<PAGE>
                                                                EXHIBIT 13(a)(x)






                                                   [A WORLD OF OPPORTUNITY LOGO]

FINANCIAL REVIEW

(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

CLARCOR's operating results for fiscal 2003 were at record levels and marked the
Company's 11th consecutive year of earnings growth. Fiscal 2003 sales, operating
profit and net earnings increased from fiscal 2002, 3.6%, 11.9% and 17.1%,
respectively. There were several key drivers for the increases in sales and
operating profit including (1) increased sales of heavy-duty engine filtration
products for the aftermarket, (2) increased sales of private label HVAC
filtration products, (3) increased sales of specialty filtration products used
primarily in oil and gas drilling, aviation and fluid power, and (4) increased
capacity utilization and production efficiencies. Fiscal 2003 sales levels also
increased approximately $9 million due to an additional six months of operations
in 2003 compared with 2002 for CLARCOR UK (formerly Locker Filtration) which was
acquired in June 2002. Cash flow from operating activities set a new record and
totaled $87.9 million. As a result of strong cash flow from operating
activities, debt was reduced significantly in 2003. Reduced debt and low
interest rates during fiscal 2003 resulted in significantly reduced interest
expense which increased net earnings from 2002 by approximately $2.7 million or
$0.11 per diluted share. Net earnings per diluted share totaled $2.15 in fiscal
2003 compared to $1.85 in 2002.

The results of operations and financial position reflect acquisitions the
Company made in fiscal 2002 and 2001, and these acquisitions are described in
Note B to the Consolidated Financial Statements. The acquisitions that most
impacted the periods presented were CLARCOR UK (formerly Locker Filtration) and
Total Filtration Services (TFS). In June 2002, CLARCOR UK was acquired, adding
approximately $7.5 million in sales to the second half of fiscal 2002 and $9
million to the first half of 2003. In June 2001, TFS was acquired adding
approximately $28 million in sales to the second half of fiscal 2001 and $34
million to the first half of 2002. Several smaller acquisitions also occurred
that were not material to the sales or results of operations for the periods
presented.

The following are several other significant items that occurred during the
periods presented:

(1) At the beginning of the first quarter of fiscal 2002, the Company adopted
Statement of Financial Accounting Standards No. 142 (SFAS 142) as described in
Note E to the Consolidated Financial Statements. No impairment charges were
recorded as a result of adopting SFAS 142; however, amortization expense for
goodwill and indefinite-lived intangible assets was reduced by approximately
$2.9 million before tax or $0.07 per diluted share after tax in fiscal 2002
compared to 2001.

(2) In the fourth quarter of 2002 upon completion of specific tax reviews, the
Company recorded a research and experiment tax credit that increased 2002 net
earnings by $1.0 million and diluted earnings per share by $0.04.

(3) In fiscal 2001, results of operations were impacted by a non-recurring
contract cancellation payment received from a customer of the Company's
Packaging segment. This contract cancellation payment increased sales $7.0
million, operating profit $4.5 million and diluted earnings per share $0.12 in
the first quarter of 2001.

The information presented in this financial review should be read in conjunction
with other financial information provided throughout this 2003 Annual Report.
The following discussion of operating results focuses on the Company's three
reportable business segments: Engine/Mobile Filtration, Industrial/Environmental
Filtration and Packaging.

OPERATING RESULTS

SALES

Net sales in fiscal 2003 were $741.4 million, a 3.6% increase from $715.6
million in fiscal 2002. The 2003 sales increase was the 17th consecutive year of
sales growth for the Company. Included in the sales growth of $25.8 million for
2003 was approximately $9 million related to the CLARCOR UK acquisition that was
completed at the beginning of the third quarter in 2002.

Comparative net sales information related to CLARCOR's operating segments is
shown in the following tables.

