##### Table of Contents



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 30, 2009
 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.
  DELAWARE
    
    36-0922490(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
  615-771-3100
 
  þ o
 o 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 30, 2009, 50,932,941 common shares with a par value of $1 per share were
outstanding.




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##### 



TABLE OF CONTENTS
 PAGEPart I  Financial InformationItem 1.
    
    Financial Statements
    
    
    3Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    22Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4.
    
    Controls and Procedures
    
    
    36Part II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    37Item 1A.
    
    Risk Factors
    
    
    37Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 3.
    
    Defaults Upon Senior Securities
    
    
    *Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    37Item 5.
    
    Other Information
    
    
    *Item 6.
    
    Exhibits
    
    
    38EX-31.IEX-31.IIEX-32.I
  
 *
    
    Item omitted because no answer is called for or item is not applicable. Page 2




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##### Table of Contents



Part I  Item 1. Financial Statements
 
 May 30,
    
    
    November 29,2009
    
    
    2008(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    46,803
    
    
    $
    40,715Restricted cash
    
    
    2,020
    
    
    
    473Short-term investments
    
    
    23,334
    
    
    
    7,269Accounts receivable, less allowance for losses
of $15,973 for 2009 and $13,267 for 2008
    
    
    170,853
    
    
    
    194,864Inventories:Raw materials
    
    
    65,332
    
    
    
    60,575Work in process
    
    
    26,077
    
    
    
    27,318Finished products
    
    
    76,692
    
    
    
    70,308Total inventories
    
    
    168,101
    
    
    
    158,201Deferred income taxes
    
    
    22,975
    
    
    
    23,121Prepaid expenses and other current assets
    
    
    7,947
    
    
    
    7,928Total current assets
    
    
    442,033
    
    
    
    432,571Plant assets at cost,
    
    
    443,122
    
    
    
    439,423less accumulated depreciation
    
    
    (252,608
    )
    
    
    (246,824
    )190,514
    
    
    
    192,599Goodwill
    
    
    229,788
    
    
    
    223,964Acquired intangibles, less accumulated amortization
    
    
    95,839
    
    
    
    95,089Deferred income taxes
    
    
    224
    
    
    
    224Other noncurrent assets
    
    
    13,151
    
    
    
    13,435Total assets
    
    $
    971,549
    
    
    $
    957,882LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    $
    154
    
    
    $
    128Accounts payable
    
    
    59,557
    
    
    
    65,398Accrued salaries, wages and commissions
    
    
    8,392
    
    
    
    14,292Compensated absences
    
    
    7,545
    
    
    
    8,004Accrued insurance liabilities
    
    
    10,907
    
    
    
    9,668Customer deposits
    
    
    11,110
    
    
    
    11,777Income taxes
    
    
    3,845
    
    
    
    5,083Other accrued liabilities
    
    
    30,996
    
    
    
    29,153Total current liabilities
    
    
    132,506
    
    
    
    143,503Long-term debt, less current portion
    
    
    82,393
    
    
    
    83,822Postretirement healthcare benefits
    
    
    652
    
    
    
    642Long-term pension liabilities
    
    
    29,327
    
    
    
    27,307Deferred income taxes
    
    
    37,878
    
    
    
    39,317Other long-term liabilities
    
    
    4,340
    
    
    
    7,360Minority interests
    
    
    2,417
    
    
    
    4,172Total liabilities
    
    
    289,513
    
    
    
    306,123ContingenciesSHAREHOLDERS EQUITYCapital stock
    
    
    50,933
    
    
    
    50,794Capital in excess of par value
    
    
    53,132
    
    
    
    48,025Accumulated other comprehensive loss
    
    
    (17,997
    )
    
    
    (26,562
    )Retained earnings
    
    
    595,968
    
    
    
    579,502Total shareholders equity
    
    
    682,036
    
    
    
    651,759Total liabilities and shareholders equity
    
    $
    971,549
    
    
    $
    957,882




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##### Table of Contents



Quarter Ended
    
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    229,395
    
    
    $
    267,137
    
    
    $
    443,085
    
    
    $
    517,318Cost of sales
    
    
    159,797
    
    
    
    181,526
    
    
    
    312,504
    
    
    
    355,152Gross profit
    
    
    69,598
    
    
    
    85,611
    
    
    
    130,581
    
    
    
    162,166Selling and administrative expenses
    
    
    44,368
    
    
    
    48,153
    
    
    
    91,664
    
    
    
    96,969Operating profit
    
    
    25,230
    
    
    
    37,458
    
    
    
    38,917
    
    
    
    65,197Other income (expense):Interest expense
    
    
    (604
    )
    
    
    (72
    )
    
    
    (1,532
    )
    
    
    (3,638
    )Interest income
    
    
    88
    
    
    
    432
    
    
    
    230
    
    
    
    701Other, net
    
    
    464
    
    
    
    (177
    )
    
    
    444
    
    
    
    (389
    )(52
    )
    
    
    183
    
    
    
    (858
    )
    
    
    (3,326
    )Earnings before income taxes and
minority interests
    
    
    25,178
    
    
    
    37,641
    
    
    
    38,059
    
    
    
    61,871Provision for income taxes
    
    
    8,121
    
    
    
    12,903
    
    
    
    12,217
    
    
    
    20,844Earnings before minority interests
    
    
    17,057
    
    
    
    24,738
    
    
    
    25,842
    
    
    
    41,027Minority interests in earnings
of subsidiaries
    
    
    (266
    )
    
    
    (104
    )
    
    
    (260
    )
    
    
    (244
    )Net earnings
    
    $
    16,791
    
    
    $
    24,634
    
    
    $
    25,582
    
    
    $
    40,783Net earnings per common share:Basic
    
    $
    0.33
    
    
    $
    0.49
    
    
    $
    0.50
    
    
    $
    0.80Diluted
    
    $
    0.33
    
    
    $
    0.48
    
    
    $
    0.50
    
    
    $
    0.80Average number of common
shares outstanding:Basic
    
    
    51,042,665
    
    
    
    50,752,765
    
    
    
    51,014,126
    
    
    
    50,682,871Diluted
    
    
    51,330,567
    
    
    
    51,272,388
    
    
    
    51,392,809
    
    
    
    51,125,712Dividends paid per share
    
    $
    0.09
    
    
    $
    0.08
    
    
    $
    0.18
    
    
    $
    0.16




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##### Table of Contents



Six Months EndedMay 30,
    
    
    May 31,2009
    
    
    2008Cash flows from operating activities:Net earnings
    
    $
    25,582
    
    
    $
    40,783Depreciation
    
    
    13,851
    
    
    
    13,259Amortization
    
    
    2,436
    
    
    
    2,779Loss on interest rate agreement
    
    
    348
    
    
    
    1,337Stock-based compensation expense
    
    
    3,142
    
    
    
    3,713Excess tax benefit from stock-based compensation
    
    
    (432
    )
    
    
    (2,289
    )Changes in short-term investments
    
    
    (16,065
    )
    
    
    (8,980
    )Changes in assets and liabilities, excluding short-term
investments
    
    
    7,394
    
    
    
    (3,776
    )Other, net
    
    
    205
    
    
    
    297Net cash provided by operating activities
    
    
    36,461
    
    
    
    47,123Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (12,192
    )
    
    
    (75,073
    )Additions to plant assets
    
    
    (10,784
    )
    
