---



##### 



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 August 30, 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 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 
 615-771-3100
 
 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 August 30, 2008, 50,776,403 common shares with a par value of $1 per share were outstanding




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##### 



Part I  Item 1
 
 August 30,
    
    
    December 1,2008
    
    
    2007(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    44,568
    
    
    $
    36,059Restricted cash
    
    
    468
    
    
    
    1,055Short-term investments
    
    
    7,431
    
    
    
    4,884Accounts receivable, less allowance for losses
of $12,543 for 2008 and $11,143 for 2007
    
    
    209,036
    
    
    
    166,912Inventories:Raw materials
    
    
    59,534
    
    
    
    49,722Work in process
    
    
    34,466
    
    
    
    18,973Finished products
    
    
    70,627
    
    
    
    67,151Total inventories
    
    
    164,627
    
    
    
    135,846Prepaid expenses and other current assets
    
    
    9,556
    
    
    
    6,968Deferred income taxes
    
    
    20,698
    
    
    
    20,196Total current assets
    
    
    456,384
    
    
    
    371,920Plant assets at cost,
    
    
    438,219
    
    
    
    398,350less accumulated depreciation
    
    
    (244,831
    )
    
    
    (229,138
    )193,388
    
    
    
    169,212Goodwill
    
    
    223,895
    
    
    
    124,718Acquired intangibles, less accumulated amortization
    
    
    96,333
    
    
    
    53,209Pension assets
    
    
    
    
    
    
    8,341Deferred income taxes
    
    
    294
    
    
    
    294Other noncurrent assets
    
    
    15,433
    
    
    
    11,441Total assets
    
    $
    985,727
    
    
    $
    739,135LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    $
    131
    
    
    $
    94Accounts payable
    
    
    76,038
    
    
    
    53,523Accrued salaries, wages and commissions
    
    
    15,605
    
    
    
    11,945Compensated absences
    
    
    7,619
    
    
    
    7,484Accrued insurance liabilities
    
    
    12,163
    
    
    
    11,412Customer deposits
    
    
    16,072
    
    
    
    Other accrued liabilities
    
    
    34,840
    
    
    
    25,255Income taxes
    
    
    6,689
    
    
    
    4,458Total current liabilities
    
    
    169,157
    
    
    
    114,171Long-term debt, less current portion
    
    
    97,383
    
    
    
    17,329Postretirement health care benefits
    
    
    766
    
    
    
    947Long-term pension liabilities
    
    
    18,625
    
    
    
    15,104Deferred income taxes
    
    
    35,476
    
    
    
    25,485Other long-term liabilities
    
    
    8,127
    
    
    
    5,792Minority interests
    
    
    3,984
    
    
    
    4,577Total liabilities
    
    
    333,518
    
    
    
    183,405ContingenciesSHAREHOLDERS EQUITYCapital stock
    
    
    50,776
    
    
    
    49,219Capital in excess of par value
    
    
    47,276
    
    
    
    Accumulated other comprehensive earnings (loss)
    
    
    (871
    )
    
    
    5,912Retained earnings
    
    
    555,028
    
    
    
    500,599Total shareholders equity
    
    
    652,209
    
    
    
    555,730Total liabilities and shareholders equity
    
    $
    985,727
    
    
    $
    739,135




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##### 



Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    276,300
    
    
    $
    238,270
    
    
    $
    793,618
    
    
    $
    682,925Cost of sales
    
    
    188,152
    
    
    
    165,412
    
    
    
    543,304
    
    
    
    478,318Gross profit
    
    
    88,148
    
    
    
    72,858
    
    
    
    250,314
    
    
    
    204,607Selling and administrative expenses
    
    
    47,328
    
    
    
    38,236
    
    
    
    144,297
    
    
    
    114,904Operating profit
    
    
    40,820
    
    
    
    34,622
    
    
    
    106,017
    
    
    
    89,703Other income (expense):Interest expense
    
    
    (1,313
    )
    
    
    (281
    )
    
    
    (4,951
    )
    
    
    (776
    )Interest income
    
    
    311
    
    
    
    264
    
    
    
    1,012
    
    
    
    1,233Other, net
    
    
    (347
    )
    
    
    70
    
    
    
    (736
    )
    
    
    (176
    )(1,349
    )
    
    
    53
    
    
    
    (4,675
    )
    
    
    281Earnings before income taxes and
minority interests
    
    
    39,471
    
    
    
    34,675
    
    
    
    101,342
    
    
    
    89,984Provision for income taxes
    
    
    13,578
    
    
    
    7,999
    
    
    
    34,422
    
    
    
    25,878Earnings before minority interests
    
    
    25,893
    
    
    
    26,676
    
    
    
    66,920
    
    
    
    64,106Minority interests in earnings of subsidiaries
    
    
    (82
    )
    
    
    (61
    )
    
    
    (326
    )
    
    
    (189
    )Net earnings
    
    $
    25,811
    
    
    $
    26,615
    
    
    $
    66,594
    
    
    $
    63,917Net earnings per common share:Basic
    
    $
    0.51
    
    
    $
    0.53
    
    
    $
    1.31
    
    
    $
    1.26Diluted
    
    $
    0.50
    
    
    $
    0.53
    
    
    $
    1.30
    
    
    $
    1.25Average number of common shares outstanding:Basic
    
    
    50,885,417
    
    
    
    49,961,327
    
    
    
    50,745,240
    
    
    
    50,555,380Diluted
    
    
    51,455,710
    
    
    
    50,560,937
    
    
    
    51,252,593
    
    
    
