##### 



SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 
 FORM 10-Q
 QUARTERLY REPORT
 
 Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934




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##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURTIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 1, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-11024
 CLARCOR Inc.
 (Exact name of registrant as specified in its charter)
 DELAWARE
    
    36-0922490(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 840 Crescent Centre Drive, Suite 600, Franklin, Tennessee 37067
 615-771-3100
 (Former name, former address and former fiscal year, if changed since last report.)
 þ o
  þ o o
 o þ




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##### 



Part I  Item 1
 
 September 1,
    
    
    December 2,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,747
    
    
    $
    29,051Restricted cash
    
    
    268
    
    
    
    1,619Short-term investments
    
    
    8,750
    
    
    
    32,195Accounts receivable, less allowance for losses
of $13,709 for 2007 and $12,548 for 2006
    
    
    163,746
    
    
    
    158,157Inventories:Raw materials
    
    
    52,339
    
    
    
    45,986Work in process
    
    
    20,160
    
    
    
    19,987Finished products
    
    
    69,229
    
    
    
    63,700Total inventories
    
    
    141,728
    
    
    
    129,673Prepaid expenses and other current assets
    
    
    7,720
    
    
    
    8,306Deferred income taxes
    
    
    21,325
    
    
    
    21,339Total current assets
    
    
    375,284
    
    
    
    380,340Plant assets at cost,
    
    
    393,571
    
    
    
    360,477less accumulated depreciation
    
    
    (225,491
    )
    
    
    (213,948
    )168,080
    
    
    
    146,529Goodwill
    
    
    118,228
    
    
    
    116,032Acquired intangibles, less accumulated amortization
    
    
    53,980
    
    
    
    53,001Pension assets
    
    
    20,718
    
    
    
    19,851Deferred income taxes
    
    
    829
    
    
    
    829Other noncurrent assets
    
    
    11,759
    
    
    
    10,934Total assets
    
    $
    748,878
    
    
    $
    727,516LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    $
    89
    
    
    $
    58Accounts payable
    
    
    52,764
    
    
    
    50,273Accrued salaries, wages and commissions
    
    
    11,638
    
    
    
    14,147Compensated absences
    
    
    7,636
    
    
    
    7,333Accrued insurance liabilities
    
    
    13,680
    
    
    
    11,799Other accrued liabilities
    
    
    25,109
    
    
    
    23,577Income taxes
    
    
    5,976
    
    
    
    11,241Total current liabilities
    
    
    116,892
    
    
    
    118,428Long-term debt, less current portion
    
    
    17,236
    
    
    
    15,946Postretirement health care benefits
    
    
    3,822
    
    
    
    4,466Long-term pension liabilities
    
    
    20,167
    
    
    
    17,476Deferred income taxes
    
    
    26,488
    
    
    
    27,159Other long-term liabilities
    
    
    5,729
    
    
    
    4,876Minority interests
    
    
    4,193
    
    
    
    1,656Total liabilities
    
    
    194,527
    
    
    
    190,007ContingenciesSHAREHOLDERS EQUITYCapital stock
    
    
    49,887
    
    
    
    51,082Capital in excess of par value
    
    
    3,809
    
    
    
    3,400Accumulated other comprehensive earnings
    
    
    3,768
    
    
    
    103Retained earnings
    
    
    496,887
    
    
    
    482,924Total shareholders equity
    
    
    554,351
    
    
    
    537,509Total liabilities and shareholders equity
    
    $
    748,878
    
    
    $
    727,516




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##### 



Quarter Ended
    
    
    Nine Months EndedSeptember 1,
    
    
    September 2,
    
    
    September 1,
    
    
    September 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales
    
    $
    238,270
    
    
    $
    231,510
    
    
    $
    682,925
    
    
    $
    671,769Cost of sales
    
    
    165,412
    
    
    
    159,689
    
    
    
    478,318
    
    
    
    469,057Gross profit
    
    
    72,858
    
    
    
    71,821
    
    
    
    204,607
    
    
    
    202,712Selling and administrative expenses
    
    
    38,236
    
    
    
    36,742
    
    
    
    114,904
    
    
    
    115,539Operating profit
    
    
    34,622
    
    
    
    35,079
    
    
    
    89,703
    
    
    
    87,173Other income (expense):Interest expense
    
    
    (281
    )
    
    
    (174
    )
    
    
    (776
    )
    
    
    (564
    )Interest income
    
    
    264
    
    
    
    468
    
    
    
    1,233
    
    
    
    1,194Other, net
    
    
    70
    
    
    
    (198
    )
    
    
    (176
    )
    
    
    (510
    )53
    
    
    
    96
    
    
    
    281
    
    
    
    120Earnings before income taxes and
minority interests
    
    
    34,675
    
    
    
    35,175
    
    
    
    89,984
    
    
    
    87,293Provision for income taxes
    
    
    7,999
    
    
    
    12,087
    
    
    
    25,878
    
    
    
    30,939Earnings before minority interests
    
    
    26,676
    
    
    
    23,088
    
    
    
    64,106
    
    
    
    56,354Minority interests in earnings of subsidiaries
    
    
    (61
    )
    
    
    (125
    )
    
    
    (189
    )
    