<TABLE>
<CAPTION>
                                                                                    2003 VS. 2002
                                                                                        CHANGE
                                                                                 --------------------
NET SALES                                             2003        % TOTAL          $              %
-----------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>            <C>            <C>
ENGINE/MOBILE FILTRATION ....................        $287.8          38.8%       $ 24.3          9.2%
INDUSTRIAL/ENVIRONMENTAL FILTRATION .........         386.3          52.1%          2.7          0.7%
PACKAGING ...................................          67.3           9.1%         (1.2)        -1.7%
                                                     ------------------------------------------------
        TOTAL ...............................        $741.4         100.0%       $ 25.8          3.6%
                                                     ================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                      2002 vs. 2001
                                                                                          Change
                                                                                  --------------------
NET SALES                                             2002        % Total           $              %
-----------------------------------------------------------------------------------------------------
<S>                                                  <C>          <C>             <C>             <C>
Engine/Mobile Filtration ....................        $263.5          36.8%        $ 12.5           5.0%
Industrial/Environmental Filtration .........         383.6          53.6%          37.2          10.7%
Packaging ...................................          68.5           9.6%          (1.1)         -1.7%
                                                     -------------------------------------------------
        Total ...............................        $715.6         100.0%        $ 48.6           7.3%
                                                     =================================================
</TABLE>

The Engine/Mobile Filtration segment's sales increased 9.2% in 2003 from 2002.
The growth of $24.3 million included approximately $9 million from an additional
six months of operations in 2003 for CLARCOR UK which was acquired in June 2002.
The remainder of the sales growth in 2003 resulted primarily from increased
domestic and international heavy-duty filter sales to traditional aftermarket
distribution and also due to efforts in 2003 to increase sales to OEM dealer
organizations. Price increases improved the segment's sales by approximately one
percentage point and changes in currency translation rates favorably impacted
sales by one and one-half percentage points in 2003. The segment's sales
increased 5.0% in 2002 from 2001. Approximately $7.5 million of the $12.5
million sales growth in 2002 was related to CLARCOR UK. The remainder of the
sales growth in 2002 resulted from increased heavy-duty filter sales to
traditional aftermarket distribution.

The Company's Industrial/Environmental Filtration segment recorded a 0.7%
increase in sales in 2003 over 2002. The segment's sales increase reflects
strong sales of specialty filters sold to industrial markets used in
applications for oil and gas drilling, aviation and fluid power and increased
sales of private label HVAC filters sold through retail mass merchants. Changes
in currency translation rates favorably impacted sales by approximately one
percentage point in 2003. Offsetting these sales increases in 2003 were
continued low sales of filtration equipment, mainly dust collectors and
electrostatic precipitators, and sales of HVAC filters used in automotive
manufacturing plants. The segment's sales increased 10.7% in 2002 compared to
2001 and included the full-year impact from the TFS acquisition. The impact of
an additional six months of sales from TFS in 2002 totaled approximately $34
million. The additional sales growth in 2002 resulted from sales of
environmental air filters, specialty industrial filters and the Total Filtration
Program. Partially offsetting this increase in sales in 2002 were reduced sales
of air quality equipment and filtration systems sold primarily into capital
goods markets.

                                                                      CLARCOR  7

<PAGE>

FINANCIAL REVIEW

(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

The Packaging segment's sales were $67.3 million in 2003, a 1.7% reduction from
2002. Although sales increased in 2003 for metal decorating and packaging
products, sales of plastic packaging products were reduced. The 2002 segment
sales were $68.5 million. Included in 2001 sales of $69.6 million was a
non-recurring $7.0 million payment arising from a contract cancellation by a
customer. Excluding the impact of the non-recurring payment, sales improved in
2002 from 2001 as a result of increased sales of flat sheet metal decorating and
non-promotional metal and plastic packaging. As a result of the customer
cancellation, sales of plastic closures decreased substantially beginning in the
first quarter 2001.

OPERATING PROFIT

Operating profit of $87.1 million in 2003 reflects improved sales levels overall
and improved capacity utilization and production efficiencies. Cost increases
for pensions, energy, incentive compensation programs and employee health care
were offset by manufacturing efficiencies and cost reduction programs including
cost reductions for certain purchased materials. During 2003 as described in
Note C to the Consolidated Financial Statements, the Company changed its method
of inventory costing from last-in, first-out (LIFO) for certain inventory to the
first-in, first-out (FIFO) method, which increased operating profit by
approximately $0.5 million and primarily impacted the Packaging segment's
operating profit. Operating profit of $77.8 million in 2002 was 2.6% higher than
in 2001. Compared to 2001, operating profit in 2002 increased approximately $2.9
million as a result of reduced amortization expense for goodwill and long-lived
intangible assets due to the adoption of SFAS 142. Fiscal 2001 operating profit
included approximately $4.5 million from a non-recurring customer contract
cancellation payment.