    51,001,420Dividends paid per share
    
    $
    0.0800
    
    
    $
    0.0725
    
    
    $
    0.2400
    
    
    $
    0.2175




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##### 



Nine Months EndedAugust 30,
    
    
    September 1,2008
    
    
    2007Cash flows from operating activities:Net earnings
    
    $
    66,594
    
    
    $
    63,917Depreciation
    
    
    19,130
    
    
    
    16,448Amortization
    
    
    3,975
    
    
    
    1,999Loss on interest rate agreement
    
    
    1,421
    
    
    
    Stock-based compensation expense
    
    
    4,162
    
    
    
    3,217Excess tax benefit from stock-based compensation
    
    
    (2,396
    )
    
    
    (2,622
    )Changes in short-term investments
    
    
    (2,547
    )
    
    
    23,445Changes in assets and liabilities, excluding short-term
investments
    
    
    (15,521
    )
    
    
    (8,357
    )Other, net
    
    
    396
    
    
    
    933Net cash provided by operating activities
    
    
    75,214
    
    
    
    98,980Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (75,329
    )
    
    
    (12,378
    )Additions to plant assets
    
    
    (24,851
    )
    
    
    (29,336
    )Investment in affiliate
    
    
    (2,000
    )
    
    
    (47
    )Other, net
    
    
    139
    
    
    
    1,704Net cash used in investing activities
    
    
    (102,041
    )
    
    
    (40,057
    )Cash flows from financing activities:Net proceeds under line of credit
    
    
    80,000
    
    
    
    Payment of long-term debt
    
    
    (7,366
    )
    
    
    (4,638
    )Sale of capital stock under stock option and employee
purchase plans
    
    
    8,467
    
    
    
    4,966Purchase of treasury stock
    
    
    (37,260
    )
    
    
    (49,334
    )Excess tax benefits from stock-based compensation
    
    
    2,396
    
    
    
    2,622Cash dividends paid
    
    
    (12,259
    )
    
    
    (11,017
    )Net cash provided by / (used in) financing activities
    
    
    33,978
    
    
    
    (57,401
    )Net effect of exchange rate changes on cash
    
    
    1,358
    
    
    
    1,174Net change in cash and cash equivalents
    
    
    8,509
    
    
    
    2,696Cash and cash equivalents, beginning of period
    
    
    36,059
    
    
    
    29,051Cash and cash equivalents, end of period
    
    $
    44,568
    
    
    $
    31,747Cash paid during the period for:Interest
    
    $
    2,892
    
    
    $
    613Income taxes
    
    $
    29,249
    
    
    $
    28,607




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##### 



1.
    
    CONSOLIDATED FINANCIAL STATEMENTSThe consolidated condensed balance sheet as of August 30, 2008, the consolidated condensed
statements of earnings and the consolidated condensed statements of cash flows for the periods
ended August 30, 2008, and September 1, 2007, have been prepared by the Company without audit.
The financial statements have been prepared on the same basis as those in the Companys Annual
Report on Form 10-K for the fiscal year ended December 1, 2007 (2007 Form 10-K). The December
1, 2007 consolidated balance sheet data was derived from the Companys year-end audited
financial statements as presented in the 2007 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 August 30, 2008, are not necessarily
indicative of the operating results for the full year.2.
    
    BUSINESS ACQUISITIONSEffective May 1, 2008, the Company acquired a 30% preferred equity share in BioProcess
Technologies, Inc. (BPT), a Rhode Island based manufacturer of industrial waste water and water
reuse filtration systems, for approximately $4,000, payable $2,000 in cash with the remaining
$2,000 to be paid by December 31, 2009. Under the terms of the agreement with BPT, the Company
will have 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, BPTs operating income. The investment is being accounted for under the equity method.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 growing 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 approximately $146,216 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 cash on hand and
approximately $80,000 of cash borrowed under the Companys revolving credit agreement.A preliminary allocation of the initial 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. The $98,984 excess of the initial purchase price over the preliminary
estimated fair value of the net tangible and identifiable intangible assets acquired was
recorded as goodwill. Other acquired intangibles will be amortized over a straight-line basis
according to their useful lives. The estimated amounts recognized and their respective lives
are shown in the following table.
 Page 5




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##### 



2.
    
    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
 The Company expects to finalize the purchase price allocation during fiscal 2008. The
allocation will be completed when the Company finishes its appraisal of the assets acquired
(which includes completing an assessment of the liabilities assumed) and finalizes the estimates
associated with deferred taxes and other costs related to the acquisition. The actual
allocation of the final purchase price and the resulting effect on income from operations will
likely differ from the unaudited pro forma amounts included herein.Following is a condensed balance sheet based on the current assessment of fair values of the
assets acquired and liabilities assumed.
 Cash
    
    $
    11,448Accounts receivable, less allowance for losses
    
    
    18,549Inventory, net
    
    
    15,220Prepaid expenses and current assets
    
    
    2,949Current deferred tax assets
    
    
    875Plant assets
    
    
    18,822Goodwill
    
    
    98,984Trademarks and trade names
    
    
    11,800Other acquired intangibles
    
    
    35,300Other noncurrent assets
    
    
    1,012Total assets acquired
    
    
    214,959Current notes payable
    
    
    (7,411
    )Accounts payable and accrued liabilities
    
    
    (31,373
    )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
 For its fiscal year ended May 31, 2007, Peco had sales of approximately $102,000 and operating
profit of approximately $12,500.The following unaudited pro forma information summarizes the results of operations and the
condensed consolidated balance sheet for the period indicated as if the Peco acquisition had
been completed as of the beginning of fiscal 2007. The pro forma information gives effect to
actual operating results prior to the acquisition, adjusted to include the estimated pro forma
effect of interest expense, depreciation, amortization of intangibles, income taxes and the
additional Company shares issued. These pro forma amounts are based on a preliminary
 Page 6




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##### 



2.
    