    
    (385
    )Net earnings
    
    $
    26,615
    
    
    $
    22,963
    
    
    $
    63,917
    
    
    $
    55,969Net earnings per common share:Basic
    
    $
    $0.53
    
    
    $
    0.45
    
    
    $
    $1.26
    
    
    $
    1.08Diluted
    
    $
    $0.53
    
    
    $
    0.44
    
    
    $
    $1.25
    
    
    $
    1.07Average number of common shares outstanding:Basic
    
    
    49,961,327
    
    
    
    51,414,083
    
    
    
    50,555,380
    
    
    
    51,691,685Diluted
    
    
    50,560,937
    
    
    
    51,981,546
    
    
    
    51,001,420
    
    
    
    52,390,283Dividends paid per share
    
    $
    0.0725
    
    
    $
    0.0675
    
    
    $
    0.2175
    
    
    $
    0.2025




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##### 



Nine Months EndedSeptember 1,
    
    
    September 2,2007
    
    
    2006Cash flows from operating activities:Net earnings
    
    $
    63,917
    
    
    $
    55,969Depreciation
    
    
    16,448
    
    
    
    16,036Amortization
    
    
    1,999
    
    
    
    1,636Stock-based compensation expense
    
    
    3,217
    
    
    
    2,194Excess tax benefits from stock-based compensation
    
    
    (2,622
    )
    
    
    (3,312
    )Changes in short-term investments
    
    
    23,445
    
    
    
    (9,100
    )Changes in assets and liabilities, excluding short-term
investments
    
    
    (8,357
    )
    
    
    (12,033
    )Other, net
    
    
    933
    
    
    
    629Net cash provided by operating activities
    
    
    98,980
    
    
    
    52,019Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (12,378
    )
    
    
    (4,627
    )Additions to plant assets
    
    
    (29,336
    )
    
    
    (11,416
    )Proceeds from insurance claim
    
    
    
    
    
    
    790Other, net
    
    
    1,657
    
    
    
    340Net cash used in investing activities
    
    
    (40,057
    )
    
    
    (14,913
    )Cash flows from financing activities:Payments on long-term debt
    
    
    (4,638
    )
    
    
    (555
    )Sale of capital stock under stock option and employee
purchase plans
    
    
    4,966
    
    
    
    5,362Excess tax benefits from stock-based compensation
    
    
    2,622
    
    
    
    3,312Purchase of treasury stock
    
    
    (49,334
    )
    
    
    (28,909
    )Cash dividends paid
    
    
    (11,017
    )
    
    
    (10,490
    )Net cash used in financing activities
    
    
    (57,401
    )
    
    
    (31,280
    )Net effect of exchange rate changes on cash
    
    
    1,174
    
    
    
    698Net change in cash and cash equivalents
    
    
    2,696
    
    
    
    6,524Cash and cash equivalents, beginning of period
    
    
    29,051
    
    
    
    18,502Cash and cash equivalents, end of period
    
    $
    31,747
    
    
    $
    25,026Cash paid during the period for:Interest
    
    $
    613
    
    
    $
    565Income taxes
    
    $
    28,607
    
    
    $
    30,043




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##### 



1.
    
    CONSOLIDATED FINANCIAL STATEMENTSThe consolidated condensed balance sheet as of September 1, 2007, the consolidated condensed
statements of earnings and the consolidated condensed statements of cash flows for the periods
ended September 1, 2007, and September 2, 2006, have been prepared by the Company without audit.
The financial statements have been prepared on the same basis as those in the Companys Annual
Report on Form 10-K for the fiscal year ended December 2, 2006 (2006 Form 10-K). The December
2, 2006 consolidated balance sheet data was derived from the Companys year-end audited
financial statements as presented in the 2006 Form 10-K but does not include all disclosures
required by accounting principles generally accepted in the United States of America. In the
opinion of management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and cash flows have
been made. The results of operations for the period ended September 1, 2007, are not
necessarily indicative of the operating results for the full year.2.
    
    STOCK-BASED COMPENSATIONThe Company applies the provisions of Statement of Financial Accounting Standards (SFAS) No.
123R, Share-Based Payment (SFAS 123R), which establishes the accounting for stock-based
awards. Under this method, stock-based employee compensation cost is recognized using the
fair-value based method for all awards granted on or after the date of adoption. The Company
issues stock option awards, restricted share unit awards and restricted stock to non-employee
directors under its stock-based incentive plans. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option pricing model. Compensation cost
related to restricted share units is recorded based on the market price of the Companys common
stock on the grant date. The key provisions of the Companys stock-based incentive plans are
described in Note P of the Companys consolidated financial statements included in the 2006 Form
10-K.The Company recorded pretax compensation expense related to stock options of $892 and $2,402 and
related tax benefits of $296 and $798 for the quarter and nine months ended September 1, 2007,
respectively. For the quarter and nine months ended September 2, 2006, the Company recorded
pretax compensation expense related to stock options of $611 and $1,628, respectively, and
related tax benefits of $217 and $578, respectively. The Company also recorded $272 and $815 in
pretax compensation expense related to its restricted share units for the quarter and nine
months ended September 1, 2007, respectively, and $161 and $566 for the quarter and nine months
ended September 2, 2006, respectively. The tax benefits associated with tax deductions that
exceed the amount of compensation expense recognized in the financial statements related to
stock-based compensation were $575 and $2,622 for the quarter and nine months ended September 1,
2007, respectively, and $320 and $3,312 for the quarter and nine months ended September 2, 2006,
respectively.
 Page 5




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##### 



2.
    
