---



##### 



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 SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended May 31, 2008
 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
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ
  As of May 31, 2008, 50,748,193 common shares with a par value of $1 per share were outstanding.




---



##### 



Part I  Item 1
 
 
 May 31,
    
    
    December 1,2008
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    47,159
    
    
    $
    36,059Restricted cash
    
    
    514
    
    
    
    1,055Short-term investments
    
    
    13,864
    
    
    
    4,884Accounts receivable, less allowance for losses
of $12,572 for 2008 and $11,143 for 2007
    
    
    194,008
    
    
    
    166,912Inventories:Raw materials
    
    
    58,670
    
    
    
    49,722Work in process
    
    
    32,655
    
    
    
    18,973Finished products
    
    
    71,203
    
    
    
    67,151Total inventories
    
    
    162,528
    
    
    
    135,846Prepaid expenses and other current assets
    
    
    10,352
    
    
    
    6,968Deferred income taxes
    
    
    20,294
    
    
    
    20,196Total current assets
    
    
    448,719
    
    
    
    371,920Plant assets at cost,
    
    
    435,377
    
    
    
    398,350less accumulated depreciation
    
    
    (240,869
    )
    
    
    (229,138
    )194,508
    
    
    
    169,212Goodwill
    
    
    223,380
    
    
    
    124,718Acquired intangibles, less accumulated amortization
    
    
    97,554
    
    
    
    53,209Pension assets
    
    
    8,799
    
    
    
    8,341Deferred income taxes
    
    
    294
    
    
    
    294Other noncurrent assets
    
    
    15,762
    
    
    
    11,441Total assets
    
    $
    989,016
    
    
    $
    739,135LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    $
    131
    
    
    $
    94Accounts payable
    
    
    76,613
    
    
    
    53,523Accrued salaries, wages and commissions
    
    
    10,459
    
    
    
    11,945Compensated absences
    
    
    7,510
    
    
    
    7,484Accrued insurance liabilities
    
    
    13,747
    
    
    
    11,412Other accrued liabilities
    
    
    33,937
    
    
    
    25,255Income taxes
    
    
    4,963
    
    
    
    4,458Total current liabilities
    
    
    147,360
    
    
    
    114,171Long-term debt, less current portion
    
    
    117,474
    
    
    
    17,329Postretirement health care benefits
    
    
    826
    
    
    
    947Long-term pension liabilities
    
    
    16,369
    
    
    
    15,104Deferred income taxes
    
    
    40,570
    
    
    
    25,485Customer deposits
    
    
    14,110
    
    
    
    Other long-term liabilities
    
    
    8,518
    
    
    
    5,792Minority interests
    
    
    3,824
    
    
    
    4,577Total liabilities
    
    
    349,051
    
    
    
    183,405ContingenciesSHAREHOLDERS EQUITYCapital stock
    
    
    50,748
    
    
    
    49,219Capital in excess of par value
    
    
    46,160
    
    
    
    Accumulated other comprehensive earnings
    
    
    9,764
    
    
    
    5,912Retained earnings
    
    
    533,293
    
    
    
    500,599Total shareholders equity
    
    
    639,965
    
    
    
    555,730Total liabilities and shareholders equity
    
    $
    989,016
    
    
    $
    739,135
  Page 2




---



##### 



Quarter ended
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    267,137
    
    
    $
    235,125
    
    
    $
    517,318
    
    
    $
    444,655Cost of sales
    
    
    181,526
    
    
    
    164,356
    
    
    
    355,152
    
    
    
    312,906Gross profit
    
    
    85,611
    
    
    
    70,769
    
    
    
    162,166
    
    
    
    131,749Selling and administrative expenses
    
    
    48,153
    
    
    
    39,269
    
    
    
    96,969
    
    
    
    76,668Operating profit
    
    
    37,458
    
    
    
    31,500
    
    
    
    65,197
    
    
    
    55,081Other income (expense):Interest expense
    
    
    (72
    )
    
    
    (259
    )
    
    
    (3,638
    )
    
    
    (495
    )Interest income
    
    
    432
    
    
    
    295
    
    
    
    701
    
    
    
    969Other, net
    
    
    (177
    )
    
    
    (69
    )
    
    
    (389
    )
    
    
    (246
    )183
    
    
    
    (33
    )
    
    
    (3,326
    )
    
    
    228Earnings before income taxes and
minority interests
    
    
    37,641
    
    
    
