filtration 7.3 % 12.2 % 11.4 % 10.8
% 10.5 % Packaging 2.8 % 8.9 % (1.3 )% — % 5.2 % 11.2 % 14.7 % 14.1
% 13.3 % 13.4 %
CLARCOR INC. 2016 UNAUDITED FOURTH QUARTER RESULTS,
continued
Reconciliation of Full Year 2015 GAAP Financial Results to
Non-GAAP Adjusted Results
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP cost of sales, non-GAAP gross
profit, non-GAAP selling and administrative expenses, non-GAAP
operating profit, non-GAAP earnings before income taxes, non-GAAP
provision for income taxes, non-GAAP net earnings, non-GAAP net
earnings attributable to CLARCOR Inc., non-GAAP basic and diluted
earnings per share, non-GAAP gross margin percentage, non-GAAP
selling and administrative expenses as a percentage of net sales
and non-GAAP operating margin, for the quarter ended December 3,
2016. These non-GAAP financial measures are not in accordance with,
or an alternative for, generally accepted accounting principles in
the United States. The GAAP measures most directly comparable to
these non-GAAP measures are cost of sales, gross profit, selling
and administrative expenses, operating profit, earnings before
income taxes, provision for income taxes, net earnings, net
earnings attributable to CLARCOR Inc., basic and diluted earnings
per share, gross margin percentage, selling and administrative
expenses as a percentage of net sales and operating margin,
respectively.
The quarter ended December 3, 2016 non-GAAP financial measures
provided in this release exclude certain expenses associated with
the Parker-Hannifin transaction and upfront expenses for cost
reduction initiatives including, but not limited to, expenses
associated with the closure of a manufacturing facility in Houston,
Texas, and expenses associated with moving manufacturing operations
from a facility in the U.K. Although these financial measures
excluding these items in the quarter ended December 3, 2016 are not
measures of financial performance under GAAP, the Company believes
that providing these non-GAAP financial measures better enables
investors to understand and evaluate the Company's historical and
prospective operating performance. In addition, the Company
believes that removing the impact of these items provides a more
comparable measure of the changes in these financial measures for
the quarter ended December 3, 2016 compared to the quarter ended
November 28, 2015.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
(Dollars in
thousands, except per share data)
FourthQuarter
2016GAAP
ExpensesAssociatedwith
Parker-HannifinTransaction
UpfrontExpenses
forCostReductionInitiatives
FourthQuarter2016Non-GAAPAdjusted
Net sales $ 376,947 $
—
$ — $ 376,947 Cost of sales 252,211
—
(2,134 ) 250,077 Gross profit 124,736
—
2,134 126,870 Selling and administrative expenses 80,290
(7,420 ) (185 ) 72,685 Operating profit 44,446 7,420
2,319 54,185 Other income (expense): Interest
expense (1,794 )
—
— (1,794 ) Interest income 156
—
— 156 Other, net (317 )
—
— (317 ) (1,955 )
—
— (1,955 ) Earnings before income taxes 42,491 7,420
2,319 52,230 Provision for income taxes 13,447 1,597
812 15,856 Net earnings 29,044 5,823 1,507 36,374
Net earnings attributable to
noncontrolling interests, net of tax
(44 )
—
— (44 )
Net earnings attributable to CLARCOR
Inc.