    
    (17,412
    )Investment in affiliate
    
    
    (1,000
    )
    
    
    (2,000
    )Other, net
    
    
    394
    
    
    
    56Net cash used in investing activities
    
    
    (23,582
    )
    
    
    (94,429
    )Cash flows from financing activities:Net proceeds (payments) under line of credit
    
    
    (10,000
    )
    
    
    100,000Borrowings under long-term debt
    
    
    8,410
    
    
    
    Payments on long-term debt
    
    
    (559
    )
    
    
    (7,327
    )Sale of capital stock under stock option
and employee purchase plans
    
    
    2,106
    
    
    
    7,825Purchase of treasury stock
    
    
    
    
    
    
    (37,260
    )Excess tax benefits from stock-based compensation
    
    
    432
    
    
    
    2,289Cash dividends paid
    
    
    (9,196
    )
    
    
    (8,183
    )Net cash (used in) provided by financing activities
    
    
    (8,807
    )
    
    
    57,344Net effect of exchange rate changes on cash
    
    
    2,016
    
    
    
    1,062Net change in cash and cash equivalents
    
    
    6,088
    
    
    
    11,100Cash and cash equivalents, beginning of period
    
    
    40,715
    
    
    
    36,059Cash and cash equivalents, end of period
    
    $
    46,803
    
    
    $
    47,159Cash paid during the period for:Interest
    
    $
    1,140
    
    
    $
    1,642Income taxes
    
    $
    14,200
    
    
    $
    17,821




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##### Table of Contents



1.
    
    CONSOLIDATED FINANCIAL STATEMENTSThe consolidated condensed balance sheet as of May 30, 2009, the consolidated condensed
statements of earnings and the consolidated condensed statements of cash flows for the periods
ended May 30, 2009, and May 31, 2008, 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 November 29, 2008 (2008 Form 10-K). The November
29, 2008 consolidated balance sheet data was derived from the Companys year-end audited
financial statements as presented in the 2008 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 May 30, 2009, are not necessarily
indicative of the operating results for the full year.2.
    
    BUSINESS ACQUISITIONSOn April 20, 2009, the Company purchased the remaining 20% minority interest in its consolidated
subsidiary based in Weifang, China for $4,583, including acquisition costs. This subsidiary is
part of the Companys Engine/Mobile Filtration segment and manufactures heavy-duty engine
filters, certain lines of environmental filters and filter systems and filters used in off-shore
oil drilling. The allocation of the purchase price will be made to major categories of assets
and liabilities when the Company completes its assessment of assets acquired and liabilities
assumed during fiscal 2009. The $2,195 excess of the initial purchase price over the preliminary
estimated fair value of the assets acquired and liabilities assumed was recorded as goodwill.On April 6, 2009, the Company purchased Weifang Yuhua Filters Ltd. (Yuhua), based in Weifang,
China for approximately $706. Yuhua manufactures heavy-duty engine filters. The business is
included in the Companys Engine/Mobile Filtration segment. The acquisition is not material to
the results of the Company. The allocation of the purchase price will be made to major
categories of assets and liabilities when the Company completes its assessment of the assets
acquired and liabilities assumed during fiscal 2009.On February 1, 2009, the Company purchased 85% ownership interests in Pujiang Novaeastern
International Mesh Co., Ltd. (Pujiang) and Quzhou Chinagrace Filter Co., Ltd. (Quzhou). Both
companies are based in China and were under common ownership. Pujiang and Quzhou are
manufacturers of wire mesh filtration products sold primarily to the fibers, resin and aerospace
industries. The combined purchase price for the ownership interests in both companies was
approximately $1,535, excluding cash acquired and including acquisition costs. The Company has
the right, but not the obligation, to purchase the remaining 15% ownership interests using a
formula based on the combined companies future operating results. The businesses are included
in the Companys Industrial/Environmental Filtration segment. The acquisition is not material to
the results of the Company. A preliminary allocation of the purchase price for the acquisition
has been made to major categories of assets and liabilities, based on available information, and
is currently subject to change. Other acquired intangibles included patents valued at $189 which
will be amortized over an estimated useful life of 10 years. The $717 excess of the initial purchase price over the preliminary estimated fair value of the assets
acquired and the liabilities assumed was recorded as goodwill.
 Page 6




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On January 16, 2009, the Company purchased certain assets of Meggitt (UK) Limited (Meggitt), for
$578. This business was acquired to expand the Companys product range of aerospace filters sold
primarily to European aircraft manufacturers and aerospace parts distributors. The purchased
assets were combined into an existing Company subsidiary which is part of the Companys
Industrial/Environmental Filtration segment. The Company expects to make an additional payment
in 2010 of approximately $146 to the former owner of the Meggitt assets contingent upon the
renewal of a contract with a customer. The acquisition is not material to the results of the
Company. A preliminary allocation of the purchase price for the acquisition has been made to
major categories of assets based on available information, and is currently subject to change.
Other acquired intangibles included customer relationships valued at $201 which will be
amortized over their estimated useful life of 13 years. The $231 excess of the initial purchase
price over the preliminary estimated fair value of the net assets acquired was recorded as
goodwill.On December 29, 2008, the Company purchased the Keddeg Company (Keddeg), a manufacturer of
aerospace filtration products based in Lenexa, Kansas. The purchase price was $5,495, excluding
cash acquired and including acquisition costs. Keddegs results are included as part of the
Companys Industrial/Environmental Filtration segment from the date of acquisition. The
acquisition is not material to the results of the Company. A preliminary allocation of the
purchase price has been made to major categories of assets and liabilities assumed, based on
available information, and is subject to change. The $1,753 excess of the purchase price over
the preliminary estimated fair value of the net tangible and intangible assets acquired was
recorded as goodwill. Acquired intangible assets, other than trade names and goodwill, are
amortized on a straight-line basis according to the useful lives of the acquired assets. The
fair value of the identifiable intangible assets and their respective lives are shown in the
following table:
 EstimatedIdentifiable Intangible Asset
    