    STOCK-BASED COMPENSATION (Continued)Stock OptionsThe following table summarizes the activity for the nine months ended September 1, 2007, with
respect to non-qualified stock options granted under the Companys incentive plans.
 Shares Granted
    
    Weightedunder Incentive
    
    AveragePlans
    
    Exercise PriceOutstanding at beginning of year
    
    
    3,253,059
    
    
    $
    21.56Granted
    
    
    453,525
    
    
    
    33.60Exercised
    
    
    (458,359
    )
    
    
    17.83Surrendered
    
    
    (10,200
    )
    
    
    24.02Outstanding at September 1, 2007
    
    
    3,238,025
    
    
    $
    23.77Options exercisable at September 1, 2007
    
    
    2,738,175
    
    
    $
    22.35
 The total intrinsic value of options exercised during the nine months ended September 1, 2007,
and September 2, 2006, was $7,741 and $9,923, respectively. The weighted average fair value per
option at the date of grant for options granted during the nine months ended September 1, 2007,
and September 2, 2006, was $9.36 and $10.53, respectively.The following table summarizes information about the Companys outstanding and exercisable
options at September 1, 2007.
 Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    Average
    
    
    
    
    
    Weighted
    
    AverageAverage
    
    Remaining
    
    
    
    
    
    Average
    
    RemainingRange of Exercise
    
    
    
    
    
    Exercise
    
    Life in
    
    
    
    
    
    Exercise
    
    Life inPrices
    
    Number
    
    Price
    
    Years
    
    Number
    
    Price
    
    Years$8.97 - $9.79
    
    
    244,088
    
    
    $
    9.15
    
    
    
    2.33
    
    
    
    244,088
    
    
    $
    9.15
    
    
    
    2.33$10.53 - $13.75
    
    
    222,900
    
    
    
    13.22
    
    
    
    4.04
    
    
    
    222,900
    
    
    
    13.22
    
    
    
    4.04$16.01 - $22.80
    
    
    1,118,089
    
    
    
    20.57
    
    
    
    5.00
    
    
    
    1,017,689
    
    
    
    20.35
    
    
    
    4.87$25.89 - $38.72
    
    
    1,652,948
    
    
    
    29.51
    
    
    
    7.54
    
    
    
    1,253,498
    
    
    
    28.17
    
    
    
    6.973,238,025
    
    
    $
    23.77
    
    
    
    6.03
    
    
    
    2,738,175
    
    
    $
    22.35
    
    
    
    5.54
 At September 1, 2007, the aggregate intrinsic value of options outstanding and exercisable was
$48,412 and $44,814, respectively.Restricted Share Unit AwardsDuring the nine months ended September 1, 2007, the Company granted 26,200 restricted units of
Company common stock with a fair value of $33.75 per unit. No restricted share units were
granted during the nine months ended September 2, 2006. Compensation expense related to
 Page 6




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##### 



2.
    
    STOCK-BASED COMPENSATION (Continued)restricted stock awards totaled $272 and $815 for the quarter and nine months ended September 1,
2007, respectively, and $161 and $566 for the quarter and nine months ended September 2, 2006,
respectively.3.
    
    EARNINGS PER SHARE AND TREASURY STOCK TRANSACTIONSDiluted earnings per share reflects the impact of outstanding stock options and restricted share
units as if exercised during the periods presented using the treasury stock method. The
following table provides a reconciliation of the numerators and denominators utilized in the
calculation of basic and diluted earnings per share.
 Quarter Ended
    
    Nine Months EndedSeptember 1,
    
    September 2,
    
    September 1,
    
    September 2,2007
    
    2006
    
    2007
    
    2006Basic weighted average number of
common shares outstanding
    
    
    49,961,327
    
    
    
    51,414,083
    
    
    
    50,555,380
    
    
    
    51,691,685Dilutive effect of stock-based
arrangements
    
    
    599,610
    
    
    
    567,463
    
    
    
    446,040
    
    
    
    698,598Diluted weighted
average number of
common shares
outstanding
    
    
    50,560,937
    
    
    
    51,981,546
    
    
    
    51,001,420
    
    
    
    52,390,283Net earnings
    
    $
    26,615
    
    
    $
    22,963
    
    
    $
    63,917
    
    
    $
    55,969Basic earnings per share amount
    
    $
    0.53
    
    
    $
    0.45
    
    
    $
    1.26
    
    
    $
    1.08Diluted earnings per share amount
    
    $
    0.53
    
    
    $
    0.44
    
    
    $
    1.25
    
    
    $
    1.07
 Options with exercise prices greater than the average market price of the common shares
during the respective quarter and nine-month periods were not included in the computation of
diluted earnings per share. For the quarter and nine months ended September 1, 2007, 5,325 and
61,625 options with a weighted average exercise price of $38.23 and $35.80, respectively, were
excluded from the computation. For the quarter and nine months ended September 2, 2006, 57,550
options with a weighted average price of $35.53 were excluded from the computation.For the nine months ended September 1, 2007, exercises of stock options added $5,559 to capital
in excess of par value.During the quarter ended September 1, 2007, the Company did not repurchase any shares of common
stock. During the nine months ended September 1, 2007, the Company repurchased and retired
1,550,000 shares of common stock for $49,334. During the quarter and nine months ended
September 2, 2006, the Company purchased and retired 1,000,000 shares of common stock for
$28,909. On June 25, 2007, the Companys Board of Directors authorized a $250 million stock
repurchase program of the Companys common stock in the open market and through private
transactions over a three-year period. This authorization replaces the Companys previous $150
million share repurchase authorization that expired on June 16, 2007.
 Page 7




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##### 



4.
    