    31,467
    
    
    
    61,871
    
    
    
    55,309Provision for income taxes
    
    
    12,903
    
    
    
    10,461
    
    
    
    20,844
    
    
    
    17,879Earnings before minority interests
    
    
    24,738
    
    
    
    21,006
    
    
    
    41,027
    
    
    
    37,430Minority interests in earnings of subsidiaries
    
    
    (104
    )
    
    
    (77
    )
    
    
    (244
    )
    
    
    (128
    )Net earnings
    
    $
    24,634
    
    
    $
    20,929
    
    
    $
    40,783
    
    
    $
    37,302Net earnings per common share:Basic
    
    $
    0.49
    
    
    $
    0.41
    
    
    $
    0.80
    
    
    $
    0.73Diluted
    
    $
    0.48
    
    
    $
    0.41
    
    
    $
    0.80
    
    
    $
    0.73Average number of common shares outstanding:Basic
    
    
    50,752,765
    
    
    
    50,459,481
    
    
    
    50,682,871
    
    
    
    50,801,230Diluted
    
    
    51,272,388
    
    
    
    50,950,931
    
    
    
    51,125,712
    
    
    
    51,355,724Dividends paid per share
    
    $
    0.0800
    
    
    $
    0.0725
    
    
    $
    0.1600
    
    
    $
    0.1450
  Page 3




---



##### 



Six Months EndedMay 31,
    
    
    June 2,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    40,783
    
    
    $
    37,302Depreciation
    
    
    13,259
    
    
    
    10,965Amortization
    
    
    2,779
    
    
    
    1,380Loss on interest rate agreement
    
    
    1,337
    
    
    
    Stock-based compensation expense
    
    
    3,713
    
    
    
    2,053Excess tax benefit from stock-based compensation
    
    
    (2,289
    )
    
    
    (2,047
    )Changes in short-term investments
    
    
    (8,980
    )
    
    
    32,195Changes in assets and liabilities, excluding short-term
investments
    
    
    (3,776
    )
    
    
    (1,215
    )Other, net
    
    
    297
    
    
    
    743Net cash provided by operating activities
    
    
    47,123
    
    
    
    81,376Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (75,073
    )
    
    
    (12,254
    )Additions to plant assets
    
    
    (17,412
    )
    
    
    (18,557
    )Investment in affiliate
    
    
    (2,000
    )
    
    
    Other, net
    
    
    56
    
    
    
    163Net cash used in investing activities
    
    
    (94,429
    )
    
    
    (30,648
    )Cash flows from financing activities:Net proceeds under line of credit
    
    
    100,000
    
    
    
    Payment of long-term debt
    
    
    (7,327
    )
    
    
    (4,779
    )Sale of capital stock under stock option and employee
purchase plans
    
    
    7,825
    
    
    
    3,282Purchase of treasury stock
    
    
    (37,260
    )
    
    
    (49,334
    )Excess tax benefits from stock-based compensation
    
    
    2,289
    
    
    
    2,047Cash dividends paid
    
    
    (8,183
    )
    
    
    (7,389
    )Net cash provided by / (used in) financing activities
    
    
    57,344
    
    
    
    (56,173
    )Net effect of exchange rate changes on cash
    
    
    1,062
    
    
    
    470Net change in cash and cash equivalents
    
    
    11,100
    
    
    
    (4,975
    )Cash and cash equivalents, beginning of period
    
    
    36,059
    
    
    