    BUSINESS ACQUISITIONS (Continued)allocation of the purchase price to estimates of the fair values of the assets acquired and
liabilities assumed. The pro forma amounts include the Companys preliminary determination of
purchase accounting adjustments based upon available information and certain assumptions that
the Company believes are reasonable. The unaudited pro forma results do not include the impact
of any revenues, costs or other operating synergies and non-recurring charges expected to result
from the acquisition. In addition, management has performed an initial review of the respective
accounting policies and has determined that conforming Pecos policies to the Companys
policies, where applicable, creates no significant differences that impact the unaudited pro
forma amounts shown below. The pro forma amounts do not purport to be indicative of the results
that would have actually been obtained if the acquisition had occurred as of the beginning of
the period presented or that may be obtained in the future.
 Quarter Ended
    
    
    Nine Months EndedSeptember 1, 2007
    
    
    September 1, 2007Net sales
    
    $
    264,160
    
    
    $
    768,762Operating profit
    
    
    36,394
    
    
    
    98,128Net earnings
    
    
    26,983
    
    
    
    67,518Diluted earnings per share
    
    $
    0.51
    
    
    $
    1.27As of November 30, 2007Current assets
    
    $
    413,704Plant assets
    
    
    188,624Goodwill
    
    
    223,702Other acquired intangibles
    
    
    100,309Other noncurrent assets
    
    
    21,533Total assets
    
    $
    947,872Current liabilities
    
    $
    145,994Long-term debt
    
    
    97,373Other long-term liabilities
    
    
    70,335Shareholders equity
    
    
    634,170Total liabilities and shareholders equity
    
    $
    947,872
 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 at closing and the remaining $591 will be paid over the next four years. A preliminary
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 preliminary estimated fair
value of the net tangible and identifiable intangible assets acquired was recorded as goodwill.
The business is included in the Industrial/Environmental Filtration segment from the date of
acquisition and is not material to the results of the Company.On March 5, 2007, the Company acquired an 80% ownership share in Sinfa SA, a manufacturer of
automotive and heavy-duty engine filters based in Casablanca, Morocco, for approximately $5,556
in cash including acquisition expenses, net of cash received, plus debt of approximately $6
million which the Company paid after the acquisition date. The business is included in the
Engine/Mobile Filtration segment from the date of acquisition. The acquisition is not material
to the results of the Company.
 Page 7




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##### 



2.
    
    BUSINESS ACQUISITIONS (Continued)As part of the purchase agreement, the Company and the minority owners each have an option to
require the purchase of the remaining 20% ownership share by the Company after December 31,
2012. As of August 30, 2008, the purchase price for such 20% ownership share is estimated to be
$1 million based on the formula in the purchase agreement. Any change in the estimated purchase
price for the remaining ownership share will be recorded through net earnings.During February 2007, the Company acquired a synthetic fibers filtration business from Newton
Tool & Mfg. Company, Inc., a privately-owned engineering and machining company based in
Swedesboro, New Jersey, for $6,603 in cash, including acquisition expenses. The synthetic
fibers filtration business, including all of the related production equipment, was moved into
the Companys operations in Houston, Texas, and Shelby, North Carolina. The business is
included in the Industrial/Environmental Filtration segment from the date of acquisition.An allocation of the purchase price for the acquisition was made to major categories of assets
and liabilities. The $715 excess of the purchase price over the estimated fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill. Other acquired
intangibles included non-compete agreements valued at $100 and customer relationships valued at
$2,100, which are being amortized on a straight-line basis over three years and thirteen years,
respectively. The acquisition is not material to the results of the Company.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. The key provisions of the
Companys stock-based incentive plans are described in Note O of the Companys consolidated
financial statements included in the 2007 Form 10-K.The Company recorded pretax compensation expense related to stock options of $365 and $3,140 and
related tax benefits of $126 and $1,081 for the quarter and nine months ended August 30, 2008,
respectively. For the quarter and nine months ended September 1, 2007, the Company recorded
pretax compensation expense related to stock options of $892 and $2,402 and related tax benefits
of $296 and $798, respectively. The Company also recorded $84 and $1,022 in pretax compensation
expense related to its restricted share units for the quarter and nine months ended August 30,
2008, respectively, and $272 and $815 for the quarter and nine months ended September 1, 2007,
respectively. The tax benefits associated with tax deductions that exceed the amount of
compensation expense recognized in the financial statements related to stock-based compensation
were $107 and $2,396 for the quarter and nine months ended August 30, 2008, respectively, and
$575 and $2,622 for the quarter and nine months ended September 1, 2007, respectively.
 Page 8




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##### 



3.
    