    Value
    
    
    Useful LifeTrade names
    
    $
    553
    
    
    IndefiniteNon-compete agreements
    
    
    86
    
    
    5 yearsCustomer relationships
    
    
    875
    
    
    12 yearsDeveloped technology
    
    
    1,256
    
    
    10 yearsTotal fair value
    
    $
    2,770
 Effective May 1, 2008, the Company acquired a 30% share in BioProcessH2O LLC (BPH), a
Rhode Island based manufacturer of industrial waste water and water reuse filtration systems,
for $4,000, payable $2,000 in cash at the acquisition date with the remaining $2,000 to be paid
by December 31, 2009. On February 6, 2009, the Company paid $1,000 of the remaining amount.
Under the terms of the agreement with BPH, the Company has the right, but not the obligation, to
acquire additional ownership shares and eventually complete ownership of the company over
several years at a price based on, among other factors, BPHs operating income. The investment,
with a carrying amount of $3,802 and $4,011 at May 30, 2009 and November 29, 2008, respectively,
is being accounted for under the equity method of accounting in accordance with Accounting
Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. The investment was initially recorded at cost. The carrying
amount is adjusted each period to recognize the Companys share of the earnings or losses of the
investee based on the percentage of ownership, as well as the receipt of any dividend income.
The equity investment is periodically reviewed for indicators of impairment. The Companys share
of undistributed earnings was not material at May 30, 2009.
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On December 3, 2007, the Company acquired Perry Equipment Corporation (Peco), a privately-owned
manufacturer of engineered filtration products and technologies used in a wide array of
industries, including oil and natural gas, refining, power generation, petrochemical, food and
beverage, electronics, polymers and pulp and paper. Peco is based in Mineral Wells, Texas with
operations in Mexico, Canada, the United Kingdom, Italy, Romania, Malaysia and China. Peco was
merged with the Companys Facet operations with the combined headquarters based in Mineral
Wells. Peco was acquired to expand the Companys product offerings, technology, filtration
solutions and customer base in the oil and natural gas industries. Its results are included as
part of the Companys Industrial/Environmental Filtration segment since the date of acquisition.
The purchase price was $145,807 excluding cash acquired and including acquisition costs. The
Company issued 2,137,797 shares of CLARCOR common stock with a value of approximately $71,954
and paid the remaining purchase price with available cash of $5,301 and $80,000 of cash borrowed
under the Companys multicurrency revolving credit agreement. An allocation of the purchase
price for the acquisition has been made to major categories of assets and liabilities based on
available information. The $101,987 excess of the purchase price over the fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill. Other acquired
intangibles are amortized over a straight-line basis according to their useful lives. During the
quarter ended May 30, 2009, the Company resolved a tax accrual issue resulting in a decrease to
goodwill of $108.Also in December 2007, the Company purchased a distributor of engineered filtration products in
Canada for approximately $1,402 including acquisition costs. Of the purchase price, $811 was
paid during fiscal year 2008, $198 was paid during fiscal year 2009 and the remaining amount
will be paid over the next three years. An allocation of the purchase price for the acquisition
has been made to major categories of assets and liabilities. The $698 excess of the purchase
price over the fair value of the net tangible and identifiable intangible assets acquired was
recorded as goodwill. The business was included in the Industrial/Environmental Filtration
segment from the date of acquisition and was not material to the results of the Company.3.
    
    STOCK-BASED COMPENSATIONThe Company applies the provisions of Statement of Financial Accounting Standards (SFAS) No.
123R, Share-Based Payment, 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
and restricted share unit awards to employees and issues stock option 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. Options granted vest 25% per year beginning at the end
of the first year; therefore, they become fully exercisable at the end of four years. Vesting
may be accelerated in the event of retirement, disability or death of a participant or change in
control of the Company. For those who are already retirement eligible on the date of grant,
compensation expense is recognized immediately. The key provisions of the Companys stock-based
incentive plans are described in Note N of the Companys consolidated financial statements
included in the 2008 Form 10-K.
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The Company recorded pretax compensation expense related to stock options of $620 and $2,277,
respectively, and related tax benefits of $197 and $724, respectively, for the quarter and six
months ended May 30, 2009. For the quarter and six months ended May 31, 2008, the Company
recorded pretax compensation expense related to stock options of $1,293 and $2,775,
respectively, and related tax benefits of $445 and $955, respectively. Pretax compensation
expense related to restricted share unit awards totaled $107 and $865, respectively, for the
quarter and six months ended May 30, 2009, and $412 and $938, respectively, for the quarter and
six months ended May 31, 2008. 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 $10 and $432, respectively, for the quarter and six months ended May 30, 2009,
and $1,323 and $2,289, respectively, for the quarter and six months ended May 31, 2008.Stock OptionsThe following table summarizes the activity for the six months ended May 30, 2009, with respect
to non-qualified stock options granted under the Companys incentive plans.
 SharesGranted
    
    Weightedunder
    
    AverageIncentive
    
    ExercisePlans
    
    PriceOutstanding at beginning of year
    
    
    3,132,111
    
    
    $
    25.75Granted
    
    
    466,025
    
    
    $
    35.22Exercised
    
    
    (76,322
    )
    
    $
    10.91Surrendered
    
    
    (13,200
    )
    
    $
    34.26Outstanding at May 30, 2009
    
    
    3,508,614
    
    
    $
    26.86Options exercisable at May 30, 2009
    
    
    2,622,897
    
    
    $
    24.39
 The fair value of stock options granted during the six months ended May 30, 2009 and May 31,
2008 were based on the following assumptions:
 Six Months EndedMay 30,
    
    
    May 31,2009
    
    
    2008Risk-free interest rate
    
    
    1.91
    %
    
    
    3.76
    %Expected dividend yield
    
    
    0.96
    %
    
    
    0.85
    %Expected volatility factor
    
    
    24.16
    %
    
    
    20.24
    %Expected option term in years
    
    
    6.1
    
    
    
    6.1
 The weighted average fair value per option at the date of grant for options granted during the
six months ended May 30, 2009 and May 31, 2008, was $7.62 and $9.37, respectively. The total
intrinsic value of options exercised during the six months ended May 30, 2009 and May 31, 2008,
was $1,527 and $7,001, respectively.
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The following table summarizes information about the Companys outstanding and exercisable
options at May 30, 2009.
 Options Outstanding
    
    Options ExercisableWeighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    Average
    
    
    
    
    
    Average
    
    
    
    
    
    AverageRange of
    
    
    
    
    
    Exercise
    
    Intrinsic
    
    Remaining
    
    
    
    
    
    Exercise
    
    Intrinsic
    
    RemainingExercise Prices
    
    Number
    
    Price
    
    Value
    
    Life in Years
    
    Number
    
    Price
    
    Value
    
    Life in Years$8.97  $9.75
    
    
    150,948
    
    
    $
    9.10
    
    
    $
    2,953
    
    
    
    0.85
    
    
    
    150,948
    
    
    $
    9.10
    
    
    $
    2,953
    
    
    
    0.85$11.50  $13.75
    
    
    163,400
    
    
    $
    13.13
    
    
    
    2,537
    
    
    
    2.33
    
    
    
    163,400
    
    
    $
    13.13
    
    
    
    2,537
    
    
    
    2.33$16.01  $22.80
    
    
    887,148
    
    
    $
    20.54
    
    
    
    7,208
    
    
    
    3.35
    
    
    
    887,148
    
    
    $
    20.54
    
    
    
    7,208
    
    
    
    3.35$25.31  $28.13
    
    
    467,000
    
    
    $
    25.98
    
    
    
    1,249
    
    
    
    6.03
    
    
    
    466,000
    
    
    $
    25.98
    
    
    
    1,248
    
    
    
    6.02$28.79  $38.23
    
    
    1,840,118
    
    
    $
    32.81
    
    
    
    
    
    
    
    7.23
    
    
    
    955,401
    
    
    $
    31.53
    
    
    
    
    
    
    
    5.823,508,614
    
    
    $
    26.86
    
    
    $
    13,947
    
    
    
    5.59
    
    
    
    2,622,897
    
    
    $
    24.39
    
    
    $
    13,946
    
    
    
    4.52
 At May 30, 2009, total unrecognized compensation cost of $3,689 related to non-vested stock
option awards is expected to be recognized over a weighted-average period of 2.6 years.Restricted Share Unit AwardsDuring the six months ended May 30, 2009 and May 31, 2008, the Company granted 36,368 and 25,989
restricted units of Company common stock with a fair value of $32.78 and $36.48, respectively,
per unit. During the six months ended May 30, 2009, 1,481 restricted units of Company common
stock with a weighted average grant date fair value of $34.19 were forfeited.4.
    