$ 29,000 $ 5,823 $ 1,507 $ 36,330 Net
earnings per share attributable to CLARCOR Inc. - Basic $ 0.60
$ 0.12 $ 0.03 $ 0.75 Net earnings per
share attributable to CLARCOR Inc. - Diluted $ 0.59 $ 0.12
$ 0.03 $ 0.74 Gross margin percentage 33.1 %
0.0 % 0.6 % 33.7 % Selling and administrative expenses as a
percentage of net sales 21.3 % (2.0 )% 0.0 % 19.3 % Operating
margin 11.8 % 2.0 % 0.6 % 14.4 %
CLARCOR INC. 2016 UNAUDITED FOURTH QUARTER RESULTS,
continued
Reconciliation of Fourth Quarter 2015 GAAP Financial Results
to Non-GAAP Adjusted Results
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP cost of sales, non-GAAP gross
profit, non-GAAP selling and administrative expenses, non-GAAP
operating profit, non-GAAP earnings before income taxes, non-GAAP
provision for income taxes, non-GAAP net earnings, non-GAAP net
earnings attributable to CLARCOR Inc., non-GAAP basic and diluted
earnings per share, non-GAAP gross margin percentage, non-GAAP
selling and administrative expenses as a percentage of net sales
and non-GAAP operating margin, for the quarter ended November 28,
2015. These non-GAAP financial measures are not in accordance with,
or an alternative for, generally accepted accounting principles in
the United States. The GAAP measures most directly comparable to
these non-GAAP measures are cost of sales, gross profit, selling
and administrative expenses, operating profit, earnings before
income taxes, provision for income taxes, net earnings, net
earnings attributable to CLARCOR Inc., basic and diluted earnings
per share, gross margin percentage, selling and administrative
expenses as a percentage of net sales and operating margin,
respectively.
The quarter ended November 28, 2015 non-GAAP financial measures
provided in this release exclude upfront expenses for cost
reduction initiatives related to employee severance and other
employee termination benefits incurred in the fourth quarter 2015
in connection with a reduction-in-force. Although these financial
measures excluding these items are not measures of financial
performance under GAAP, the Company believes that providing these
non-GAAP financial measures better enables investors to understand
and evaluate the Company's historical and prospective operating
performance. In addition, the Company believes that removing the
impact of the financial results of these items provides a more
comparable measure of the changes in these financial measures for
the quarter ended November 28, 2015 compared to the quarter ended
December 3, 2016.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
(Dollars in thousands,
except per share data)
Fourth Quarter2015 GAAP
UpfrontExpenses forCost
ReductionInitiatives
Fourth quarter2015
Non-GAAPAdjusted
Net sales $ 372,547 $ — $ 372,547 Cost of sales 250,258
(1,048 ) 249,210 Gross profit 122,289 1,048 123,337
Selling and administrative expenses 72,900 (4,582 ) 68,318
Operating profit 49,389 5,630 55,019
Other income (expense): Interest expense (1,664 ) — (1,664 )
Interest income 104 — 104 Other, net 93 — 93
(1,467 ) — (1,467 ) Earnings (loss) before income taxes
47,922 5,630 53,552 Provision for income taxes 14,828 1,970
16,798 Net earnings (loss) 33,094 3,660 36,754
Net earnings attributable to
noncontrolling interests, net of tax
(41 ) — (41 )
Net earnings attributable to CLARCOR
Inc.
$ 33,053 $ 3,660 $ 36,713 Net earnings per
share attributable to CLARCOR Inc. - Basic $ 0.67 $ 0.07
$ 0.74 Net earnings per share attributable to CLARCOR
Inc. - Diluted $ 0.67 $ 0.07 $ 0.74 Gross
margin percentage 32.8 % 0.3 % 33.1 % Selling and administrative
expenses as a percentage of net sales 19.6 % (1.2 )% 18.3 %
Operating margin 13.3 % 1.5 % 14.8 %
CLARCOR INC. 2016 UNAUDITED FOURTH QUARTER RESULTS,
continued
Reconciliation of Full Year 2016 GAAP Financial Results to
Non-GAAP Adjusted Results
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP cost of sales, non-GAAP gross
profit, non-GAAP selling and administrative expenses, non-GAAP
operating profit, non-GAAP other, net, non-GAAP other income
(expense), non-GAAP earnings before income taxes, non-GAAP
provision for income taxes, non-GAAP net earnings, non-GAAP net
earnings attributable to CLARCOR Inc., non-GAAP basic and diluted
earnings per share, non-GAAP gross margin percentage, non-GAAP
selling and administrative expenses as a percentage of net sales
and non-GAAP operating margin, for the fiscal year ended December
3, 2016. These non-GAAP financial measures are not in accordance
with, or an alternative for, generally accepted accounting
principles in the United States. The GAAP measures most directly
comparable to these non-GAAP measures are cost of sales, gross
profit, selling and administrative expenses, operating profit,
other, net, other income (expense), earnings before income taxes,
provision for income taxes, net earnings, net earnings attributable
to CLARCOR Inc., basic and diluted earnings per share, gross margin
percentage, selling and administrative expenses as a percentage of
net sales and operating margin, respectively.
