FRANKLIN , Tenn. — CLARCOR, manufacturer of Hastings, Baldwin and Clark filters, has reported that its third quarter 2008 net sales increased by 16 percent and operating profit increased by 18 percent, compared to the same quarter in 2007. Earnings before income taxes were 14 percent higher than in the third quarter of 2007. Operating margins improved to 14.8 percent for the 2008 third quarter compared to 14.5 percent in last year’s third quarter.
In the third quarter of 2008, CLARCOR incurred a charge of approximately $1 million related to the closing of an HVAC filter manufacturing plant in North Carolina . In the third quarter of 2007, CLARCOR recorded an after-tax benefit of $4 million, or 8 cents per diluted share, related to the completion of various income tax audits and the finalization of certain income tax liabilities.
Norm Johnson, CLARCOR’s chairman and chief executive officer, said, “We are very pleased with our third quarter 2008 results. Each of our filtration segments reported higher sales and higher operating profit than in the third quarter of last year. Our gross margin of 31.9 percent and our operating margin of 14.8 percent for the quarter were the highest yet for 2008 and also exceeded last year’s third quarter gross and operating margins.
“We have been able to raise our prices to offset rising commodity prices for various types and grades of steel, filter media, packaging materials, aluminum, specialty metals, gaskets and resins. We are optimistic that we will be able to continue to offset future cost increases. We are fortunate to have a very strong balance sheet, strong and consistent cash flows, and to operate in the filtration aftermarket where the effect of inflationary and economic cycles is usually muted.
“Internationally, sales in local currencies were stronger than in the prior year’s third quarter with most of our operations outside the United States reporting double-digit growth over the 2007 third quarter. International sales grew 38 percent in U.S. dollars during the quarter and were 32 percent of consolidated sales for the quarter. Currency fluctuations increased 2008 third quarter sales by $4 million and operating profit by $800 thousand.
“CLARCOR’s financial position is solid and our cash flow continues to be strong,” said Johnson. “Cash flow from operations, excluding changes in our short-term investments, increased to $78 million in the 2008 nine-month period from $76 million last year. We did not repurchase any of our common stock in the third quarter. However, we did pay down $20 million of borrowing under our line of credit. We expect free cash flow to remain strong for the remainder of 2008 and into 2009.
“Even with a strong third quarter, we are not expecting a pickup in the U.S. economy for the rest of 2008. Although our Asian business continues to be strong, Europe appears to be slowing from a good first half of 2008. Based on our nine-month results and current order backlog, we expect our 2008 sales to grow by approximately 17 percent from 2007. In light of a slow U.S. economy, we have revised our previous earnings per share forecast and now expect diluted earnings per share for 2008 to be $1.88 to $1.93. Even at the lower end of this range, CLARCOR will post our 16th consecutive year of increased sales and earnings.
“Looking forward to 2009, despite some softness in certain sectors of the U.S. and world economies, we are confident that our growth will continue. Although we are not providing an earnings estimate for fiscal 2009 at this time, our initial review of our operating company budgets indicate sales growth in the mid to upper single digits and operating profit growth in the low double-digit range. This would make 2009 our 17th consecutive year of growth in sales and earnings.”
Johnson added that the company is currently evaluating several small acquisitions in the United States and abroad.
For more information about Clarcor, go to: www.clarcor.com.