    COMPREHENSIVE EARNINGSThe Companys total comprehensive earnings and its components are as follows:
 Quarter Ended
    
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net earnings
    
    $
    16,791
    
    
    $
    24,634
    
    
    $
    25,582
    
    
    $
    40,783Other comprehensive earnings, net of tax:Foreign currency translation adjustments
    
    
    11,446
    
    
    
    2,412
    
    
    
    8,132
    
    
    
    3,852Pension liability adjustments
    
    
    216
    
    
    
    
    
    
    
    433
    
    
    
    Total comprehensive earnings
    
    $
    28,453
    
    
    $
    27,046
    
    
    $
    34,147
    
    
    $
    44,635
 The components of the ending balances of accumulated other comprehensive loss are as follows:
 May 30,
    
    
    November 29,2009
    
    
    2008Pension liability, net of tax of $10,532 and $10,790
    
    $
    (17,745
    )
    
    $
    (18,178
    )Translation adjustments, net of tax of $155 and $155
    
    
    (252
    )
    
    
    (8,384
    )Accumulated other comprehensive loss
    
    $
    (17,997
    )
    
    $
    (26,562
    )
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5.
    
    ACQUIRED INTANGIBLESThe following table reconciles the activity for goodwill by reporting unit for the six months
ended May 30, 2009.
 Industrial/Engine/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at November 29, 2008
    
    $
    21,143
    
    
    $
    202,821
    
    
    $
    
    
    
    $
    223,964Acquisitions
    
    
    2,195
    
    
    
    2,593
    
    
    
    
    
    
    
    4,788Currency translation adjustments
    
    
    654
    
    
    
    382
    
    
    
    
    
    
    
    1,036Balance at May 30, 2009
    
    $
    23,992
    
    
    $
    205,796
    
    
    $
    
    
    
    $
    229,788
 The following table summarizes acquired intangibles by reporting unit. Other acquired
intangibles includes parts manufacturer regulatory approvals, proprietary technology, patents
and non-compete agreements.
 Industrial/Engine/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at May 30, 2009:Trademarks, gross
    
    $
    919
    
    
    $
    41,510
    
    
    $
    
    
    
    $
    42,429Less accumulated amortization
    
    
    36
    
    
    
    269
    
    
    
    
    
    
    
    305Trademarks, net
    
    $
    883
    
    
    $
    41,241
    
    
    $
    
    
    
    $
    42,124Customer relationships, gross
    
    $
    2,169
    
    
    $
    34,048
    
    
    $
    
    
    
    $
    36,217Less accumulated amortization
    
    
    1,124
    
    
    
    7,017
    
    
    
    
    
    
    
    8,141Customer relationships, net
    
    $
    1,045
    
    
    $
    27,031
    
    
    $
    
    
    
    $
    28,076Other acquired intangibles, gross
    
    $
    243
    
    
    $
    35,400
    
    
    $
    
    
    
    $
    35,643Less accumulated amortization
    
    
    243
    
    
    
    9,761
    
    
    
    
    
    
    
    10,004Other acquired intangibles, net
    
    $
    
    
    
    $
    25,639
    
    
    $
    
    
    
    $
    25,639
 Amortization expense is estimated to be $4,877 in 2009, $4,470 in 2010, $4,410 in 2011, $4,395
in 2012 and $4,325 in 2013.
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6.
    
    FAIR VALUE MEASUREMENTThe Company measures assets and liabilities at fair value as discussed throughout the footnotes
to its quarterly and annual financial statements. Assets or liabilities that have recurring
measurements are shown below:
 Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)May 30, 2009Short-term investments
    
    $
    23,334
    
    
    $
    23,334
    
    
    $
    
    
    
    $
    Restricted trust (part of noncurrent assets)
    
    
    1,321
    
    
    
    1,321
    
    
    
    
    
    
    
    Interest rate agreement (part of current liabilities)
    
    
    (2,355
    )
    
    
    
    
    
    
    (2,355
    )
    
    
    $
    22,300
    
    
    $
    24,655
    
    
    $
    (2,355
    )
    
    $
    November 29, 2008Short-term investments
    
    $
    7,269
    
    
    $
    7,269
    
    
    $
    
    
    
    $
    Restricted trust (part of noncurrent assets)
    
    
    1,428
    
    
    
    1,428
    
    
    
    
    
    
    
    Interest rate agreement (part of long-term liabilities)
    
    
    (2,007
    )
    
    
    
    
    
    
    (2,007
    )
    
    
    $
    6,690
    
    
    $
    8,697
    
    
    $
    (2,007
    )
    
    $
    
 The Companys short-term investments consist of tax-exempt municipal money market funds, which
are actively traded. The restricted trust, which is used to fund certain payments for the
Companys nonqualified U.S. pension plan, consists of actively traded equity and bond funds. The
interest rate agreements fair value was determined based on the present value of expected
future cash flows using discount rates appropriate to the risks involved.7.
    
    GUARANTEES AND WARRANTIESThe Company has provided letters of credit totaling approximately $23,575 and $24,003 as of May
30, 2009 and November 29, 2008, respectively, 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
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.
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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.Changes in the Companys warranty accrual during the six months ended May 30, 2009, are as
follows:
 Balance at November 29, 2008
    
    $
    2,494Accruals for warranties issued during the period
    
    
    502Accruals related to pre-existing warranties
    
    
    345Settlements made during the period
    
    
    (366
    )Other adjustments, including currency translation
    
    
    48Balance at May 30, 2009, included in other accrued liabilities
    
    $
    3,023
 8.
    
    LONG-TERM DEBT AND INTEREST RATE AGREEMENTDuring the second fiscal quarter of 2009, the Company re-issued an $8,410 industrial revenue
bond issued in cooperation with the South Dakota Economic Development Finance Authority which is
due February 1, 2016. The interest rate on this bond was 0.57%
at May 30, 2009 and is reset weekly.On December 18, 2007, the Company entered into a five-year multicurrency revolving credit
agreement (Credit Facility) with a group of financial institutions under which it may borrow up
to $250,000 under a selection of currencies and rate formulas. The Credit Facility interest rate
is based upon, at the Companys election, either a defined Base Rate or the London Interbank
Offered Rate (LIBOR) plus or minus applicable margins. Commitment fees, letter of credit fees
and other fees are also payable as provided in the credit agreement. At May 30, 2009, long-term
debt included $65,000 outstanding on the Credit Facility.The Companys significant accounting policies for derivative instruments are described in Note A
of the 2008 Form 10-K. On January 2, 2008, the Company entered into a fixed rate interest swap
agreement to manage its interest rate exposure on certain amounts outstanding under the Credit
Facility. The interest rate agreement provides for the Company to receive interest at floating
rates based on LIBOR and pay a 3.93% fixed interest rate plus an applicable margin on a notional
amount of $100,000. Payments pursuant to the interest rate agreement are settled on a net basis
quarterly. The agreement expires January 1, 2010. The swap agreement has not been designated as
a hedge pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. Unrealized gains or losses and periodic settlement payments are recorded in
interest expense in the Consolidated Condensed Statements of Earnings and as a component of cash
flows from operations in the Consolidated Condensed Statements of Cash Flows.The Companys swap agreement incorporates by reference the non-financial and financial debt
covenants included in the Credit Facility. The swap agreement also includes other events which
would qualify as a default or termination event, whereby the counterparty could request payment
on the derivative instrument. Should the counterparty to the Companys derivative contract fail
to meet its obligations, the Company would be exposed to greater interest rate fluctuations along
with the cost, if any, to extinguish the contract. The Company manages exposure to counterparty
credit risk by entering into derivative financial instruments with institutions that can be
expected to perform fully under the terms of the agreements.
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At May 30, 2009 and November 29, 2008, the Company had the following derivative in a liability
position. The Company did not have any derivatives in an asset position at either reporting
date.
 Derivatives In Liability PositionConsolidatedDerivatives Not Designated as Hedging
    