    COMPREHENSIVE EARNINGSThe Companys total comprehensive earnings and its components are as follows:
 Quarter Ended
    
    
    Nine Months EndedSeptember 1,
    
    
    September 2,
    
    
    September 1,
    
    
    September 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Net earnings
    
    $
    26,615
    
    
    $
    22,963
    
    
    $
    63,917
    
    
    $
    55,969Other comprehensive earnings, net of tax:Foreign currency translation adjustments
    
    
    2,833
    
    
    
    (61
    )
    
    
    3,665
    
    
    
    3,499Total comprehensive earnings
    
    $
    29,448
    
    
    $
    22,902
    
    
    $
    67,582
    
    
    $
    59,468
 The components of the ending balances of accumulated other comprehensive earnings are as
follows:
 September 1,
    
    
    December 2,2007
    
    
    2006Minimum pension liability, net of $2,243 tax
    
    $
    (3,778
    )
    
    $
    (3,778
    )Translation adjustments, net of $155 tax
    
    
    7,546
    
    
    
    3,881Accumulated other comprehensive earnings
    
    $
    3,768
    
    
    $
    103
 5.
    
    ACQUISITIONS AND PURCHASE OF MINORITY INTERESTOn March 5, 2007, the Company acquired an 80% ownership share in Sinfa SA, a manufacturer of
automotive and heavy-duty engine filters based in Casablanca, Morocco, for approximately $5,615
in cash, net of cash received, plus debt of approximately $5 million which the Company paid
after the acquisition date. The business is included in the Engine/Mobile Filtration segment
from the date of acquisition. As part of the purchase agreement, the Company and the minority
owners each have an option to require the purchase of the remaining 20% ownership share by the
Company after December 31, 2012. As of the end of the third quarter, the preliminary purchase price for
such 20% ownership share is estimated to be $2 million.A preliminary allocation of the initial purchase price for the acquisition has been made to
major categories of assets and liabilities. The $397 excess of the initial purchase price over
the preliminary estimated fair value of the net tangible and identifiable intangible assets
acquired was recorded as goodwill. Other acquired intangibles included customer relationships
preliminarily valued at $295 and trademarks preliminarily valued at $472, which will
both be amortized on a straight-line basis over fifteen years. The preliminary allocation will
be finalized once the appraisal has been completed and the purchase price and assumed
liabilities are finalized. The Company expects to finalize the purchase price allocation during
fiscal 2007. The acquisition is not material to the results of the Company.During February 2007, the Company acquired a synthetic fibers filtration business from Newton
Tool & Mfg. Company, Inc., a privately-owned engineering and machining company based in
Swedesboro, New Jersey, for $6,603 in cash, including acquisition expenses. The synthetic
fibers filtration business, including all of the related production equipment, was moved into
the Companys operations in Houston, Texas, and Shelby, North Carolina. The business is
included in the Industrial/Environmental Filtration segment from the date of acquisition.
 Page 8




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##### 



5.
    
    ACQUISITIONS AND PURCHASE OF MINORITY INTEREST (Continued)An allocation of the purchase price for the acquisition was made to major categories of assets
and liabilities. The $715 excess of the purchase price over the estimated fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill. Other acquired
intangibles included noncompete agreements valued at $100 and customer relationships valued at
$2,100, which are being amortized on a straight-line basis over three years and thirteen years,
respectively. The acquisition is not material to the results of the Company.In April 2006, the Company acquired two businesses for approximately $2,843 in cash, net of cash
received. One was a filter distributorship based in Minnesota which became a wholly-owned
subsidiary of the Company and was included in the Industrial/Environmental Filtration segment
beginning in the second quarter of 2006. In the other transaction, the Company acquired certain
assets of a manufacturer and distributor of heavy-duty engine air filters based in Oklahoma.
These assets were combined into an existing subsidiary of the Company within the Engine/Mobile
Filtration segment, and the results were included in the Companys consolidated results of
operations from the date of acquisition. An allocation of the final purchase prices for these
two acquisitions was made to major categories of assets and liabilities during fiscal 2006. The
$672 excess of the final purchase price over the estimated fair value of the net tangible and
identifiable intangible assets acquired was recorded as goodwill. Other acquired intangibles
included noncompete agreements valued at $91 and customer relationships valued at $1,195, which
are being amortized on a straight-line basis over three years and ten to twenty years,
respectively. Under the terms of the purchase agreement for the Industrial/Environmental
Filtration segment acquisition, the Company paid an additional $160 during the third quarter of
fiscal 2007. This payment was recorded as goodwill. The acquisitions were not material to the
results of the Company.On June 1, 2006, the Company purchased the minority owners interest in a consolidated
affiliate in South Africa for approximately $2,230 of which $1,644 was paid as of September 2,
2006. The remainder will be paid during fiscal 2008 based on fiscal 2006 results. In addition,
there may be a payment estimated not to exceed $100 to be paid in 2008 based on fiscal 2007
results. As a result of this transaction, the Company recorded $113 as goodwill. The purchase
was not material to the results of the Company.On November 1, 2005, the Company acquired Martin Kurz & Co., Inc. (MKI), a privately-owned
Mineola, New York, manufacturer of sintered porous metal laminates used in screening and
filtration products for a wide array of industries for approximately $24,621 net of cash
received, including acquisition expenses. During the first nine months of 2006, the Company
paid an additional $140 related to a working capital adjustment and final settlement with the
sellers. MKI is included in the Industrial/Environmental Filtration segment from the date of
acquisition. Allocation of the final purchase price to major categories of assets and
liabilities for MKI was finalized during fiscal 2006.
 Page 9




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##### 



6.
    