    STOCK-BASED COMPENSATION (Continued)Stock OptionsThe following table summarizes the activity for the nine months ended August 30, 2008, with
respect to non-qualified stock options granted under the Companys incentive plans.
 Shares Granted
    
    Weightedunder Incentive
    
    AveragePlans
    
    Exercise PriceOutstanding at beginning of year
    
    
    3,191,598
    
    
    $
    23.79Granted
    
    
    477,900
    
    
    
    36.38Exercised
    
    
    (450,075
    )
    
    
    21.54Surrendered
    
    
    (67,724
    )
    
    
    35.77Outstanding at August 30, 2008
    
    
    3,151,699
    
    
    $
    25.76Options exercisable at August 30, 2008
    
    
    2,495,433
    
    
    $
    23.26
 The total intrinsic value of options exercised during the nine months ended August 30, 2008, and
September 1, 2007, was $7,379 and $7,741, respectively. The weighted average fair value per
option at the date of grant for options granted during the nine months ended August 30, 2008 and
September 1, 2007, was $9.37 and $9.36, respectively.The following table summarizes information about the Companys outstanding and exercisable
options at August 30, 2008.
 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
    
    
    198,624
    
    
    $
    9.14
    
    
    
    1.42
    
    
    
    198,624
    
    
    $
    9.14
    
    
    
    1.42$11.50 - $13.75
    
    
    169,600
    
    
    
    13.16
    
    
    
    3.09
    
    
    
    169,600
    
    
    
    13.16
    
    
    
    3.09$16.01 - $22.80
    
    
    913,198
    
    
    
    20.54
    
    
    
    4.12
    
    
    
    913,198
    
    
    
    20.54
    
    
    
    4.12$25.89 - $38.23
    
    
    1,870,277
    
    
    
    31.21
    
    
    
    7.04
    
    
    
    1,214,011
    
    
    
    29.02
    
    
    
    6.083,151,699
    
    
    $
    25.76
    
    
    
    5.63
    
    
    
    2,495,433
    
    
    $
    23.26
    
    
    
    4.79
 At August 30, 2008, the aggregate intrinsic value of options outstanding and exercisable was
$44,664 and $41,610, respectively.Restricted Share Unit AwardsDuring the nine months ended August 30, 2008 and September 1, 2007, the Company granted 25,989
and 26,200 restricted units of Company common stock with a fair value of $36.48 and $33.75,
respectively, per unit. Compensation expense related to restricted stock unit awards totaled
$84 and $1,022 for the quarter and nine months ended August 30, 2008, respectively, and $272 and
$815 for the quarter and nine months ended September 1, 2007, respectively.
 Page 9




---



##### 



4.
    
    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
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Weighted average number of common shares
outstanding
    
    
    50,885,417
    
    
    
    49,961,327
    
    
    
    50,745,240
    
    
    
    50,555,380Dilutive effect of stock-based arrangements
    
    
    570,293
    
    
    
    599,610
    
    
    
    507,353
    
    
    
    446,040Weighted average
number of diluted
common shares
outstanding
    
    
    51,455,710
    
    
    
    50,560,937
    
    
    
    51,252,593
    
    
    
    51,001,420Net earnings
    
    $
    25,811
    
    
    $
    26,615
    
    
    $
    66,594
    
    
    $
    63,917Basic earnings per share amount
    
    $
    0.51
    
    
    $
    0.53
    
    
    $
    1.31
    
    
    $
    1.26Diluted earnings per share amount
    
    $
    0.50
    
    
    $
    0.53
    
    
    $
    1.30
    
    
    $
    1.25
 Options with exercise prices greater than the average market price of the common shares during
the respective quarter and nine-month periods were not included in the computation of diluted
earnings per share. No options were excluded for the quarter ended August 30, 2008. For the
nine months ended August 30, 2008, 5,325 options with a weighted average exercise price of
$38.23 were excluded from the computation. For the quarter and nine months ended September 1,
2007, 5,325 and 61,625 options with a weighted average exercise price of $38.23 and $35.80,
respectively, were excluded from the computation.For the nine months ended August 30, 2008, exercises of stock options added $9,357 to capital in
excess of par value.During the quarter ended August 30, 2008, the Company did not repurchase any shares of its
common stock under its $250,000 stock repurchase program. For the nine months ended August 30,
2008, the Company repurchased and retired 1,000,000 shares of common stock for $37,260. As of
August 30, 2008, $187,210 remains available for purchase under this program. During the quarter
ended September 1, 2007, the Company did not repurchase any shares of common stock. During the
nine months ended September 1, 2007, the Company repurchased and retired 1,550,000 shares of
common stock for $49,334.
 Page 10




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##### 



5.
    
    COMPREHENSIVE EARNINGSThe Companys total comprehensive earnings and its components are as follows:
 Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Net earnings
    
    $
    25,811
    
    
    $
    26,615
    
    
    $
    66,594
    
    
    $
    63,917Other comprehensive earnings, net of tax:Foreign currency translation adjustments
    
    
    (4,157
    )
    
    
    2,833
    
    
    
    (305
    )
    
    
    3,665Pension curtailment (See Note 10)
    
    
    (6,478
    )
    
    
    
    
    
    
    (6,478
    )
    
    
    Total comprehensive earnings
    
    $
    15,176
    
    
    $
    29,448
    
    
    $
    59,811
    
    
    $
    67,582
 The components of the ending balances of accumulated other comprehensive earnings are as
follows:
 August 30,
    
    
    December 1,2008
    
    
    2007Pension liability, net of $7,502 tax
    
    $
    (13,472
    )
    
    $
    (6,994
    )Translation adjustments, net of $155 tax
    
    
    12,601
    
    
    
    12,906Accumulated other comprehensive earnings (loss)
    
    $
    (871
    )
    
    $
    5,912
 As discussed in Note 10, the remeasurement of pension plan assets and obligations due to a
pension plan curtailment in the third quarter of 2008 resulted in a $10,324, or $6,478 after
tax, adjustment to accumulated other comprehensive loss.6.
    
    FAIR VALUE MEASUREMENTEffective, December 2, 2007, the Company adopted the required provisions of SFAS No. 157, Fair
Value Measurements, which defines fair value, establishes a framework for measuring fair value
pursuant to generally accepted accounting principles (GAAP) and expands disclosures about fair
value measurements. These provisions relate to the Companys financial assets and liabilities.On February 12, 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position
(FSP) No. 157-2, which deferred the effective date for certain portions of SFAS No. 157 related
to nonrecurring measurements of nonfinancial assets and liabilities. That provision of SFAS No.
157 will be effective for the Companys fiscal year 2009.The Company measures certain 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:
 Page 11




---



##### 



6.
    