    29,051Cash and cash equivalents, end of period
    
    $
    47,159
    
    
    $
    24,076Cash paid during the period for:Interest
    
    $
    1,642
    
    
    $
    383Income taxes
    
    $
    17,821
    
    
    $
    15,716
  Page 4




---



##### 



CONSOLIDATED FINANCIAL STATEMENTS
  BUSINESS ACQUISITIONS
    Page 5




---



##### 



BUSINESS ACQUISITIONS (Continued)
 EstimatedIdentifiable Intangible Asset
    
    Value
    
    
    Useful LifeTrade names
    
    $
    11,800
    
    
    IndefiniteNon-compete agreements
    
    
    800
    
    
    2 yearsCustomer relationships
    
    
    14,200
    
    
    15 yearsDeveloped technology
    
    
    20,300
    
    
    16 yearsTotal fair value
    
    $
    47,100
   Cash
    
    
    $   11,448Accounts receivable, less allowance for losses
    
    
    18,556Inventory, net
    
    
    15,220Prepaid expenses and current assets
    
    
    2,949Current deferred tax assets
    
    
    875Plant assets
    
    
    20,011Goodwill
    
    
    97,890Trademarks and trade names
    
    
    11,800Other acquired intangibles
    
    
    35,300Other noncurrent assets
    
    
    1,013Total assets acquired
    
    
    215,062Current notes payable
    
    
    (7,411
    )Accounts payable and accrued liabilities
    
    
    (31,476
    )Long-term deferred tax liabilities
    
    
    (17,031
    )Long-term liabilities
    
    
    (1,480
    )Net assets acquired
    
    
    157,664Less cash acquired
    
    
    (11,448
    )Assets acquired, net of cash
    
    $
    146,216
   Page 6




---



##### 



BUSINESS ACQUISITIONS (Continued)
  Quarter Ended
    
    
    Six Months EndedJune 2, 2007
    
    
    June 2, 2007Net sales
    
    $
    267,565
    
    
    $
    577,263Operating profit
    
    
    36,649
    
    
    
    72,155Net earnings
    
    
    24,116
    
    
    
    44,606Diluted earnings per share
    
    $
    0.45
    
    
    $
    0.84As of November 30, 2007Current assets
    
    $
    413,704Plant assets
    
    
    189,813Goodwill
    
    
    222,608Other acquired intangibles
    
    
    100,309Other noncurrent assets
    
    
    21,533Total assets
    
    $
    947,967Current liabilities
    
    $
    146,089Long-term debt
    
    
    97,373Other long-term liabilities
    
    
    70,335Shareholders equity
    
    
    634,170Total liabilities and
shareholders equity
    
    $
    947,967
   Page 7




---



##### 



BUSINESS ACQUISITIONS (Continued)
    STOCK-BASED COMPENSATION
   Page 8




---



##### 



STOCK-BASED COMPENSATION (Continued)
 Stock Options
  Shares Granted
    
    
    Weightedunder Incentive
    
    
    AveragePlans
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    3,191,598
    
    
    $
    23.79Granted
    
    
    477,900
    
    
    
    36.38Exercised
    
    
    (431,325
    )
    
    
    21.72Surrendered
    
    
    (16,224
    )
    
    
    33.65Outstanding at May 31, 2008
    
    
    3,221,949
    
    
    $
    25.88Options exercisable at May 31, 2008
    
    
    2,513,683
    
    
    $
    23.21
   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  $9.75
    
    
    204,874
    
    
    $
    9.14
    
    
    
    1.68
    
    
    
    204,874
    
    
    $
    9.14
    
    
    
    1.68$11.50  $13.75
    
    
    171,800
    
    
    
    13.16
    
    
    
    3.34
    
    
    
    171,800
    
    
    
    13.16
    
    
    
    3.34$16.01  $22.80
    
    
    917,898
    
    
    
    20.53
    
    
    
    4.37
    
    
    
    917,898
    
    
    
    20.53
    
    
    
    4.37$25.89  $38.23
    
    
    1,927,377
    
    
    
    31.34
    
    
    
    7.34
    
    
    
    1,219,111
    
    
    
    29.01
    
    
    
    6.333,221,949
    
    
    $
    25.88
    
    
    
    5.92
    
    
    
    2,513,683
    
    
    $
    23.21
    
    
    
    5.03
  Restricted Share Unit Awards
  Page 9




---



##### 



EARNINGS PER SHARE AND TREASURY STOCK TRANSACTIONS
  Quarter Ended
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average number of common
shares outstanding
    
    
    50,752,765
    
    
    
    50,459,481
    
    
    
    50,682,871
    
    
    
    50,801,230Dilutive effect of stock-based
arrangements
    
    
    519,623
    
    
    
    491,450
    
    
    
    442,841
    
    
    
    554,494Weighted average
number of diluted
common shares
outstanding
    
    
    51,272,388
    
    
    
    50,950,931
    
    
    
    51,125,712
    
    
    
    51,355,724Net earnings
    
    $
    24,634
    
    
    $
    20,929
    
    
    $
    40,783
    
    
    $
    37,302Basic earnings per share amount
    
    $
    0.49
    
    
    $
    0.41
    
    
    $
    0.80
    
    
    $
    0.73Diluted earnings per share amount
    
    $
    0.48
    
    
    $
    0.41
    
    
    $
    0.80
    
    
    $
    0.73
    Page 10




---



##### 



COMPREHENSIVE EARNINGS
  Quarter Ended
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    24,634
    