The fiscal year ended December 3, 2016 non-GAAP financial
measures provided in this release exclude the patent litigation
award received from 3M Company during the second quarter of fiscal
2016, certain expenses associated with the Parker-Hannifin
transaction incurred during the fourth quarter of fiscal 2016, and
upfront expenses for cost reduction initiatives incurred during
fiscal 2016, including expenses associated with the closure of a
manufacturing facility in Houston, Texas, costs associated with
moving manufacturing operations from a facility in the U.K., lease
termination payments related to our exit of a natural gas
filtration vessel manufacturing facility in Australia, costs
associated with the exit of an HVAC filtration facility in the
U.S., and severance and other employee termination benefit costs
pursuant to reductions-in-force. Although these financial measures
excluding these items are not measures of financial performance
under GAAP, the Company believes that providing these non-GAAP
financial measures better enables investors to understand and
evaluate the Company's historical and prospective operating
performance. In addition, the Company believes that removing the
impact of these items provides a more comparable measure of the
changes in these financial measures for the fiscal year ended
December 3, 2016 compared to the fiscal year ended November 28,
2015.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
(Dollars in thousands, except per share
data)
Full Year2016GAAP
PatentLitigationAward
ExpensesAssociatedwithParker-HannifinTransaction
UpfrontExpenses
forCostReductionInitiatives
Full
Year2016Non-GAAPAdjusted
Net sales $ 1,389,573 $ — $ — $ — $ 1,389,573 Cost of sales
927,674 —
—
(4,315 ) 923,359 Gross profit 461,899 —
—
4,315 466,214 Selling and administrative expenses 281,011 —
(7,420 ) (41 ) 273,550 Operating profit 180,888
— 7,420 4,356 192,664 Other
income (expense): Interest expense (7,538 ) — — — (7,538 ) Interest
income 551 — — — 551 Other, net 27,705 (27,250 ) — —
455 20,718 (27,250 ) — — (6,532
) Earnings before income taxes 201,606 (27,250 ) 7,420 4,356
186,132 Provision for income taxes 62,216 (9,102 ) 1,597
1,525 56,236 Net earnings 139,390 (18,148 )
5,823 2,831 129,896
Net earnings attributable to
noncontrolling interests, net of tax
(124 ) — — — (124 )
Net earnings attributable to CLARCOR
Inc.
$ 139,266 $ (18,148 ) $ 5,823 $ 2,831 $
129,772 Net earnings per share attributable to CLARCOR Inc.
- Basic $ 2.86 $ (0.37 ) $ 0.12 $ 0.06 $ 2.67
Net earnings per share attributable to CLARCOR Inc. -
Diluted $ 2.84 $ (0.37 ) $ 0.12 $ 0.06 $ 2.65
Gross margin percentage 33.2 % 0.0 % 0.0 % 0.4 % 33.6 %
Selling and administrative expenses as a percentage of net sales
20.2 % 0.0 % 0.5 % 0.0 % 19.7 % Operating margin 13.0 % 0.0 % 0.5 %
0.4 % 13.9 %
CLARCOR INC. 2016 UNAUDITED FOURTH QUARTER RESULTS,
continued
Reconciliation of Full Year 2015 GAAP Financial Results to
Non-GAAP Adjusted Results
In addition to the GAAP results, this earnings release presents
information with respect to non-GAAP net sales, non-GAAP cost of
sales, non-GAAP gross profit, non-GAAP selling and administrative
expenses, non-GAAP operating profit, non-GAAP other, net, non-GAAP
other income (expense), non-GAAP earnings before income taxes,
non-GAAP provision for income taxes, non-GAAP net earnings,
non-GAAP net earnings attributable to CLARCOR Inc., non-GAAP basic
and diluted earnings per share, non-GAAP gross margin percentage,
non-GAAP selling and administrative expenses as a percentage of net
sales and non-GAAP operating margin, for the fiscal year ended
November 28, 2015. These non-GAAP financial measures are not in
accordance with, or an alternative for, generally accepted
accounting principles in the United States. The GAAP measures most
directly comparable to these non-GAAP measures are net sales, cost
of sales, gross profit, selling and administrative expenses,
operating profit, other, net, other income (expense), earnings
before income taxes, provision for income taxes, net earnings, net
earnings attributable to CLARCOR Inc., basic and diluted earnings
per share, gross margin percentage, selling and administrative
expenses as a percentage of net sales and operating margin,
respectively.