    FAIR VALUE MEASUREMENT (Continued)
 Fair Value Measurements at Reporting Date UsingQuoted Prices in
    
    SignificantActive Markets
    
    Other
    
    Significantfor Identical
    
    Observable
    
    UnobservableAugust
    
    Assets
    
    Inputs
    
    InputsDescription
    
    30, 2008
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Short-term investments
    
    $
    7,431
    
    
    $
    7,431
    
    
    $
    
    
    
    $
    Restricted trust
(part of noncurrent
assets)
    
    
    1,779
    
    
    
    1,779
    
    
    
    
    
    
    
    Interest rate
agreement (part of
long-term
liabilities)
    
    
    (1,421
    )
    
    
    
    
    
    
    (1,421
    )
    
    
    Net
    
    $
    7,789
    
    
    $
    9,210
    
    
    $
    (1,421
    )
    
    $
    
 The Companys short-term investments consist of bank money market funds which are actively
traded. The restricted trust, which is used to fund certain payments under its non-qualified
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 with the risks involved.7.
    
    LONG-TERM DEBT AND INTEREST RATE AGREEMENTOn December 18, 2007, the Company entered into a five-year multicurrency revolving credit
agreement with a group of financial institutions under which it may borrow up to $250,000 under
a selection of currencies and rate formulas. The interest rate is based upon 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 payable as provided in the credit
agreement. At August 30, 2008, long-term debt included $80,000 outstanding on the line of
credit.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 $250,000 revolving credit
agreement. The interest rate agreement provides for the Company to pay a 3.93% fixed interest
rate plus applicable margin on a notional amount of $100,000 and expires January 1, 2010. Under
the agreement the Company will receive interest at floating rates based on LIBOR. Unrealized
gains/losses and periodic settlement payments are recorded in interest expense in the statement
of earnings and as a component of cash flows from operations in the statement of cash flows.
For the quarter and nine months ended August 30, 2008, an $84 loss and a $1,421 loss were
recorded, respectively, related to the interest rate agreement.
 Page 12




---



##### 



8.
    
    ACQUIRED INTANGIBLESThe following table reconciles the activity for goodwill by reporting unit for the nine months
ended August 30, 2008.
 Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at December 1, 2007
    
    $
    24,185
    
    
    $
    100,533
    
    
    $
    
    
    
    $
    124,718Acquisitions
    
    
    14
    
    
    
    99,939
    
    
    
    
    
    
    
    99,953Currency translation adjustments
    
    
    (635
    )
    
    
    (141
    )
    
    
    
    
    
    
    (776
    )Balance at August 30, 2008
    
    $
    23,564
    
    
    $
    200,331
    
    
    $
    
    
    
    $
    223,895
 The following table summarizes acquired intangibles by reporting unit. Other acquired
intangibles includes parts manufacturer regulatory approvals, proprietary technology, patents
and noncompete agreements.
 Engine/
    
    
    Industrial/Mobile
    
    
    EnvironmentalFiltration
    
    
    Filtration
    
    
    Packaging
    
    
    TotalBalance at August 30, 2008:Trademarks, gross
    
    $
    922
    
    
    $
    40,957
    
    
    $
    
    
    
    $
    41,879Less accumulated amortization
    
    
    24
    
    
    
    258
    
    
    
    
    
    
    
    282Trademarks, net
    
    $
    898
    
    
    $
    40,699
    
    
    $
    
    
    
    $
    41,597Customer relationships, gross
    
    $
    2,184
    
    
    $
    32,974
    
    
    $
    
    
    
    $
    35,158Less accumulated amortization
    
    
    1,067
    
    
    
    5,299
    
    
    
    
    
    
    
    6,366Customer relationships, net
    
    $
    1,117
    
    
    $
    27,675
    
    
    $
    
    
    
    $
    28,792Other acquired intangibles, gross
    
    $
    243
    
    
    $
    33,883
    
    
    $
    
    
    
    $
    34,126Less accumulated amortization
    
    
    236
    
    
    
    7,946
    
    
    
    
    
    
    
    8,182Other acquired intangibles, net
    
    $
    7
    
    
    $
    25,937
    
    
    $
    
    
    
    $
    25,944
 Amortization expense is estimated to be $5,527 in 2008, $4,268 in 2009, $4,224 in 2010, $4,163
in 2011 and $4,148 in 2012.9.
    
    GUARANTEES AND WARRANTIESThe Company has provided letters of credit totaling approximately $25,355 as of August 30, 2008
and $25,727 as of December 1, 2007 to various government agencies, primarily related to
industrial revenue bonds, and to insurance companies and other entities in support of its
obligations. The Company believes that no payments will be required resulting from these
accommodation obligations.
 Page 13




---



##### 



9.
    
    GUARANTEES AND WARRANTIES (Continued)In the ordinary course of business, the Company also provides routine indemnifications and other
guarantees whose terms range in duration and are often not explicitly defined. The Company does
not believe these will have a material impact on the results of operations or financial
condition of the Company.Warranties are recorded as a liability on the balance sheet and as charges to current expense
for estimated normal warranty costs and, if applicable, for specific performance issues known to
exist on products already sold. The expenses estimated to be incurred are provided at the time
of sale and adjusted as needed, based primarily upon experience.Changes in the Companys warranty accrual during the nine months ended August 30, 2008, are as
follows:
 Balance at December 1, 2007
    
    $
    1,485Business acquisitions
    
    
    1,732Accruals for warranties issued during the period
    
    
    673Accruals related to pre-existing warranties
    
    
    138Settlements made during the period
    
    
    (1,026
    )Other adjustments, including currency translation
    
    
    6Balance at August 30, 2008, included in other accrued liabilities
    
    $
    3,008
 10.
    