    RESTRUCTURING CHARGESAs announced in July 2006, the Company began a restructuring program focused on the heating,
ventilating and air conditioning (HVAC) filter manufacturing operations within its
Industrial/Environmental Filtration segment. The Company discontinued production at an HVAC
filter manufacturing plant in Kenly, North Carolina, in November 2006. Severance costs of $164
were accrued and paid during fiscal 2006 and included in cost of sales in the
Industrial/Environmental Filtration segment.Also during fiscal 2006, the Company merged two of its manufacturing facilities in order to
realize cost savings and efficiency benefits. At the end of August 2006, the Company
terminated manufacturing at one of its European facilities. During the nine months ended
September 2, 2006, the Company recorded a $416 severance charge for one-time termination
benefits paid to employees who were involuntarily terminated during 2006. This charge is
included in cost of sales in the Industrial/Environmental Filtration segment.7.
    
    GAIN ON INSURANCE SETTLEMENTIn April 2006, the Companys warehouse in Goodlettsville, Tennessee, was damaged by a tornado.
In accordance with Financial Accounting Standards Board (FASB) Interpretation No. 30,
Accounting for Involuntary Conversions of Non-Monetary Assets to Monetary Assets, the Company
recognized during fiscal 2006 a $591 gain in selling and administrative expenses on the excess
of insurance proceeds over the net book value of the property, net of $250 of expenses subject
to a deductible paid by the Company. As of September 2, 2006, $540 of this gain had been
recorded. The Company has collected all insurance proceeds, and the repairs to the building are
complete as of third quarter 2007.8.
    
    ACQUIRED INTANGIBLESThe following table reconciles the activity for goodwill by reporting unit for the nine months
ended September 1, 2007.
 Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at December 2, 2006
    
    $
    16,747
    
    
    $
    99,285
    
    
    $
    
    
    
    $
    116,032Acquisitions
    
    
    397
    
    
    
    875
    
    
    
    
    
    
    
    1,272Currency translation adjustments
    
    
    721
    
    
    
    203
    
    
    
    
    
    
    
    924Balance at September 1, 2007
    
    $
    17,865
    
    
    $
    100,363
    
    
    $
    
    
    
    $
    118,228
 Page 10




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##### 



8.
    
    ACQUIRED INTANGIBLES (Continued)The following table summarizes acquired intangibles by reporting unit. Other acquired
intangibles includes parts manufacturer regulatory approvals, proprietary technology, patents
and noncompete agreements.
 Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at September 1, 2007:Trademarks, gross
    
    $
    1,183
    
    
    $
    29,157
    
    
    $
    
    
    
    $
    30,340Less accumulated amortization
    
    
    119
    
    
    
    245
    
    
    
    
    
    
    
    364Trademarks, net
    
    $
    1,064
    
    
    $
    28,912
    
    
    $
    
    
    
    $
    29,976Customer relationships, gross
    
    $
    2,265
    
    
    $
    18,766
    
    
    $
    
    
    
    $
    21,031Less accumulated amortization
    
    
    522
    
    
    
    3,284
    
    
    
    
    
    
    
    3,806Customer relationships, net
    
    $
    1,743
    
    
    $
    15,482
    
    
    $
    
    
    
    $
    17,225Other acquired intangibles, gross
    
    $
    246
    
    
    $
    12,882
    
    
    $
    
    
    
    $
    13,128Less accumulated amortization
    
    
    227
    
    
    
    6,122
    
    
    
    
    
    
    
    6,349Other acquired intangibles, net
    
    $
    19
    
    
    $
    6,760
    
    
    $
    
    
    
    $
    6,779
 Amortization expense is estimated to be $2,517 in 2007, $2,192 in 2008, $2,172 in 2009,
$2,128 in 2010 and $2,068 in 2011.9.
    
    GUARANTEES AND WARRANTIESThe Company has provided letters of credit totaling approximately $25,702 to various government
agencies, primarily related to industrial revenue bonds, and to insurance companies and other
entities in support of its obligations. The Company believes that no payments will be required
resulting from these accommodation obligations.In the ordinary course of business, the Company also provides routine indemnifications and other
guarantees whose terms range in duration and are often not explicitly defined. The Company does
not believe these will have a material impact on the results of operations or financial
condition of the Company.Warranties are recorded as a liability on the balance sheet and as charges to current expense
for estimated normal warranty costs and, if applicable, for specific performance issues known to
exist on products already sold. The expenses estimated to be incurred are provided at the time
of sale and adjusted as needed, based primarily upon experience.
 Page 11




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##### 



9.
    