    
    $
    20,929
    
    
    $
    40,783
    
    
    $
    37,302Other comprehensive earnings, net of tax:Foreign currency translation adjustments
    
    
    2,412
    
    
    
    557
    
    
    
    3,852
    
    
    
    832Total comprehensive earnings
    
    $
    27,046
    
    
    $
    21,486
    
    
    $
    44,635
    
    
    $
    38,134
  May 31, 2008
    
    
    December 1,
 2007Pension liability, net of $3,656 tax
    
    $
    (6,994
    )
    
    $
    (6,994
    )Translation adjustments, net of $155 tax
    
    
    16,758
    
    
    
    12,906Accumulated other comprehensive loss
    
    $
    9,764
    
    
    $
    5,912
 FAIR VALUE MEASURMENT
    Page 11




---



##### 



FAIR VALUE MEASUREMENT (Continued)
 Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableMay 31,
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Short-term investments
    
    $
    13,864
    
    
    $
    13,864
    
    
    $
    
    
    
    $
    Restricted trust
(part of noncurrent
assets)
    
    
    1,883
    
    
    
    1,883
    
    
    
    
    
    
    
    Interest rate
agreement (part of
long-term
liabilities)
    
    
    (1,337
    )
    
    
    
    
    
    
    (1,337
    )
    
    
    Net
    
    $
    14,410
    
    
    $
    15,747
    
    
    $
    (1,337
    )
    
    $
    
  LONG-TERM DEBT AND INTEREST RATE AGREEMENT
   Page 12




---



##### 



ACQUIRED INTANGIBLES
  Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at December 1, 2007
    
    $
    24,185
    
    
    $
    100,533
    
    
    $
    
    
    
    $
    124,718Acquisitions
    
    
    14
    
    
    
    98,588
    
    
    
    
    
    
    
    98,602Currency translation adjustments
    
    
    (2
    )
    
    
    62
    
    
    
    
    
    
    
    60Balance at May 31, 2008
    
    $
    24,197
    
    
    $
    199,183
    
    
    $
    
    
    
    $
    223,380
  Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at May 31, 2008:Trademarks, gross
    
    $
    954
    
    
    $
    40,957
    
    
    $
    
    
    
    $
    41,911Less accumulated amortization
    
    
    21
    
    
    
    255
    
    
    
    
    
    
    
    276Trademarks, net
    
    $
    933
    
    
    $
    40,702
    
    
    $
    
    
    
    $
    41,635Customer relationships, gross
    
    $
    2,175
    
    
    $
    32,977
    
    
    $
    
    
    
    $
    35,152Less accumulated amortization
    
    
    1,027
    
    
    
    4,738
    
    
    
    
    
    
    
    5,765Customer relationships, net
    
    $
    1,148
    
    
    $
    28,239
    
    
    $
    
    
    
    $
    29,387Other acquired intangibles, gross
    
    $
    243
    
    
    $
    33,883
    
    
    $
    
    
    
    $
    34,126Less accumulated amortization
    
    
    233
    
    
    
    7,361
    
    
    
    
    
    
    
    7,594Other acquired intangibles, net
    
    $
    10
    
    
    $
    26,522
    
    
    $
    
    
    
    $
    26,532
  GUARANTEES AND WARRANTIES
  Page 13




---



##### 



GUARANTEES AND WARRANTIES (Continued)
    Balance at December 1, 2007
    
    $
    1,485Business acquisitions
    
    
    1,617Accruals for warranties issued during the period
    
    
    379Accruals related to pre-existing warranties
    
    
    84Settlements made during the period
    
    
    (602
    )Other adjustments, including currency translation
    
    
    40Balance at May 31, 2008, included in other accrued liabilities
    
    $
    3,003
 RETIREMENT BENEFITS
  Quarter Ended
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Pension Benefits:Components of net periodic benefit
cost:Service cost
    
    $
    650
    
    
    $
    725
    
    
    $
    1,300
    
    
    $
    1,449Interest cost
    
    
    2,129
    
    
    
    1,794
    
    
    
    4,258
    
    
    
    3,586Expected return on plan assets
    
    
    (2,604
    )
    
    
    (2,145
    )
    
    
    (5,207
    )
    
    
    (4,288
    )Amortization of unrecognized:Prior service cost
    
    
    41
    
    
    
    44
    
    
    
    82
    
    
    
    88Net actuarial loss
    
    
    42
    
    
    
    301
    
    
    
    84
    
    
    
    603Net periodic benefit cost
    
    $
    258
    
    
    $
    719
    
    
    $
    517
    
    
    $
    1,438Cash contributions
    
    $
    319
    
    
    $
    120
    
    
    $
    645
    
    
    $
    228
 Page 14




---



##### 



10.
    