The fiscal year ended November 28, 2015 non-GAAP financial
measures provided in this release exclude the financial results of
our J.L. Clark packaging business disposed of during the third
quarter of 2015, a net gain on the sale of such packaging business
recognized in the third quarter of 2015, and an impairment loss
related to our BioProcess H2O and Algae investments recognized in
the third quarter of 2015. Although these financial measures
excluding these items are not measures of financial performance
under GAAP, the Company believes that providing these non-GAAP
financial measures better enables investors to understand and
evaluate the Company's historical and prospective operating
performance. In addition, the Company believes that removing the
impact of these items provides a more comparable measure of the
changes in these financial measures for the fiscal year ended
November 28, 2015 compared to the fiscal year ended December 3,
2016.
These non-GAAP financial measures may have limitations as
analytical tools, and management does not intend these measures to
be considered in isolation or as a substitute for the related GAAP
measures. Following are reconciliations to the most comparable GAAP
financial measures of these non-GAAP financial measures.
(Dollars in thousands, except per share data)
Full Year2015GAAP
J.L. ClarkResults andGain
onDisposition
BioProcessInvestmentImpairment
UpfrontExpensesfor
CostReductionInitiatives
Full Year2015
Non-GAAPAdjusted
Net sales $ 1,481,026 $ (40,909 ) 1 $ — $ — $ 1,440,117 Cost
of sales 992,397 (33,954 ) 1 — (1,048 ) 957,395
Gross profit 488,629 (6,955 ) — 1,048 482,722 Selling and
administrative expenses 290,682 (4,812 ) 1 — (4,582 )
281,288 Operating profit 197,947 (2,143 ) —
5,630 201,434 Other income (expense): Interest
expense (5,629 ) — — — (5,629 ) Interest income 443 — — — 443
Other, net 5,204 (12,131 ) 2 6,729 — (198 ) 18
(12,131 ) 6,729 — (5,384 ) Earnings before
income taxes 197,965 (14,274 ) 6,729 5,630 196,050 Provision for
income taxes 63,052 (5,136 ) 2,355 1,970
62,241 Net earnings 134,913 (9,138 ) 4,374 3,660 133,809
Net earnings attributable to
noncontrolling interests, net of tax
(209 ) — — — (209 )
Net earnings attributable to CLARCOR
Inc.
$ 134,704 $ (9,138 ) $ 4,374 $ 3,660 $ 133,600
Net earnings per share attributable to CLARCOR Inc. - Basic
$ 2.70 $ (0.18 ) $ 0.09 $ 0.07 $ 2.68
Net earnings per share attributable to CLARCOR Inc. - Diluted $
2.67 $ (0.18 ) $ 0.09 $ 0.07 $ 2.65
Gross margin percentage 33.0 % 0.4 % 0.0 % 0.1 % 33.5 % Selling and
administrative expenses as a percentage of net sales 19.6 % 0.2 %
0.0 % (0.3 )% 19.5 % Operating margin 13.4 % 0.2 % 0.0 % 0.4 % 14.0
%
1 -
2015 financial results for J.L. Clark
through disposition date of June 27, 2015 (approximately seven
months of operations during fiscal 2015)
2 -
Net gain on third quarter 2015 disposition
of J.L. Clark
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CLARCOR Inc.David J. Fallon, 615-771-3100Chief Financial
Officer
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