CLARCOR Reports Record Third Quarter 2005 Results; Net Earnings up 31%; Earnings Per Share up 29%

Business Wire, Sept 14, 2005

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

Unaudited Fiscal Third Quarter and Nine Months 2005 Highlights
(Amounts in thousands, except per share data and percentages)
----------------------------------------------------------------------
                   Quarter Ended       %     Nine Months Ended    %
                 8/27/05   8/28/04   Change  8/27/05   8/28/04  Change
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Net Sales        $216,403  $206,209    4.9   $632,450  $580,193   9.0
Operating
 Profit           $31,052   $25,500   21.8    $79,685   $67,106  18.7
Net Earnings      $20,855   $15,875   31.4    $51,355   $42,450  21.0
Diluted
 Earnings Per
 Share              $0.40     $0.31   29.0      $0.98     $0.82  19.5
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Third Quarter and Nine Months 2005 Operating Review

CLARCOR Inc. (NYSE: CLC) reported today that third quarter 2005 sales increased by 5%, and net earnings and diluted earnings per share increased by 31% and 29%, respectively, compared to the same quarter in 2004. Third quarter operating profit increased by 22%, and operating margins improved to 14.3% in 2005 from 12.4% in 2004.

For the nine-month 2005 period, sales increased by 9%, and net earnings and diluted earnings per share rose by 21% and 20%, respectively, compared to 2004. Nine-month operating profit increased by 19%, and operating margins improved to 12.6% in 2005 from 11.6% in 2004.

Third quarter 2005 and 2004 results were impacted by two items:

--In the third quarter 2005, CLARCOR recorded a $1.2 million or $0.02 per share benefit arising from a settlement with the Internal Revenue Service of a tax issue involving a deduction for costs incurred at a subsidiary.

--In the third quarter 2004, CLARCOR incurred $1.5 million or $0.02 per share after-tax, in headquarters relocation costs. There were no costs incurred in the third quarter 2005.

Excluding the tax benefit and relocation costs from third quarter 2005 and 2004 results, third quarter 2005 operating profit increased by 15%, net earnings by 17% and diluted earnings per share by 15%. Operating margins improved to 14.3% from 13.1%.

Norm Johnson, CLARCOR's Chairman and Chief Executive Officer, said, "We had an excellent third quarter driven by continuing growth and increasing profitability in our Engine/Mobile segment and the steady improvement in our Packaging business. Several of the businesses in our Industrial/Environmental segment did not meet our expectations and we have made significant changes to address these issues.

"Our Engine/Mobile Filtration segment sales grew by over 8% this quarter with increases in most product categories, particularly heavy-duty and locomotive filtration, and also included increases in both aftermarket and OEM sales. Our international engine businesses also grew strongly led by over a 50% sales increase in China. Operating margins improved to 22.6% in the third quarter 2005 from 20.2% in last year's third quarter. The improved margins stem largely from increased operating efficiencies as sales grew, improvement in our operations in the U.K. and price increases in the quarter to offset raw material cost increases incurred earlier this year.

"Our Industrial/Environmental Filtration segment sales this quarter increased by 2% from third quarter sales last year. The acquisition of Purolator EFP, acquired in September 2004, added approximately $7 million in sales to our third quarter 2005 results. Sales of HVAC filter products, primarily for industrial and commercial markets, declined in the third quarter of 2005 compared to 2004. The movement of manufacturing off-shore has resulted in the closure of manufacturing plants in North America which historically has been a solid market for us. Retail sales of our HVAC filters and sales of environmental and liquid filtration equipment and dust collection cartridges grew strongly during the quarter compared to last year. We continued to see strong potential in our waste water equipment products and sales continue to be solid. Sales declined for certain oil drilling, aerospace and specialty filter products, but we believe this is largely due to the timing of orders. We expect to see a rebound in sales for these products later this year and in 2006.

"Operating margins in our Industrial/Environmental segment were comparable to last year's third quarter at slightly over 8%, but we will not meet our goal of a 1% point improvement for 2005. Improving margins by 1% point per year to at least a 10% operating margin remains our objective and in certain liquid process markets we already exceed a 10% operating margin. While operating margins in our HVAC manufacturing businesses are still below 10%, they are improving. We combined the administrative functions of our HVAC businesses last year and, due to a systems conversion project, shipments during the quarter were slower than usual. Based on current order rates, we expect sales to improve in the 4th quarter. We also incurred integration costs, both this year and last year, in combining our HVAC branch network with our HVAC distribution business, but we believe these are now largely behind us.