Operating margin improved to 11.7% from 10.9% in 2002 and 11.4% in 2001.
Operating margins decreased in 2002 and 2001 principally due to the increase in
sales from acquisitions that have lower margins than the 11.7% overall margin
recorded in 2000. Foreign currency fluctuations did not have a material impact
on consolidated operating profit in 2003, 2002 or 2001.

Comparative operating profit information related to the Company's business
segments is as follows.

<TABLE>
<CAPTION>
                                                                                  2003 VS. 2002
                                                                                     CHANGE
                                                                                -----------------
OPERATING PROFIT                                     2003        % TOTAL          $           %
-------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>            <C>          <C>
ENGINE/MOBILE FILTRATION ....................        $58.3         67.0%        $ 5.5        10.5%
INDUSTRIAL/ENVIRONMENTAL FILTRATION .........         24.2         27.8%          3.5        16.9%
PACKAGING ...................................          4.6          5.2%          0.3         6.2%
                                                     --------------------------------------------
        TOTAL ...............................        $87.1        100.0%        $ 9.3        11.9%
                                                     ============================================
</TABLE>

<TABLE>
<CAPTION>
                                                                                  2002 vs. 2001
                                                                                      Change
                                                                                ------------------
OPERATING PROFIT                                     2002        % Total          $            %
--------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>            <C>          <C>
Engine/Mobile Filtration ....................        $52.8         67.9%        $ 1.0          1.9%
Industrial/Environmental Filtration .........         20.7         26.6%          3.9         23.3%
Packaging ...................................          4.3          5.5%         (2.9)       -40.4%
                                                     ---------------------------------------------
       Total ................................        $77.8        100.0%        $ 2.0          2.6%
                                                     =============================================
</TABLE>

<TABLE>
<CAPTION>
OPERATING MARGIN AS A
PERCENT OF NET SALES                                 2003         2002         2001
-----------------------------------------------------------------------------------
<S>                                                  <C>          <C>          <C>
Engine/Mobile Filtration ....................        20.3%        20.0%        20.6%
Industrial/Environmental Filtration .........         6.3%         5.4%         4.8%
Packaging ...................................         6.8%         6.3%        10.4%
                                                     ------------------------------
       Total ................................        11.7%        10.9%        11.4%
                                                     ==============================
</TABLE>

Operating profit for the Engine/Mobile Filtration segment increased 10.5% to
$58.3 million from $52.8 million in fiscal 2002. Operating margin improved to
20.3% primarily as a result of increased sales and capacity utilization. Cost
reduction programs that included material and labor cost reductions also
contributed to the improved operating profit for the segment. Operating profit
also improved in 2002 compared to 2001 as a result of increased sales,
productivity improvement programs and reduced amortization expense. Offsetting
these profit improvements in 2003 and 2002 were increased costs for health care,
insurance, incentive programs and pensions. Operating margin as a percent of
sales in fiscal 2002 decreased to 20.0% from 20.6% in 2001, primarily as a
result of lower margins from CLARCOR UK.

The Industrial/Environmental Filtration segment's 2003 operating profit improved
16.9% over fiscal 2002 primarily as a result of the significantly improved
capacity utilization of several manufacturing plants that began operating in
2001, increased sales of industrial products for aviation and oil and gas
drilling applications, and ongoing discretionary cost reduction programs. The
segment has been actively integrating newly acquired businesses and making
organizational changes within several of the segment's businesses that have
reduced overhead and administrative costs. As a result of these efforts, the
segment's operating margin improved to 6.3% in 2003 from 5.4% in 2002 and 4.8%
in 2001. In fiscal 2002, operating profit for the segment improved to $20.7
million from $16.8 million in 2001, an increase of 23.3%. The increase included
profit from TFS for an additional six months compared to 2001 and reduced
amortization expense of approximately $2.5 million. In addition, reduced
manufacturing costs and improved productivity at several newer facilities offset
cost increases for insurance, pensions and incentive programs.