    RETIREMENT BENEFITS (Continued)
 Quarter Ended
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Postretirement Healthcare Benefits:Components of net periodic
benefit cost:Service cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest cost
    
    
    15
    
    
    
    18
    
    
    
    30
    
    
    
    36Amortization of unrecognized:Prior service cost
    
    
    (31
    )
    
    
    (31
    )
    
    
    (62
    )
    
    
    (62
    )Net actuarial gain
    
    
    (33
    )
    
    
    (32
    )
    
    
    (66
    )
    
    
    (64
    )Net periodic benefit income
    
    $
    (49
    )
    
    $
    (45
    )
    
    $
    (98
    )
    
    $
    (90
    )Cash contributions
    
    $
    53
    
    
    $
    70
    
    
    $
    106
    
    
    $
    140
 The Companys policy is to contribute to its qualified U.S. and non-U.S. pension plans at least
the minimum amount required by applicable laws and regulations, to contribute to its
non-qualified plan when required for benefit payments and to contribute to its postretirement
benefit plan an amount equal to the benefit payments. The minimum required contribution to one
of the Companys qualified U.S. pension plans for fiscal 2008 is expected to be approximately $1
million. The Company, from time to time, makes contributions in excess of the minimum amount
required as economic conditions warrant. The Company has not determined whether it will make
any voluntary contributions to its U.S. qualified plans in 2008; however, it does expect to fund
$277 to the U.S. non-qualified plan, $769 to the non-U.S. plan and $213 for the postretirement
benefit plan to pay benefits during 2008.In addition to the plan assets related to its qualified plans, the Company has funded
approximately $1,883 and $1,044 at May 31, 2008 and November 30, 2007, respectively, in a
restricted trust for its non-qualified plan. This trust is included in other noncurrent assets
in the Consolidated Balance Sheets. The Company contributed $1,000 to this trust in the second
quarter of 2008.11.
    
    INCOME TAXESThe Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
(FIN 48) at the beginning of fiscal 2008. As a result, the Company recognized a $67 increase in
the net liability for unrecognized tax benefits, which was recorded as a decrease to retained
earnings.The liability for the gross unrecognized tax benefits was $1,932 at May 31, 2008 and $1,650 at
December 2, 2007 after the adjustment to the beginning balance of retained earnings upon
adoption of FIN 48. The net increase in the liability since the date of adoption resulted
primarily from changes in unrecognized tax benefits related to tax positions that arose during
the first six months of 2008.At May 31, 2008, the amount of unrecognized tax benefit that would impact the effective tax rate
if recognized, was $1,488. The Company recognizes interest and penalties related to
 Page 15




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##### 



11.
    
    INCOME TAXES (Continued)unrecognized tax benefits in income tax expense. As of May 31, 2008, the Company had $413
accrued for the payment of interest and penalties. The Company expects its tax reserve to
decrease by approximately $700 over the next twelve months due to statute expirations and
settlements with taxing authorities.The Company is regularly audited by federal, state and foreign tax authorities. The IRS has
completed its audits of the Companys U.S. income tax returns through fiscal 2005. With few
exceptions, the Company is no longer subject to income tax examinations by state or foreign tax
jurisdictions for years prior to fiscal 2002.12.
    
    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.13.
    
    RESTRUCTURING CHARGESThe Company began a restructuring program focused on the heating, ventilating and air
conditioning (HVAC) filter manufacturing operations within its Industrial/Environmental
Filtration segment in July 2006. As an ongoing part of this program, the Company discontinued
production at an HVAC filter manufacturing plant in Davenport, Iowa during the second quarter
2008. The Company accrued $145 for restructuring charges. Employee termination costs were $73
which has largely been paid. Minimal additional charges related to contract termination
costs and facilities consolidation costs will be recognized when the Company exits a lease
related to that facility.
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##### 



14.
    