    Balance Sheet
    
    
    FairInstruments Under SFAS No. 133
    
    Location
    
    
    ValueMay 30, 2009Fixed rate interest swap agreement
    
    Current liabilities
    
    $
    2,355Total
    
    
    
    
    
    $
    2,355November 29, 2008Fixed rate interest swap agreement
    
    Other long-term liabilities
    
    $
    2,007Total
    
    
    
    
    
    $
    2,007
 The following table reflects the gain (loss) on interest rate agreement for the quarter and six
months ended May 30, 2009 and May 31, 2008, respectively.
 Location of GainDerivatives Not Designated as Hedging
    
    (Loss) on Interest
    
    
    Amount of Gain (Loss) onInstruments Under SFAS No. 133
    
    Rate Agreement
    
    
    Interest Rate AgreementQuarter EndedMay 30,
    
    
    May 31,2009
    
    
    2008Fixed rate interest swap agreement
    
    Interest expense
    
    $
    257
    
    
    $
    1,116
 Six Months EndedMay 30,
    
    
    May 31,2009
    
    
    2008Fixed rate interest swap agreement
    
    Interest expense
    
    $
    (348
    )
    
    $
    (1,337
    )
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9.
    
    PENSION AND OTHER POSTRETIREMENT PLANSThe Company provides various retirement benefits, including defined benefit plans and
postretirement healthcare 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
    
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Pension Benefits:Components of net periodic benefit cost:Service cost
    
    $
    451
    
    
    $
    650
    
    
    $
    901
    
    
    $
    1,300Interest cost
    
    
    2,298
    
    
    
    2,129
    
    
    
    4,595
    
    
    
    4,258Expected return on plan assets
    
    
    (1,715
    )
    
    
    (2,604
    )
    
    
    (3,428
    )
    
    
    (5,207
    )Amortization of unrecognized:Prior service cost
    
    
    32
    
    
    
    41
    
    
    
    65
    
    
    
    82Net actuarial loss
    
    
    390
    
    
    
    42
    
    
    
    779
    
    
    
    84Net periodic benefit cost
    
    $
    1,456
    
    
    $
    258
    
    
    $
    2,912
    
    
    $
    517Cash contributions
    
    $
    417
    
    
    $
    319
    
    
    $
    807
    
    
    $
    645Postretirement Healthcare Benefits:Components of net periodic benefit income:Interest cost
    
    $
    15
    
    
    $
    15
    
    
    $
    30
    
    
    $
    30Amortization of unrecognized:Prior service cost
    
    
    (31
    )
    
    
    (31
    )
    
    
    (62
    )
    
    
    (62
    )Net actuarial gain
    
    
    (46
    )
    
    
    (33
    )
    
    
    (92
    )
    
    
    (66
    )Net periodic benefit income
    
    $
    (62
    )
    
    $
    (49
    )
    
    $
    (124
    )
    
    $
    (98
    )Cash contributions
    
    $
    50
    
    
    $
    53
    
    
    $
    100
    
    
    $
    106
 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 the
nonqualified plan when required for benefit payments and to contribute to the postretirement
healthcare 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 2009 is
approximately $400. The Company, from time to time, makes contributions in excess of the minimum
amount required as economic conditions warrant. The Company has determined it will make a
voluntary contribution to its U.S. qualified plans of $360 in 2009. The Company has not
determined if it will make further contributions to its U.S. qualified plans in 2009. The
Company
also expects to contribute $295 to its U.S. nonqualified plan, $363 to its non-U.S. plan and
$198 to its postretirement healthcare benefit plan to pay benefits during 2009.
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In addition to the plan assets related to its qualified plans, the Company has also funded
$1,321 and $1,428 at May 30, 2009 and November 29, 2008, respectively, in a restricted trust for
its nonqualified plan. This trust is included in other noncurrent assets in the Consolidated
Condensed Balance Sheets.Recent declines in the fair value of the plans assets may result in significant charges to
other comprehensive loss and a potential increase in the fiscal year 2010 pension expense to the
extent the effects are not offset by a change in the discount rate at the time of the Companys
annual pension measurement on November 30, 2009. The Companys required contributions to its
plans may also be affected.10.
    
    INCOME TAXESThe liability for gross unrecognized tax benefits was $2,207 at May 30, 2009 and $1,970 at
November 29, 2008. The net increase in the liability for the quarter and six months ended May
30, 2009 of $95 and $237, respectively, resulted from additions of current and prior period tax
positions and changes in interest and penalties of $125 and $112, respectively.At May 30, 2009, the amount of unrecognized tax benefit for permanent tax adjustments that, if
recognized, would impact the effective tax rate was $1,763. The Company recognizes interest and
penalties related to unrecognized tax benefits in income tax expense. As of May 30, 2009, the
Company had $498 accrued for the payment of interest and penalties. The Company believes it is
reasonably possible that the total amount of unrecognized tax benefits as of May 30, 2009 will
decrease by $657 over the next twelve months as a result of expected settlements with taxing
authorities. Due to the various jurisdictions in which the Company files tax returns and the
uncertainty regarding the timing of settlements, it is possible that there could be other
significant changes in the amount of unrecognized tax benefits in fiscal 2009; however, the
amount cannot be estimated.The Company is regularly audited by federal, state and foreign tax authorities. The Internal
Revenue Service has completed its audits of the Companys U.S. income tax returns through fiscal
2003 and has started audits of the Companys U.S. income tax returns for fiscal years 2004
through 2007. With few exceptions, the Company is no longer subject to income tax examinations
by state or foreign tax jurisdictions for years prior to fiscal 2003.11.
    
    RESTRUCTURING CHARGESAs discussed more fully in the 2008 Form 10-K, 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 anticipates that
the HVAC restructuring program will be completed in fiscal year 2009, and that realization of
the full benefits of the program will be achieved in fiscal year 2010. The majority of these
expenses have been paid as of May 30, 2009.As an ongoing part of this program, during the six months ended May 30, 2009, the Company
consolidated four Louisville, Kentucky area facilities into one location in Jeffersonville,
Indiana in order to realize cost savings and efficiency benefits. Severance costs of $107 and
$133, respectively, were accrued during the quarter and six months ended May 30, 2009 and were
included in cost of sales in the Condensed Consolidated Statements of Earnings. At May 30,
2009, severance costs of $66 were accrued in other accrued liabilities in the accompanying
consolidated condensed balance sheet.
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During May 2009, the Company also closed a small facility in Clover, South Carolina. The
Company did not incur any material expenses related to this closure.During the third quarter of fiscal year 2008, the Company discontinued production at an HVAC
filter manufacturing plant in Henderson, North Carolina. The Company expensed $1,081 in fiscal
year 2008, which was included in cost of sales in the Condensed Consolidated Statements of
Earnings, mainly for employee termination costs and a pension curtailment expense of $516. The
Company expensed $20 and $47, respectively, related to the Henderson, North Carolina location
during the quarter and six months ended May 30, 2009, mainly for facility consolidation and
employee termination costs. Minimal additional charges related to facility consolidation costs
will be recognized when the Company exits that facility. The Company has classified land of
$230 and building and building fixtures of $2,962, which are included in plant assets, as
assets held for sale related to the North Carolina plant.During the second quarter of fiscal year 2008, the Company discontinued production at an HVAC
filter manufacturing plant in Davenport, Iowa. The Company expensed and paid $154 in fiscal
year 2008, which was included in cost of sales in the Condensed Consolidated Statements of
Earnings, mainly for employee termination costs. The Company did not incur any expenses related
to the Davenport, Iowa location during the quarter and six months ended May 30, 2009. Minimal
additional charges related to contract termination costs and facility consolidation costs will
be recognized when the Company exits a lease related to that facility.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
were included in cost of sales in the Condensed Consolidated Statements of Earnings.12.
    