The Packaging segment's operating profit of $4.6 million was nearly the same
level as recorded in fiscal 2002 on slightly lower sales. Although higher
capacity utilization of the segment's metal packaging facilities and cost
reduction programs improved the 2003 operating profit, these improvements were
offset by lower sales of plastic packaging. Included in 2003 operating profit
is approximately $0.4 million related to a change to FIFO inventory costing as
described in Note C to the Consolidated Financial Statements. The segment's 2002
operating profit of $4.3 million was lower than the 2001 level of $7.2 million
primarily because the fiscal 2001 results included approximately $4.5 mil-
lion related to a non-recurring cancellation payment from a customer. The
segment's 2002 operating profit benefited from increased metal lithography
sales, improved leverage of fixed costs and improved productivity from
equipment installed in 2001.

OTHER INCOME & EXPENSE

Net other expense totaled $1.0 million in 2003, $6.3 million in 2002 and $10.1
million in 2001. Interest expense of $1.8 million was lower in 2003 compared
with $6.1 million in 2002 and $10.3 million in 2001, due to lower interest rates
and reduced overall borrowings during the year. Currency gains of $1.0 million
in 2003, losses of $0.2 million in 2002 and gains of $0.2 million in 2001
resulted primarily from fluctuations of the Euro against the U.S. dollar.

8   CLARCOR

<PAGE>

                                                   [A WORLD OF OPPORTUNITY LOGO]

PROVISION FOR INCOME TAXES

The provision for income taxes in 2003 was $31.4 million and resulted in an
effective tax rate of 36.5%. The provision for income taxes in 2002 was $24.8
million and resulted in an effective tax rate of 34.7%. The 2002 provision
included approximately $1.0 million related to a research and experiment tax
credit recorded in the fourth quarter of 2002. The provision for taxes was $23.8
million in 2001 and resulted in an effective tax rate of 36.2%. The effective
tax rate in 2004 is expected to be approximately 36.5%.

NET EARNINGS AND EARNINGS PER SHARE

Net earnings were a record $54.6 million in 2003 or diluted earnings per share
of $2.15. Net earnings in 2002 were $46.6 million or diluted earnings per share
of $1.85, compared to $41.9 million or $1.68 per diluted share in 2001. As
described in Note A to the Consolidated Financial Statements, diluted earnings
per share would have been $2.06, $1.79 and $1.64 for 2003, 2002 and 2001,
respectively, had compensation expense for stock options been recorded in
accordance with SFAS 123. Diluted average shares outstanding for fiscal 2003
were 25,372,806 compared to 25,171,931 for 2002, an increase of 0.8%. Diluted
average shares outstanding for fiscal 2001 were 24,892,062. The increase in
diluted average shares outstanding was primarily due to additional stock option
grants.

FINANCIAL CONDITION

CORPORATE LIQUIDITY

The Consolidated Statements of Cash Flows are shown on page 15 and this
discussion of corporate liquidity should be read in conjunction with information
presented in those statements.

Cash and short-term cash investments decreased to $8.3 million at year-end 2003
from $13.7 million at year-end 2002. Cash provided by operating activities
totaled $87.9 million in 2003 compared to $85.0 million in 2002 and $63.3
million in 2001. The increases in cash provided by operating activities in
2003 and 2002 resulted from higher net earnings and as a result of improvements
in working capital management during fiscal 2003 and 2002. In the 2003 and
2002 fourth quarters, voluntary contributions of $3.0 million and $5.0
million, respectively, were made to the Company's pension trust for covered
U.S. employees. Using the current assumptions for pension plan asset returns,
interest rates and benefit costs, annual contributions are not expected to be
required until after fiscal 2009.