    GUARANTEES AND WARRANTIES (Continued)Changes in the Companys warranty accrual during the nine months ended September 1, 2007, are as
follows:
 Balance at December 2, 2006
    
    $
    1,486Accruals for warranties issued during the period
    
    
    892Accruals related to pre-existing warranties
    
    
    14Settlements made during the period
    
    
    (734
    )Other adjustments, including currency translation
    
    
    (98
    )Balance at September 1, 2007, included in other accrued liabilities
    
    $
    1,560
 10.
    
    RETIREMENT BENEFITSThe Company provides various retirement benefits, including defined benefit plans and
postretirement health care plans covering certain current and retired employees in the U.S. and
abroad. Components of net periodic benefit cost and company contributions for these plans were
as follows:
 Quarter Ended
    
    
    Nine Months EndedSeptember 1,
    
    
    September 2,
    
    
    September 1,
    
    
    September 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Pension Benefits:Components of net periodic benefit cost:Service cost
    
    $
    725
    
    
    $
    848
    
    
    $
    2,174
    
    
    $
    2,541Interest cost
    
    
    1,794
    
    
    
    1,689
    
    
    
    5,380
    
    
    
    5,057Expected return on plan assets
    
    
    (2,146
    )
    
    
    (1,964
    )
    
    
    (6,434
    )
    
    
    (5,874
    )Amortization of unrecognized:Prior service cost
    
    
    45
    
    
    
    42
    
    
    
    133
    
    
    
    129Net actuarial loss
    
    
    304
    
    
    
    502
    
    
    
    907
    
    
    
    1,505Net periodic benefit cost
    
    $
    722
    
    
    $
    1,117
    
    
    $
    2,160
    
    
    $
    3,358Cash contributions
    
    $
    77
    
    
    $
    127
    
    
    $
    258
    
    
    $
    376Postretirement Healthcare Benefits:Components of net periodic benefit cost:Service cost
    
    $
    1
    
    
    $
    4
    
    
    $
    1
    
    
    $
    15Interest cost
    
    
    18
    
    
    
    22
    
    
    
    54
    
    
    
    63Amortization of unrecognized:Prior service cost
    
    
    (31
    )
    
    
    (31
    )
    
    
    (93
    )
    
    
    (93
    )Net actuarial gain
    
    
    (32
    )
    
    
    (27
    )
    
    
    (96
    )
    
    
    (78
    )Net periodic benefit income
    
    $
    (44
    )
    
    $
    (32
    )
    
    $
    (134
    )
    
    $
    (93
    )Cash contributions
    
    $
    70
    
    
    $
    70
    
    
    $
    210
    
    
    $
    210
 The Companys policy is to contribute to the qualified U.S. and non-U.S. pension plans at
least the minimum amount required by applicable laws and regulations, to contribute to the
non-qualified plan when required for benefit payments and to contribute to the postretirement
benefit plan an amount equal to the benefit payments. There is no minimum required contribution
for the U.S. pension plans for 2007. The Company, from time to time, makes contributions in
excess of the minimum amount required as economic conditions warrant. The Company has
 Page 12




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##### 



10.
    
    RETIREMENT BENEFITS (Continued)not determined whether it will make a voluntary contribution to the U.S. qualified plan in 2007;
however, it does expect to fund $279 to the U.S. non-qualified plan, $534 to the non-U.S. plan
and $279 for the postretirement benefit plan to pay benefits during 2007.11.
    
    CONTINGENCIESThe Company is involved in legal actions arising in the normal course of business.
Additionally, the Company is party to various proceedings relating to environmental issues. The
U.S. Environmental Protection Agency (EPA) and/or other responsible state agencies have
designated the Company as a potentially responsible party (PRP), along with other companies, in
remedial activities for the cleanup of waste sites under the federal Superfund statute.Although it is not certain what future environmental claims, if any, may be asserted, the
Company currently believes that its potential liability for known environmental matters does not
exceed its present accrual of $50. However, environmental and related remediation costs are
difficult to quantify for a number of reasons, including the number of parties involved, the
difficulty in determining the extent of the contamination at issue, the difficulty in
determining the nature and extent of contamination, the length of time remediation may require,
the complexity of the environmental regulation and the continuing advancement of remediation
technology. Applicable federal law may impose joint and several liability on each PRP for the
cleanup.It is the opinion of management, after consultation with legal counsel, that additional
liabilities, if any, resulting from these legal or environmental issues, are not expected to
have a material adverse effect on the Companys financial condition or consolidated results of
operations.In the event of a change in control of the Company, termination benefits are likely to be
required for certain executive officers and other key employees.12.
    
    SEGMENT DATAThe Company operates in three principal product segments: Engine/Mobile Filtration,
Industrial/Environmental Filtration and Packaging. The segment data for the third quarter and
nine months ended September 1, 2007, and September 2, 2006, respectively, are shown below. Net
sales represent sales to unaffiliated customers as reported in the consolidated condensed
statements of earnings. Intersegment sales were not material.
 Quarter Ended
    
    
    Nine Months EndedSeptember 1,
    
    
    September 2,
    
    
    September 1,
    
    
    September 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Net sales:Engine/Mobile Filtration
    
    $
    112,280
    
    
    $
    103,358
    
    
    $
    317,480
    
    
    $
    295,819Industrial/Environmental Filtration
    
    
    104,980
    
    
    
    106,263
    
    
    
    307,404
    
    
    
    312,785Packaging
    
    
    21,010
    
    
    
    21,889
    
    
    
    58,041
    
    
    
    63,165$
    238,270
    
    
    $
    231,510
    
    
    $
    682,925
    
    
    $
    671,769
 Page 13




---



##### 



12.
    