    INSURANCE CLAIMSIn the second quarter of fiscal 2008, four of the Companys facilities in three states were
damaged in weather-related events. In accordance with FASB Interpretation No. 30 (FIN 30),
Accounting for Involuntary Conversions of Non-Monetary Assets to Monetary Assets, the
Companys Industrial/Environmental Filtration segment recognized a gain for fiscal year 2008,
resulting from the excess of insurance proceeds received over the net book value of the
property, of $1,963 (net of the $500 deductible paid by the Company) as a reduction of cost of
sales. The Companys Engine/Mobile Filtration segment recognized a loss for fiscal year 2008,
resulting from costs incurred below the Companys deductible limit, of $178 in cost of sales.
For the quarter ended May 31, 2008, expenses of $750 were recorded in cost of sales. As of May
30, 2009, the Company has a receivable of approximately $292 from the insurance company and the
repairs to the buildings were complete.13.
    
    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 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.
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##### Table of Contents



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 nature and extent of the contamination at issue, 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 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 employees.14.
    
    EARNINGS PER SHARE AND TREASURY STOCK TRANSACTIONSDiluted earnings per share reflect 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
    
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average number of
common shares outstanding
    
    
    51,042,665
    
    
    
    50,752,765
    
    
    
    51,014,126
    
    
    
    50,682,871Dilutive effect of stock-based
arrangements
    
    
    287,902
    
    
    
    519,623
    
    
    
    378,683
    
    
    
    442,841Weighted average number of
diluted common shares
outstanding
    
    
    51,330,567
    
    
    
    51,272,388
    
    
    
    51,392,809
    
    
    
    51,125,712Net earnings
    
    $
    16,791
    
    
    $
    24,634
    
    
    $
    25,582
    
    
    $
    40,783Basic earnings per share amount
    
    $
    0.33
    
    
    $
    0.49
    
    
    $
    0.50
    
    
    $
    0.80Diluted earnings per share amount
    
    $
    0.33
    
    
    $
    0.48
    
    
    $
    0.50
    
    
    $
    0.80
 Options with exercise prices greater than the average market price of the common shares during
the respective periods are not included in the computation of diluted earnings per share.
For the quarter and six months ended May 30, 2009, 1,840,118 and 1,330,663 options with a
weighted average exercise price of $32.81 and $34.32, respectively, were excluded from the
computation. For the quarter ended May 31, 2008, no options were excluded from the computation.
For the six months ended May 31, 2008, 5,325 options with a weighted average exercise price of
$38.23 were excluded from the computation.
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For the six months ended May 30, 2009, exercises of stock options added $1,903 to capital in
excess of par value. For the six months ended May 31, 2008, exercises of stock options added
$8,911 to capital in excess of par value.During the quarter and six months ended May 30, 2009, the Company did not repurchase any shares
of its common stock under its $250,000 stock repurchase program. As of May 30, 2009, there was
approximately $187,210 available for future purchases under this program. During the quarter
ended May 31, 2008, the Company did not repurchase any shares of its common stock. For the six
months ended May 31, 2008, the Company repurchased and retired 1,000,000 shares of common stock
for $37,260.15.
    
    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 30, 2009 and May 31, 2008, 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 30,
    
    
    May 31,
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales:Engine/Mobile Filtration
    
    $
    92,277
    
    
    $
    108,658
    
    
    $
    177,657
    
    
    $
    213,767Industrial/Environmental Filtration
    
    
    119,889
    
    
    
    139,326
    
    
    
    233,347
    
    
    
    265,748Packaging
    
    
    17,229
    
    
    
    19,153
    
    
    
    32,081
    
    
    
    37,803$
    229,395
    
    
    $
    267,137
    
    
    $
    443,085
    
    
    $
    517,318Operating profit:Engine/Mobile Filtration
    
    $
    18,457
    
    
    $
    24,450
    
    
    $
    31,758
    
    
    $
    46,792Industrial/Environmental Filtration
    
    
    5,864
    
    
    
    11,444
    
    
    
    6,527
    
    
    
    15,729Packaging
    
    
    909
    
    
    
    1,564
    
    
    
    632
    
    
    
    2,67625,230
    
    
    
    37,458
    
    
    
    38,917
    
    
    
    65,197Other (expense) income
    
    
    (52
    )
    
    
    183
    
    
    
    (858
    )
    
    
    (3,326
    )Earnings before income taxes and
minority earnings
    
    $
    25,178
    
    
    $
    37,641
    
    
    $
    38,059
    
    
    $
    61,871
 Page 19




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##### Table of Contents



May 30,
    
    November 29,2009
    
    2008Identifiable assets:Engine/Mobile Filtration
    
    $
    251,104
    
    
    $
    252,380Industrial/Environmental Filtration
    
    
    648,775
    
    
    
    638,915Packaging
    
    
    37,706
    
    
    
    37,949Corporate
    
    
    33,964
    
    
    
    28,638$
    971,549
    
    
    $
    957,882
 16.
    
    RECENT ACCOUNTING PRONOUNCEMENTSIn December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141R,
Business Combinations and SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements. These standards will affect the Companys accounting for businesses acquired after
November 28, 2009 and presentation of noncontrolling interests, previously called minority
interests, in its consolidated financial statements in fiscal year 2010. In April 2009, the FASB
issued FSP SFAS 141R-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies. This FSP requires that assets acquired or
liabilities assumed in a business combination and arising from a contingency be recognized at
fair value at the acquisition date if the acquisition date fair value can be determined during
the measurement period. The Company will adopt this FSP in connection with its adoption of SFAS
No. 141R 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
132(R). 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 other comprehensive earnings in the year in which
the changes occur. SFAS No. 158 also requires measurement of the funded status of a plan as of
the date of the statement of financial position. See Note I of the 2008 Form 10-K for further
discussion of the impact of this change on the Companys consolidated financial statements. SFAS
No. 158s provisions regarding the change in the measurement date are effective for the
Companys fiscal year ending November 28, 2009. As permitted by SFAS No. 158, the Company will
use the measurements performed in fiscal year 2008 to estimate the effects of the changes to the
2009 fiscal year-end measurement dates. The impact of the transition to fiscal year-end
measurement dates, which will be recorded as an adjustment to retained earnings in the fourth
quarter of fiscal year 2009, is expected to be immaterial to the consolidated financial
statements.In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities. This standard requires enhanced disclosures to enable investors to better
understand their effects on an entitys financial position, financial performance and cash
flows. These requirements include the disclosure of the fair values of derivative instruments
and their
gains and losses in a tabular format. The Company adopted SFAS No. 161 effective as of the
beginning of the first quarter of fiscal year 2009.
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##### Table of Contents