    RETIREMENT BENEFITSThe Company provides various retirement benefits, including defined benefit plans and
postretirement health care plans covering certain current and retired employees in the U.S. and
abroad. Components of net periodic benefit cost and company contributions for these plans were
as follows:
 Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Pension Benefits:Components of net periodic benefit
cost:Service cost
    
    $
    561
    
    
    $
    725
    
    
    $
    1,861
    
    
    $
    2,174Interest cost
    
    
    2,158
    
    
    
    1,794
    
    
    
    6,416
    
    
    
    5,380Expected return on plan assets
    
    
    (2,398
    )
    
    
    (2,146
    )
    
    
    (7,605
    )
    
    
    (6,434
    )Amortization of unrecognized:Prior service cost
    
    
    38
    
    
    
    45
    
    
    
    120
    
    
    
    133Net actuarial loss
    
    
    184
    
    
    
    304
    
    
    
    268
    
    
    
    907Pension curtailment
    
    
    516
    
    
    
    
    
    
    
    516
    
    
    
    Net periodic benefit cost
    
    $
    1,059
    
    
    $
    722
    
    
    $
    1,576
    
    
    $
    2,160Cash contributions
    
    $
    522
    
    
    $
    77
    
    
    $
    1,167
    
    
    $
    258
 Page 14




---



##### 



10.
    
    RETIREMENT BENEFITS (Continued)
 Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Postretirement Healthcare Benefits:Components of net periodic
benefit income:Service cost
    
    $
    
    
    
    $
    1
    
    
    $
    
    
    
    $
    1Interest cost
    
    
    15
    
    
    
    18
    
    
    
    45
    
    
    
    54Amortization of unrecognized:Prior service cost
    
    
    (31
    )
    
    
    (31
    )
    
    
    (93
    )
    
    
    (93
    )Net actuarial gain
    
    
    (33
    )
    
    
    (32
    )
    
    
    (99
    )
    
    
    (96
    )Net periodic benefit income
    
    $
    (49
    )
    
    $
    (44
    )
    
    $
    (147
    )
    
    $
    (134
    )Cash contributions
    
    $
    53
    
    
    $
    70
    
    
    $
    159
    
    
    $
    210
 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 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 $1,779 and $1,044 at August 30, 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 2008.As a result of the two plant closings in the Industrial/Environmental Filtration segment, the
Company has recognized a curtailment loss of $516 during the third quarter of 2008 under SFAS
No. 88 due to the significant reduction in the expected aggregate years of future service cost
for employees covered by one of its U.S. qualified pension plans. The curtailment loss includes
recognition of the change in the projected benefit obligation (PBO) and a portion of the
previously unrecognized prior service cost reflecting the reduction in expected future service.
The PBO increased to $333. The remeasurement of the U.S. qualified pension plan as of the July
1, 2008 curtailment date will increase fiscal 2008 pension cost by $575, of which $230 was
recorded in the third quarter of 2008 and the remainder will be recognized in the fourth quarter
of 2008. The impact of the curtailment is reflected in the table above.
 Page 15




---



##### 



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 gross unrecognized tax benefits was $1,991 at August 30, 2008 and $1,650 at
December 2, 2007 after the initial 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 from
increases of unrecognized tax benefits and decreases due to statute expirations for the quarter
and nine months of $285 and $56, respectively.At August 30, 2008, the amount of unrecognized tax benefit for permanent tax adjustments that,
if recognized, would impact the effective tax rate was $1,547. The Company recognizes interest
and penalties related to unrecognized tax benefits in income tax expense. As of August 30,
2008, the Company had $428 accrued for the payment of interest and penalties. The Company does
not expect a significant increase or decrease in its unrecognized tax benefits over the next 12
months.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
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 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.
 Page 16




---



##### 



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
and at an HVAC filter manufacturing plant in Henderson, North Carolina during the third quarter
2008. The Company accrued $313 for employee terminations costs related to the North Carolina
plant closing in the third quarter of 2008. This amount was paid early in the fourth quarter of
2008. The closure also resulted in the recognition of a pension curtailment expense of $516
during the third quarter as discussed in Note 10. There may be additional costs associated with
this plant closing when the company completely exits the facilities in the fourth quarter of
2008. The majority of the $145 related to the Iowa plant closing was expensed and paid in the
second quarter of 2008.14.
    
    INSURANCE CLAIMSDuring the second quarter of 2008, four of the Companys facilities in three states were damaged
in weather-related incidents resulting in $678 of expense recorded in cost of sales for the nine
months ended August 30, 2008. The Engine/Mobile Filtration segment incurred $178 of costs and
the Industrial/Environmental Filtration segment incurred $500 of costs. 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 nine
months ended August 30, 2008, and September 1, 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
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales:Engine/Mobile Filtration
    
    $
    117,753
    
    
    $
    112,280
    
    
    $
    331,520
    
    
    $
    317,480Industrial/Environmental Filtration
    
    
    138,708
    
    
    
    104,980
    
    
    
    404,456
    
    
    
    307,404Packaging
    
    
    19,839
    
    
    
    21,010
    
    
    
    57,642
    
    
    
    58,041$
    276,300
    
    
    $
    238,270
    
    
    $
    793,618
    
    
    $
    682,925
 Page 17




---



##### 



15.
    