    SEGMENT DATA (Continued)
 Quarter Ended
    
    
    Nine Months EndedSeptember 1,
    
    
    September 2,
    
    
    September 1,
    
    
    September 2,2007
    
    
    2006
    
    
    2007
    
    
    2006Operating profit:Engine/Mobile Filtration
    
    $
    26,629
    
    
    $
    25,147
    
    
    $
    71,351
    
    
    $
    66,666Industrial/Environmental Filtration
    
    
    6,100
    
    
    
    7,965
    
    
    
    14,472
    
    
    
    15,044Packaging
    
    
    1,893
    
    
    
    1,967
    
    
    
    3,880
    
    
    
    5,46334,622
    
    
    
    35,079
    
    
    
    89,703
    
    
    
    87,173Other income
    
    
    53
    
    
    
    96
    
    
    
    281
    
    
    
    120Earnings before income taxes and
minority earnings
    
    $
    34,675
    
    
    $
    35,175
    
    
    $
    89,984
    
    
    $
    87,293Identifiable assets:Engine/Mobile Filtration
    
    
    
    
    
    
    
    
    
    $
    248,235
    
    
    $
    208,364Industrial/Environmental Filtration
    
    
    
    
    
    
    
    
    
    
    397,863
    
    
    
    375,299Packaging
    
    
    
    
    
    
    
    
    
    
    44,412
    
    
    
    42,756Corporate
    
    
    
    
    
    
    
    
    
    
    58,368
    
    
    
    74,252$
    748,878
    
    
    $
    700,671
 During the second quarter of fiscal 2006, the Company recognized a pre-tax charge to
earnings of approximately $3,000 in the Industrial/Environmental Filtration segments operating
profit arising from the refusal of a customer to pay for products it had ordered and used. The
charge represents unpaid invoices and certain inventories and is included in selling and
administrative expenses. The Company has initiated legal proceedings against the customer to
recover this amount. The Industrial/Environmental Filtration segment operating profit for the
nine months ended September 2, 2006, also includes the $611 charge related to restructuring of a
European manufacturing facility and closing of a North Carolina operation and the $540 gain
related to insurance proceeds.13.
    
    RECENT ACCOUNTING PRONOUNCEMENTSIn February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS 159). The
statement provides companies with an option to report selected financial assets and liabilities
at fair value, with changes in fair value recorded in earnings. SFAS 159 will be effective for
the Companys fiscal year 2008. The Company does not expect the adoption of SFAS 159 to have a
material impact on its financial statements.In September 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and
132(R) (SFAS 158). This statement requires recognition of the overfunded or underfunded status
of defined benefit postretirement plans as an asset or liability in the statement of financial
position and to recognize changes in the funded status in comprehensive income in the year in
which the changes occur. SFAS 158 also requires measurement of the funded status of a plan as
of the date of the statement of financial position. SFAS 158 is effective for recognition of
the funded status of the benefit plans for the Companys fiscal year 2007 and is effective for
the measurement date provisions for fiscal year 2009.
 Page 14




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##### 



13.
    
    RECENT ACCOUNTING PRONOUNCEMENTS (Continued)The Company is currently evaluating the effect of SFAS 158 on its consolidated financial
statements. However, based on the Companys funded status as of year-end 2006, the adoption of
SFAS 158 would decrease total shareholders equity by approximately $14,000, net of deferred
tax. The ultimate amounts recorded are dependent on a number of factors, including the discount
rate in effect at the next measurement date, the actual rate of return on pension assets for
2007 and the tax effects of the adjustment upon adoption. Changes in those factors as well as
any funding in 2007 could increase or decrease the expected impact of implementing SFAS 158 on
the Companys consolidated financial statements at year-end 2007.In September 2006, the FASB also issued SFAS No. 157, Fair Value Measurements (SFAS 157),
which defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS 157
will be effective for the Companys fiscal year 2008. Adoption of this statement is not
expected to have a material impact on the Companys financial statements, although additional
disclosures may be required.In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48). The Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprises financial statements in accordance with SFAS No. 109, Accounting
for Income Taxes, and will be effective for the Companys fiscal year 2008. FIN 48 prescribes
guidance for recognizing, measuring, reporting and disclosing a tax position taken or expected
to be taken in a tax return. The Company is currently evaluating the effects FIN 48 will have
on its financial statements.
 Page 15




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
 Third Quarter Ended
    
    Nine Months EndedSeptember 1,
    
    September 2,
    
    %
    
    September 1,
    
    September 2,
    
    %2007
    
    2006
    
    Change
    
    2007
    
    2006
    
    ChangeNet Sales
    
    $
    238,270
    
    
    $
    231,510
    
    
    
    2.9
    %
    
    $
    682,925
    
    
    $
    671,769
    
    
    
    1.7
    %Operating Profit
    
    
    34,622
    
    
    
    35,079
    
    
    
    (1.3
    )%
    
    
    89,703
    
    
    
    87,173
    
    
    
    2.9
    %Operating Margin
    
    
    14.5
    %
    
    
    15.2
    %
    
    
    (0.7
    ) pts.
    