In June 2008, the FASB issued FASB Staff Position (FSP) EITF 03-6-1, Determining Whether
Instruments Granted in Share Based Payment Transactions Are Participating Securities. FSP EITF
03-6-1 requires that unvested share-based payment awards that contain nonforfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) be considered participating
securities and be included in the computation of earnings per share pursuant to the two-class
method discussed in SFAS No. 128, Earnings per Share. FSP EITF 03-6-1 is effective for the
Companys fiscal year 2010 and requires the restatement of all previously reported earnings per
share data. The Company does not expect the adoption of FSP EITF 03-6-1 to have a material
impact on the consolidated financial statements.In December 2008, the FASB issued FSP SFAS 132R-1, Employers Disclosures about Postretirement
Benefit Plan Assets. FSP SFAS 132R-1 expands the disclosure set forth in SFAS No. 132R by
adding required disclosures about how investment allocation decisions are made by management,
major categories of plan assets and significant concentration of risk. Additionally, FSP SFAS
132R-1 requires an employer to disclose information about the valuation of plan assets similar
to that required under SFAS No. 157. This FSP will be effective for the Companys fiscal year
2010 and will affect the disclosures in the consolidated financial statements.In April 2009, the FASB issued FSP SFAS 157-4, Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly. FSP SFAS 157-4 provides additional guidance for estimating fair value in
accordance with SFAS No. 157 when the volume and level of activity for the asset or liability
have significantly decreased and re-emphasizes that regardless of market conditions the fair
value measurement is an exit price concept as defined in SFAS No. 157. The scope of this FSP
does not include assets and liabilities measured under level 1 inputs (quoted prices in active
markets for identical assets). FSP SFAS 157-4 is applied prospectively to all fair value
measurements where appropriate and will be effective for the Companys interim and annual
periods beginning in the third quarter of fiscal year 2009. The Company does not anticipate
adoption to have a material impact on the Condensed Consolidated Financial Statements.In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This FSP amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require publicly-traded companies to provide disclosures on the fair
value of financial instruments in interim financial statements. FSP SFAS 107-1 and APB 28-1 will
be effective for the Companys third quarter of fiscal year 2009. The Company does not
anticipate adoption to have a material impact on the Condensed Consolidated Financial
Statements.In May 2009, the FASB issued SFAS No. 165, Subsequent Events. This standard establishes
general standards for accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued and shall be
applied to subsequent events not addressed in other applicable generally accepted accounting
principles. SFAS No. 165, among other things, sets forth the period after the balance sheet date
during which management should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, the circumstances under which an entity
should recognize events or transactions occurring after the balance sheet date in its financial
statements and the disclosures an entity should make about events or transactions that occurred
after the balance sheet date. SFAS No. 165 is effective for the Companys interim and annual
periods beginning in the third quarter of fiscal year 2009. The Company does not expect the
adoption of SFAS No. 165 to have a material impact on the interim or annual financial statements
or the disclosures in those financial statements.
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##### Table of Contents



Part I  Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
  EXECUTIVE SUMMARY
 
 Second Quarter Ended
    
    Six Months EndedMay 30, 2009
    
    May 31, 2008
    
    Change
    
    May 30, 2009
    
    May 31, 2008
    
    ChangeNet sales
    
    $
    229,395
    
    
    $
    267,137
    
    
    
    -14.1
    %
    
    $
    443,085
    
    
    $
    517,318
    
    
    
    -14.3
    %Operating profit
    
    
    25,230
    
    
    
    37,458
    
    
    
    -32.6
    %
    
    
    38,917
    
    
    
    65,197
    
    
    
    -40.3
    %Operating margin
    
    
    11.0
    %
    
    
    14.0
    %
    
    -3.0 pts.
    
    
    8.8
    %
    
    
    12.6
    %
    
    -3.8 pts.Other income (expense)
    
    
    (52
    )
    
    
    183
    
    
    
    -128.4
    %
    
    
    (858
    )
    
    
    (3,326
    )
    
    
    -74.2
    %Provision for income taxes
    
    
    8,121
    
    
    
    12,903
    
    
    
    -37.1
    %
    
    
    12,217
    
    
    
    20,844
    
    
    
    -41.4
    %Effective tax rate
    
    
    32.3
    %
    
    
    34.3
    %
    
    -2.0 pts.
    
    
    32.1
    %
    
    
    33.7
    %
    
    -1.6 pts.Net earnings
    
    
    16,791
    
    
    
    24,634
    
    
    
    -31.8
    %
    
    
    25,582
    
    
    
    40,783
    
    
    
    -37.3
    %Net earnings margin
    
    
    7.3
    %
    
    
    9.2
    %
    
    -1.9 pts.
    
    
    5.8
    %
    
    
    7.9
    %
    
    -2.1 pts.Diluted earnings per share
    
    $
    0.33
    
    
    $
    0.48
    
    
    
    -31.3
    %
    
    $
    0.50
    
    
    $
    0.80
    
    
    
    -37.5
    %Average diluted shares
outstanding
    
    
    51,330,567
    
    
    
    51,272,388
    
    
    
    0.1
    %
    
    
    51,392,809
    
    
    
    51,125,712
    
    
    
    0.5
    %
  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
 On February 1, 2009, the Company purchased 85% ownership interests in Pujiang Novaeastern
International Mesh Co., Ltd. (Pujiang) and Quzhou Chinagrace Filter Co., Ltd. (Quzhou). Both
companies are based in China and were under common ownership. Pujiang and Quzhou are manufacturers
of wire mesh filtration products sold primarily to the fibers, resin and aerospace industries. The
combined purchase price for both companies was approximately $1.5 million. In addition, the Company
is committed to invest an additional $2.8 million within two years to fund growth initiatives. The
Company has the right, but not the obligation, to purchase the remaining 15% ownership interests
using a formula based on the combined companies future operating results.On April 6, 2009, the Company purchased Weifang Yuhua Filters Ltd. (Yuhua), a manufacturer of
heavy-duty engine filters, based in Weifang, China for approximately $706,000. Yuhua is included in
the Companys Engine/Mobile Filtration segment.On April 20, 2009, the Company purchased the remaining 20% minority interest in its consolidated
subsidiary based in Weifang, China, for approximately $4.6 million. This subsidiary is part of the
Companys Engine/Mobile Filtration segment and manufactures heavy-duty engine filters and certain
lines of environmental filters and filter systems and also filters used in off-shore oil drilling.
 RESULTS OF OPERATIONS
 SALES
  Second Quarter Ended
    
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    
    
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    ChangeEngine/Mobile Filtration
    
    $
    92,277
    
    
    $
    108,658
    
    
    
    -15.1
    %
    
    $
    177,657
    
    
    $
    213,767
    
    
    
    -16.9
    %Industrial/EnvironmentalFiltration
    
    
    119,889
    
    
    
    139,326
    
    
    
    -14.0
    %
    
    
    233,347
    
    
    
    265,748
    
    
    
    -12.2
    %Packaging
    
    
    17,229
    
    
    