    SEGMENT DATA (Continued)
 Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    August 30,
    
    
    September 1,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating profit:Engine/Mobile Filtration
    
    $
    28,669
    
    
    $
    26,629
    
    
    $
    75,461
    
    
    $
    71,351Industrial/Environmental Filtration
    
    
    10,404
    
    
    
    6,100
    
    
    
    26,133
    
    
    
    14,472Packaging
    
    
    1,747
    
    
    
    1,893
    
    
    
    4,423
    
    
    
    3,88040,820
    
    
    
    34,622
    
    
    
    106,017
    
    
    
    89,703Other income (expense)
    
    
    (1,349
    )
    
    
    53
    
    
    
    (4,675
    )
    
    
    281Earnings before income taxes and
minority earnings
    
    $
    39,471
    
    
    $
    34,675
    
    
    $
    101,342
    
    
    $
    89,984Identifiable assets:Engine/Mobile Filtration
    
    
    
    
    
    
    
    
    
    $
    269,115
    
    
    $
    248,235Industrial/Environmental Filtration
    
    
    
    
    
    
    
    
    
    
    644,494
    
    
    
    397,863Packaging
    
    
    
    
    
    
    
    
    
    
    42,052
    
    
    
    44,412Corporate
    
    
    
    
    
    
    
    
    
    
    30,066
    
    
    
    58,368$
    985,727
    
    
    $
    748,878
 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
132(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




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   (Dollars in thousands except per share data)Third Quarter Ended
    
    
    Nine Months EndedAugust
    
    
    September
    
    
    %
    
    
    August
    
    
    September
    
    
    %30, 2008
    
    
    1, 2007
    
    
    Change
    
    
    30, 2008
    
    
    1, 2007
    
    
    ChangeNet Sales
    
    $
    276,300
    
    
    $
    238,270
    
    
    
    16.0
    %
    
    $
    793,618
    
    
    $
    682,925
    
    
    
    16.2
    %Operating Profit
    
    
    40,820
    
    
    
    34,622
    
    
    
    17.9
    %
    
    
    106,017
    
    
    
    89,703
    
    
    
    18.2
    %Operating Margin
    
    
    14.8
    %
    
    
    14.5
    %
    
    0.3
    pts.
    
    
    13.4
    %
    
    
    13.1
    %
    
    0.3
    pts.Other Income/(Expense)
    
    
    (1,349
    )
    
    
    53
    
    
    
    n/a
    
    
    
    (4,675
    )
    
    
    281
    
    
    
    n/aEarnings before Income Taxes and Minority Interests
    
    
    39,471
    
    
    
    34,675
    
    
    
    13.8
    %
    
    
    101,342
    
    
    
    89,984
    
    
    
    12.6
    %Provision for Income Taxes
    
    
    13,578
    
    
    
    7,999
    
    
    
    69.7
    %
    
    
    34,422
    
    
    
    25,878
    
    
    
    33.0
    %Net Earnings
    
    
    25,811
    
    
    
    26,615
    
    
    
    -3.0
    %
    
    
    66,594
    
    
    
    63,917
    
    
    
    4.2
    %Diluted Earnings per Share
    
    $
    0.50
    
    
    $
    0.53
    
    
    
    -5.7
    %
    
    $
    1.30
    
    
    $
    1.25
    
    
    
    4.0
    %
   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
   Sales by Segment (Dollarsin Thousands)
    
    Third Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    %
    
    
    August 30,
    
    
    September 1,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeEngine/Mobile Filtration
    
    $
    117,753
    
    
    $
    112,280
    
    
    
    4.9
    %
    
    $
    331,520
    
    
    $
    317,480
    
    
    
    4.4
    %Industrial/Environmental
Filtration
    
    
    138,708
    
    
    
    104,980
    
    
    
    32.1
    %
    
    
    404,456
    
    
    
    307,404
    
    
    
    31.6
    %Packaging
    
    
    19,839
    
    
    
    21,010
    
    
    
    -5.6
    %
    
    
    57,642
    
    
    
    58,041
    
    
    
    -0.7
    %$
    276,300
    
    
    $
    238,270
    
    
    
    16.0
    %
    
    $
    793,618
    
    
    $
    682,925
    
    
    
    16.2
    %
     Page 21




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##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
     Operating Profit by Segment(Dollars in Thousands)
    
    Third Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    %
    
    
    August 30,
    
    
    September 1,
    
    
    %2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeEngine/Mobile Filtration
    
    $
    28,669
    
    
    $
    26,629
    
    
    
    7.7
    %
    
    $
    75,461
    
    
    $
    71,351
    
    
    
    5.8
    %Industrial/Environmental
Filtration
    
    
    10,404
    
    
    
    6,100
    
    
    
    70.6
    %
    
    
    26,133
    
    
    
    14,472
    
    
    
    80.6
    %Packaging
    
    
    1,747
    
    
    
    1,893
    
    
    
    -7.7
    %
    
    
    4,423
    
    
    
    3,880
    
    
    
    14.0
    %$
    40,820
    
    
    $
    34,622
    
    
    
    17.9
    %
    
    $
    106,017
    
    
    $
    89,703
    
    
    
    18.2
    %
 Operating Margin by Segment
    
    Third Quarter Ended
    
    
    Nine Months EndedAugust 30,
    
    
    September 1,
    
    
    Pts.
    