    
    13.1
    %
    
    
    13.0
    %
    
    
    0.1
    pts.Other Income
    
    
    53
    
    
    
    96
    
    
    
    (44.8
    )%
    
    
    281
    
    
    
    120
    
    
    
    134.2
    %Provision for Income Taxes
    
    
    7,999
    
    
    
    12,087
    
    
    
    (33.8
    )%
    
    
    25,878
    
    
    
    30,939
    
    
    
    (16.4
    )%Net Earnings
    
    
    26,615
    
    
    
    22,963
    
    
    
    15.9
    %
    
    
    63,917
    
    
    
    55,969
    
    
    
    14.2
    %Diluted Earnings per Share
    
    $
    0.53
    
    
    $
    0.44
    
    
    
    20.5
    %
    
    $
    1.25
    
    
    $
    1.07
    
    
    
    16.8
    %
  Page 16




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
         Page 17




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
     Page 18




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
        Page 19




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
      Page 20




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
         Page 21




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
         Page 22




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
    Payments Due by PeriodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5(Dollars in thousands)
    
    Total
    
    Year
    
    1-3 Years
    
    3-5 Years
    
    YearsLong-Term Debt
    
    $
    17,325
    
    
    $
    89
    
    
    $
    131
    
    
    $
    57
    
    
    $
    17,048Operating Leases
    
    
    46,353
    
    
    
    9,537
    
    
    
    16,787
    
    
    
    8,861
    
    
    
    11,168Total
    
    $
    63,678
    
    
    $
    9,626
    
    
    $
    16,918
    
    
    $
    8,918
    
    
    $
    28,216
       Page 23




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
       th
   Page 24




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
 ®
     
    
    statements and assumptions relating to future growth, earnings, earnings per share
and other financial performance measures, as well as managements short-term and
long-term performance goals;
    
    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.
  Page 25




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
  Page 26




---



##### 



Part I
    
    Item 3. Quantitative and Qualitative Disclosure About Market Risk.The information required hereunder is set forth on Page 23 of the Quarterly Report under
the captions Managements Discussion and Analysis  Other Matters  Market Risk.Part I
    
    Item 4. Controls and Procedures.The Company has established disclosure controls and procedures which are designed to ensure
that information required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms. The
Companys management, with the participation of Norman E. Johnson, Chairman of the Board,
President, and Chief Executive Officer and Bruce A. Klein, Vice President  Finance and
Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls
and procedures as of September 1, 2007. Based on their evaluation, such officers concluded
that the Companys disclosure controls and procedures pursuant to Rules 13a  15(e) of the
Exchange Act were effective as of September 1, 2007, in achieving the objectives for which
they were designed. No change in the Companys internal control over financial reporting
occurred during the Companys most recent fiscal quarter ended September 1, 2007, that has
materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.
 Page 27




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##### 



Part II
    
    Other InformationItem 1A.
    
    Risk FactorsThere were no material changes in the risk factors discussed in the Companys 2006 Form
10-K.Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.On June 25, 2007, the Companys Board of Directors approved a three-year Stock Repurchase
Program, pursuant to which the Company from time to time may purchase up to $250 million
of shares of the Companys Common Stock in the open market or through privately negotiated
transactions. The Companys previous share repurchase authorization expired on June 16,
2007. The Company has no obligation to repurchase stock under the program, and the
timing, actual number and value of shares to be purchased depend on market conditions and
the Companys then-current liquidity needs. As set forth in the table below, the Company
did not repurchase any shares during the fiscal quarter ended September 1, 2007, and
shares in the amount of $250,000,000 remained available for purchase under such program at
the end of the third quarter of 2007.
 COMPANY PURCHASES OF EQUITY SECURITIES (1) (2)(c)
    
    
    (d)Total number of
    
    
    Approximate dollarshares purchased as
    
    
    value of shares(a)
    
    
    (b)
    
    
    part of publicly
    
    
    that may yet beTotal number of
    
    
    Average price paid
    
    
    announced plans or
    
    
    purchased under thePeriod
    
    shares purchased
    
    
    per share
    
    
    programs
    
    
    plans or programsJune 25, 2007 through June 30, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250,000,000July 1, 2007 through July 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250,000,000August 1, 2007 through September 1,
2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    250,000,000Total
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Stock Repurchase Program announced June 25, 2007, for aggregate
purchases up to $250 million. Program expires June 25, 2010.(2)
    
    No shares were repurchased during the period June 3, 2007 through
June 16, 2007 under the previous share repurchase authorization, which expired on June 16,
2007. Page 28




---



##### 



Item 6 Exhibits
 a.
    
    Exhibits:31
    (i)
    
    Certification of Norman E. Johnson pursuant to Section
302 of the Sarbanes-Oxley Act of 200231(ii)
    
    Certification of Bruce A. Klein pursuant to Section 302
of the Sarbanes-Oxley Act of 200232
    (i)
    
    Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 Page 29




---



##### 



SIGNATURES
  CLARCOR Inc.(Registrant)September 25, 2007

(Date)
    
    
    
    By
    
    
    
    /s/ Norman E. Johnson

Norman E. JohnsonChairman of the Board, President and ChiefExecutive OfficerSeptember 25, 2007

(Date)
    
    
    
    By
    
    
    
    /s/ Bruce A. Klein

Bruce A. KleinVice President  Finance andChief Financial Officer
 Page 30