    19,153
    
    
    
    -10.0
    %
    
    
    32,081
    
    
    
    37,803
    
    
    
    -15.1
    %CLARCOR
    
    $
    229,395
    
    
    $
    267,137
    
    
    
    -14.1
    %
    
    $
    443,085
    
    
    $
    517,318
    
    
    
    -14.3
    %
 Engine/Mobile Filtration
  Page 24




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
   Industrial/Environmental Filtration
    Page 25




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 ®
    Packaging
  Page 26




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 OPERATING PROFIT
  Second Quarter Ended
    
    Six Months EndedMay 30,
    
    
    May 31,
    
    
    
    
    
    
    May 30,
    
    
    May 31,2009
    
    
    2008
    
    
    Change
    
    
    2009
    
    
    2008
    
    
    ChangeEngine/Mobile Filtration
    
    $
    18,457
    
    
    $
    24,450
    
    
    
    -24.5
    %
    
    $
    31,758
    
    
    $
    46,792
    
    
    
    -32.1
    %Industrial/Environmental
Filtration
    
    
    5,864
    
    
    
    11,444
    
    
    
    -48.8
    %
    
    
    6,527
    
    
    
    15,729
    
    
    
    -58.5
    %Packaging
    
    
    909
    
    
    
    1,564
    
    
    
    -41.9
    %
    
    
    632
    
    
    
    2,676
    
    
    
    -76.4
    %CLARCOR
    
    $
    25,230
    
    
    $
    37,458
    
    
    
    -32.6
    %
    
    $
    38,917
    
    
    $
    65,197
    
    
    
    -40.3
    %Engine/Mobile Filtration
    
    
    20.0
    %
    
    
    22.5
    %
    
    -2.5 pts.
    
    
    17.9
    %
    
    
    21.9
    %
    
    -4.0 pts.Industrial/Environmental
Filtration
    
    
    4.9
    %
    
    
    8.2
    %
    
    -3.3 pts.
    
    
    2.8
    %
    
    
    5.9
    %
    
    -3.1 pts.Packaging
    
    
    5.3
    %
    
    
    8.2
    %
    
    -2.9 pts.
    
    
    2.0
    %
    
    
    7.1
    %
    
    -5.1 pts.CLARCOR
    
    
    11.0
    %
    
    
    14.0
    %
    
    -3.0 pts.
    
    
    8.8
    %
    
    
    12.6
    %
    
    -3.8 pts.
  Engine/Mobile Filtration
  Page 27




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
  Industrial/Environmental Filtration
     Page 28




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 Packaging
  OTHER EXPENSE
   PROVISION FOR INCOME TAXES
  NET EARNINGS AND EARNINGS PER SHARE
   Page 29




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 FINANCIAL CONDITION
 LIQUIDITY AND CAPITAL RESOURCES
    Page 30




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
      Page 31




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
    Page 32




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
  Payments Due by Period (Dollars in thousands)Less than
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    5 YearsLong-term debt (excluding line of credit)
    
    $
    17,547
    
    
    $
    154
    
    
    $
    167
    
    
    $
    1,406
    
    
    $
    15,820Interest payable on long-term debt
(excluding line of credit)
    
    
    850
    
    
    
    169
    
    
    
    332
    
    
    
    148
    
    
    
    201Line of credit
    
    
    65,000
    
    
    
    
    
    
    
    
    
    
    
    65,000
    
    
    
    Interest payable on line of credit
    
    
    6,200
    
    
    
    2,820
    
    
    
    1,690
    
    
    
    1,690
    
    
    
    Unfunded nonqualified pension plan
    
    
    18,343
    
    
    
    295
    
    
    
    16,730
    
    
    
    479
    
    
    
    839Operating leases
    
    
    61,753
    
    
    
    9,896
    
    
    
    16,561
    
    
    
    11,965
    
    
    
    23,331Investment in affiliate
    
    
    794
    
    
    
    794
    
    
    
    
    
    
    
    
    
    
    
    Acquisitions
    
    
    3,264
    
    
    
    136
    
    
    
    3,037
    
    
    
    91
    
    
    
    Total
    
    $
    173,751
    
    
    $
    14,264
    
    
    $
    38,517
    
    
    $
    80,779
    
    
    $
    40,191
    OFF-BALANCE SHEET ARRANGEMENTS
  Page 33




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
 OTHER MATTERS
 CRITICAL ACCOUNTING POLICIES
  RECENT RELEVANT ACCOUNTING PRONOUNCEMENTS
  RECENT MARKET EVENTS
  OUTLOOK
  Page 34




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MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  CONTINUED
  FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY
  
    
    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;
    
    statements relating to the Companys business and growth strategies; and
    
    any other statements or assumptions that are not historical facts.
   Page 35




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##### Table of Contents



Part I  Item 3. Quantitative and Qualitative Disclosure About Market Risk
  
 Part I  Item 4. Controls and Procedures
  Page 36




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##### Table of Contents



Part II  Other Information
 
 Part II   Item 1. Legal Proceedings
  
 Part II  Item 1A. Risk Factors
  
 Part II  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  (1)
 (c)
    
    (d)(a)
    
    (b)
    
    Total number of
    
    Maximum approximateTotal
    
    Average
    
    shares purchased as
    
    dollar value of sharesnumber of
    
    price
    
    part of the
    
    that may yet beshares
    
    paid per
    
    Companys publicly
    
    purchased under thePeriod
    
    purchased
    
    share
    
    announced plan
    
    PlanMarch 1, 2009 through March 31, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241April 1, 2009 through April 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241May 1, 2009 through May 30, 2009
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241Total
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241
 
 (1)
    
    The Purchase Plan announced June 25, 2007 provides for aggregate purchases up to $250 million. The program expires June 25, 2010. 
 Part II  Item 4. Submission of Matters to a Vote of Security Holders
   Page 37




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##### Table of Contents



BrokerFor
    
    Withheld
    
    Non-Votes(A) Election of DirectorsJ. Marc Adam
    
    
    44,996,354
    
    
    
    1,796,933
    
    
    
    N/AJames Bradford, Jr.
    
    
    45,177,694
    
    
    
    1,615,593
    
    
    
    N/AJames Packard
    
    
    38,282,193
    
    
    
    8,511,094
    
    
    
    N/A
  BrokerFor
    
    Against
    
    Abstain
    
    Non-Votes(B) Approval of CLARCOR Inc. 2009 Incentive
Plan
    
    
    32,555,452
    
    
    
    8,329,988
    
    
    
    2,007,983
    
    
    
    3,899,867(C) Ratification of PricewaterhouseCoopers LLP
    
    
    46,484,155
    
    
    
    285,611
    
    
    
    23,524
    
    
    
    N/A
 
 Part II  Item 6. Exhibits
  10 (i)
    
    CLARCOR Inc. 2009 Incentive Plan (incorporated by
reference to Appendix A to the Companys Definitive Proxy
Statement filed with the SEC on February 13, 2009)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 38




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##### Table of Contents



SIGNATURES
  CLARCOR Inc.
(Registrant)June 19, 2009
    By
    /s/ Norman E. Johnson(Date)
    
    Norman E. JohnsonChairman of the Board, President and Chief
Executive OfficerJune 19, 2009
    By
    /s/ Bruce A. Klein(Date)
    
    Bruce A. KleinVice President  Finance and
Chief Financial Officer Page 39