    
    August 30,
    
    
    September 1,
    
    
    Pts.2008
    
    
    2007
    
    
    Change
    
    
    2008
    
    
    2007
    
    
    ChangeEngine/Mobile Filtration
    
    
    24.3
    %
    
    
    23.7
    %
    
    
    0.6
    
    
    
    22.8
    %
    
    
    22.5
    %
    
    
    0.3Industrial/Environmental
Filtration
    
    
    7.5
    %
    
    
    5.8
    %
    
    
    1.7
    
    
    
    6.5
    %
    
    
    4.7
    %
    
    
    1.8Packaging
    
    
    8.8
    %
    
    
    9.0
    %
    
    
    (0.2
    )
    
    
    7.7
    %
    
    
    6.7
    %
    
    
    1.014.8
    %
    
    
    14.5
    %
    
    
    0.3
    
    
    
    13.4
    %
    
    
    13.1
    %
    
    
    0.3
  Page 22




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##### 



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




---



##### 



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




---



##### 



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




---



##### 



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)
    
    $
    17,514
    
    
    $
    131
    
    
    $
    207
    
    
    $
    1,356
    
    
    $
    15,820Interest Payable on
Long-Term Debt
(excluding line of
credit)
    
    
    9,600
    
    
    
    700
    
    
    
    1,400
    
    
    
    1,300
    
    
    
    6,200Line of Credit
    
    
    80,000
    
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    Interest Payable on
Line of Credit
    
    
    16,920
    
    
    
    3,384
    
    
    
    6,768
    
    
    
    6,768
    
    
    
    Unfunded Pension Plan
    
    
    19,002
    
    
    
    277
    
    
    
    5,315
    
    
    
    12,569
    
    
    
    841Operating Leases
    
    
    44,390
    
    
    
    9,550
    
    
    
    18,265
    
    
    
    8,338
    
    
    
    8,237Total
    
    $
    187,426
    
    
    $
    14,042
    
    
    $
    31,955
    
    
    $
    110,331
    
    
    $
    31,098
   Page 27




---



##### 



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;
    
    statements relating to the Companys business and growth strategies; and
 
 Page 29




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS
 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
 
    
    any other statements or assumptions that are not historical facts.
   Page 30




---



##### 



The information required hereunder is set forth on Page 28 of the Quarterly Report under the
captions Managements Discussion and Analysis  Other Matters  Market Risk.
  The Company has established disclosure controls and procedures which are designed to ensure
that information required to be disclosed in reports filed or submitted under the Securities
Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms. The
Companys management, with the participation of Norman E. Johnson, Chairman of the Board,
President, and Chief Executive Officer and Bruce A. Klein, Vice President  Finance and
Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls
and procedures as of August 30, 2008. Based on their evaluation, such officers concluded
that the Companys disclosure controls and procedures pursuant to Rules 13a  15(e) of the
Exchange Act were effective as of August 30, 2008, in achieving the objectives for which
they were designed. No change in the Companys internal control over financial reporting
occurred during the Companys most recent fiscal quarter ended August 30, 2008, that has
materially affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting.
 Page 31




---



##### 



Except for the risk factor set forth below, there have been no material changes to the
risk factors disclosed in Item 1A. Risk Factors in the Companys Annual Report on Form
10-K for the year ended December 1, 2007.
 We may not be able to successfully consolidate our operations with PECO.On December 3, 2007, we 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. We may not be able to
successfully consolidate our operations with Peco. Our ability to successfully consolidate
our operations with Peco will depend substantially on our ability to consolidate
operations, systems and procedures and to eliminate redundancies and costs. We may not be
able to combine our and Pecos operations without encountering difficulties, such as:
 
    
    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.
 Further, we acquired Peco with the expectation that the acquisition would result in
various benefits including, among other things, benefits relating to enhanced revenues,
cross selling opportunities, technology, cost savings and operating efficiencies.
Achieving the anticipated benefits of the acquisition is subject to a number of
uncertainties, including whether we integrate Peco in an efficient and effective manner,
and general competitive factors in the marketplace. Failure to achieve these anticipated
benefits could result in increased costs, decreases in the amount of expected revenues and
diversion of managements time and energy and could materially impact our business,
financial condition and operating results. Finally, any cost savings that are realized may
be offset by losses in revenues or other charges to earnings.
 Page 32




---



##### 



On June 25, 2007, the Companys Board of Directors approved a three-year Stock Repurchase
Program, pursuant to which the Company from time to time may purchase up to $250 million
of the Companys Common Stock in the open market or through privately negotiated
transactions until June 25, 2010. The Company has no obligation to repurchase stock under
the program, and the timing, actual number and value of shares to be purchased depend on
market conditions and the Companys then-current liquidity needs. As set forth in the
table below, the Company did not repurchase any shares during the fiscal quarter ended
August 30, 2008. The amount of $187,210,241 remained available for purchase under such
program at the end of the third quarter of 2008.
 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 programsJune 1, 2008 through June 30, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241July 1, 2008 through July 31, 2008
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    187,210,241August 1, 2008 through August 30, 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. Page 33




---



##### 



a.
    
    Exhibits:31
    (i)
    
    Certification of Norman E. Johnson pursuant to Section
302 of the Sarbanes-Oxley Act of 200231
    (ii)
    
    Certification of Bruce A. Klein pursuant to Section 302
of the Sarbanes-Oxley Act of 200232
    (i)
    
    Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
 Page 34




---



##### 



SIGNATURES
  CLARCOR Inc.
 September 19, 2008
    
    By
    
    /s/ Norman E. Johnson(Date)
    
    
    
    Norman E. JohnsonChairman of the Board, President andChief Executive OfficerSeptember 19, 2008
    
    By
    
    /s/ Bruce A. Klein(Date)
    
    
    
    Bruce A. KleinVice President  Finance andChief Financial Officer
 Page 35