    INSURANCE CLAIMSDuring the second quarter of 2008, four of the Companys facilities in three states were damaged
in weather-related incidents resulting in $750 of expense recorded in cost of sales. The
Engine/Mobile Filtration segment incurred $250 of cost. The other $500 is part of the
Industrial/Environmental Filtration segment. At this time, the Company has not determined the
extent of loss of property, inventory or business interruption. However, the Company believes
any losses exceeding the amount of the deductibles will be covered by insurance.15.
    
    SEGMENT DATAThe Company operates in three principal product segments: Engine/Mobile Filtration,
Industrial/Environmental Filtration and Packaging. The segment data for the quarter and six
months ended May 31, 2008, and June 2, 2007, 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
    
    
    Six Months EndedMay 31,
    
    
    June 2,
    
    
    May 31,
    
    
    June 2,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales:Engine/Mobile Filtration
    
    $
    108,658
    
    
    $
    108,504
    
    
    $
    213,767
    
    
    $
    205,200Industrial/Environmental Filtration
    
    
    139,326
    
    
    
    106,185
    
    
    
    265,748
    
    
    
    202,424Packaging
    
    
    19,153
    
    
    
    20,436
    
    
    
    37,803
    
    
    
    37,031$
    267,137
    
    
    $
    235,125
    
    
    $
    517,318
    
    
    $
    444,655Operating profit:Engine/Mobile Filtration
    
    $
    24,450
    
    
    $
    24,445
    
    
    $
    46,792
    
    
    $
    44,722Industrial/Environmental Filtration
    
    
    11,444
    
    
    
    5,498
    
    
    
    15,729
    
    
    
    8,372Packaging
    
    
    1,564
    
    
    
    1,557
    
    
    
    2,676
    
    
    
    1,98737,458
    
    
    
    31,500
    
    
    
    65,197
    
    
    
    55,081Other income (expense)
    
    
    183
    
    
    
    (33
    )
    
    
    (3,326
    )
    
    
    228Earnings before income taxes and
minority earnings
    
    $
    37,641
    
    
    $
    31,467
    
    
    $
    61,871
    
    
    $
    55,309Identifiable assets:Engine/Mobile Filtration
    
    
    
    
    
    
    
    
    
    $
    260,133
    
    
    $
    265,367Industrial/Environmental Filtration
    
    
    
    
    
    
    
    
    
    
    640,490
    
    
    
    395,403Packaging
    
    
    
    
    
    
    
    
    
    
    42,138
    
    
    
    44,269Corporate
    
    
    
    
    
    
    
    
    
    
    46,255
    
    
    
    22,035$
    989,016
    
    
    $
    727,074
 Page 17




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16.
    
    RECENT ACCOUNTING PRONOUNCEMENTSIn March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities. This standard is intended to improve financial reporting about derivative
instruments and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entitys financial position, financial performance and
cash flows. SFAS No. 161 will affect the Companys derivatives presentation in its consolidated
financial statements in fiscal year 2009.In December 2007, the FASB issued SFAS No. 141R, Business Combinations and SFAS No.
160, Non-controlling Interests in Consolidated Financial Statements. The standards will
affect the Companys accounting for businesses acquired after December 1, 2009 and presentation
of minority interests in its consolidated financial statements in fiscal year 2010.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
123(R). This statements requirement to recognize 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 was effective for
the Companys fiscal year 2007. SFAS No. 158 also requires measurement of the funded status of
a plan as of the date of the statement of financial position. The provisions regarding the
change in the measurement date are effective for the Companys fiscal year 2009.
 Page 18




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Management Discussion Snapshot(Dollars in Thousands)Second Quarter Ended
    
    Six Months EndedMay 31,
    
    June 2,
    
    %
    
    May 31,
    
    June 2,
    
    %2008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeNet Sales
    
    $
    267,137
    
    
    $
    235,125
    
    
    
    13.6
    %
    
    $
    517,318
    
    
    $
    444,655
    
    
    
    16.3
    %Operating Profit
    
    
    37,458
    
    
    
    31,500
    
    
    
    18.9
    %
    
    
    65,197
    
    
    
    55,081
    
    
    
    18.4
    %Operating Margin
    
    
    14.0
    %
    
    
    13.4
    %
    
    0.6 pts.
    
    
    12.6
    %
    
    
    12.4
    %
    
    0.2 pts.Other Income/(Expense)
    
    
    183
    
    
    
    (33
    )
    
    
    654.5
    %
    
    
    (3,326
    )
    
    
    228
    
    
    
    1558.8
    %Provision for Income Taxes
    
    
    12,903
    
    
    
    10,461
    
    
    
    23.3
    %
    
    
    20,844
    
    
    
    17,879
    
    
    
    16.6
    %Net Earnings
    
    
    24,634
    
    
    
    20,929
    
    
    
    17.7
    %
    
    
    40,783
    
    
    
    37,302
    
    
    
    9.3
    %Diluted Earnings per Share
    
    $
    0.48
    
    
    $
    0.41
    
    
    
    17.1
    %
    
    $
    0.80
    
    
    $
    0.73
    
    
    
    9.6
    %
   Page 19




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




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##### 



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




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##### 



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




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
     Page 23




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##### 



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




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
         Page 25




---



##### 



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




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
   Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    More than(Dollars in thousands)
    
    Total
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsLong-Term Debt (excluding line of credit)
    
    $
    17,605
    
    
    $
    131
    
    
    $
    219
    
    
    $
    1,435
    
    
    $
    15,820Interest Payable on Long-Term Debt
(excluding line of credit)
    
    
    9,600
    
    
    
    700
    
    
    
    1,400
    
    
    
    1,300
    
    
    
    6,200Line of Credit
    
    
    100,000
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    Interest Payable on Line of Credit
    
    
    21,150
    
    
    
    4,230
    
    
    
    8,460
    
    
    
    8,460
    
    
    
    Unfunded Pension Plan
    
    
    19,002
    
    
    
    277
    
    
    
    5,315
    
    
    
    12,569
    
    
    
    841Operating Leases
    
    
    42,737
    
    
    
    9,294
    
    
    
    17,063
    
    
    
    8,055
    
    
    
    8,325Total
    
    $
    210,094
    
    
    $
    14,632
    
    
    $
    32,457
    
    
    $
    131,819
    
    
    $
    31,186
      Page 27




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
            Page 28




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
  th
      
    
    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, including acquisitions;
 Page 29




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
 
    
    statements relating to the Companys business and growth strategies; and
    
    any other statements or assumptions that are not historical facts.
 
  Page 30




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##### 



Page 31




---



##### 



We may not be able to successfully consolidate our operations with PECO.
  
    
    the loss of key employees and customers;
    
    the focus of managements attention on the assimilation of Peco and its employees
and on the management of the combined Peco and Facet operations;
    
    the incorporation of acquired products into our product line;
    
    possible inconsistencies in standards, control procedures and policies;
    
    the failure to realize expected synergies;
    
    the possibility that we have acquired substantial undisclosed liabilities; and/or
    
    problems from the assimilation of new operations, sites or personnel, which could
divert resources from regular operations.
  Page 32




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##### 



COMPANY PURCHASES OF EQUITY SECURITIES (1)(c)Totalnumber of
    
    
    (d)shares
    
    
    Approximatepurchased
    
    
    dollar value ofas part of
    
    
    shares that may(a)
    
    
    (b)
    
    
    publicly
    
    
    yet beTotal number
    
    
    Average
    
    
    announced
    
    
    purchasedof shares
    
    
    price paid
    
    
    plans or
    
    
    under the plansPeriod
    
    purchased
    
    
    per share
    
    
    programs
    
    
    or programsMarch 2, 2008 through March 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241April 1, 2008 through April 30, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241May 1, 2008 through May 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241
 
 (1)
    
    Stock Repurchase Program announced June 25, 2007, for aggregate purchases
up to $250 million. Program expires June 25, 2010.     For
    
    WithheldRobert H. Jenkins
    
    
    47,201,467
    
    
    
    295,480Philip R. Lochner, Jr.
    
    
    46,854,026
    
    
    
    642,921
  Page 33




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##### 



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 34




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##### 



SIGNATURES
  CLARCOR Inc.
 June 20, 2008
    
    
    
    By
    
    /s/ Norman E. Johnson(Date)
    
    
    
    
    
    Norman E. JohnsonChairman of the Board, President andChief Executive OfficerJune 20, 2008
    
    
    
    By
    
    /s/ Bruce A. Klein(Date)
    
    
    
    
    
    Bruce A. KleinVice President  Finance andChief Financial Officer
 Page 35