The Company used cash of $13.0 million for investing activities in 2003, $19.0
million in 2002 and $51.4 million in 2001. The Company made no acquisitions in
fiscal 2003. Cash used for acquisitions in 2002 totaled $10.7 million, offset
partially by a $4.0 million settlement payment received from the sellers of
TFS in accordance with the terms of the purchase agreement. Cash used for
acquisitions in 2001, primarily for TFS, totaled $33.4 million. Additions to
plant assets totaled $13.0 million in 2003 and were primarily for new products,
productivity improvement programs and cost reduction programs. Plant asset addi-
tions totaled $12.2 million in 2002 and $18.2 million in 2001.

Net cash used in financing activities totaled $80.7 million and $59.8 million in
2003 and 2002, respectively. In 2003 and 2002, net payments of $62.5 million
and $44.2 million, respectively, were made on revolving credit agreements and an
additional $11.0 million and $5.6 million, respectively, was repaid to reduce
other long-term debt. During 2001, the Company borrowed an additional $27.5
million under its revolving credit agreement, primarily for the TFS acquisition;
however, repayments of $36.5 million were made during the year. In 2001 the
Company also received $8.0 million from the issuance of industrial revenue bonds
related to a manufacturing facility in Campbellsville, Kentucky. The Company did
not repurchase any shares in 2003; nor were any shares repurchased in 2002 or
2001 under its remaining authorization of approximately 920,000 shares from the
December 1997 Board of Directors' approved stock repurchase plan. This
authorization expired in December 2002 and has not been renewed. Dividend
payments totaled $12.4 million, $12.0 million and $11.6 million in 2003, 2002
and 2001, respectively.

CLARCOR's current operations continue to generate cash and sufficient lines of
credit remain available to fund current operating needs, pay dividends, provide
for additions and the replacement of necessary plant facilities, and to service
and repay long-term debt. During fiscal 2003, a $165 million credit facility
with a group of financial institutions was established to replace a $185 million
credit facility that was to expire in September 2003. The replacement facility
will expire in April 2008. As of year-end 2003, there were no outstanding
borrowings against the replacement facility; however, under a related $40
million letter of credit line subline, $14.1 million had been issued for letters
of credit. The Company's other long-term debt totaled $17.6 million at year-end
2003 and is principally industrial revenue bonds. Principal payments on
long-term debt will be approximately $0.7 million in 2004 based on scheduled
payments in current debt agreements. The Company is in compliance with all
covenants related to its borrowings, as described in Note G to the Consolidated
Financial Statements.

The Company expects to continue to use future additional cash flow for
dividends, capital expenditures and acquisitions. Capital expenditures for
normal facility maintenance and improvements, expansion of manufacturing and
technical facilities, productivity improvements and new products are expected
to total $25 to $30 million in 2004. The Company's off-balance sheet
arrangements relate to various operating leases as discussed in Note H to the
Consolidated Financial Statements. The Company had no derivative, swap, hedge,
variable interest entity agreements or special purpose entity agreements at
fiscal year-end 2003.

The following table summarizes the Company's fixed cash obligations as of
November 30, 2003 over various future years:

<TABLE>
<CAPTION>
                                         Year        Year        Year       There-
                                           1         2 & 3       3 & 4       after
                                         -----------------------------------------
<S>                                      <C>         <C>         <C>        <C>
Long-Term Debt ..................        $ 0.7       $ 0.5       $   -       $16.4
Credit Facility .................            -           -           -           -
Operating Leases ................          8.2         9.9         5.9         6.9
</TABLE>

While changes in customer demand for our products will affect operating cash
flow, the Company is not aware of any known trends, demands or reasonably likely
events that would materially affect cash flow from operations in the future.
Although in fiscal 2003 and 2002 the Company's investment in working capital was
reduced, it is likely that additional investments in working capital may be
required to support increased operations in fiscal 2004. It is possible that
business acquisitions or dispositions could be made in the future that may
affect operating cash flows and may require changes in the Company's debt and
capitalization.

CAPITAL RESOURCES

The Company's financial position at November 30, 2003, continued to be
sufficiently liquid to support current operations and reflects increased cash
flow from operations and significant reductions in borrowings since the
beginning of the 2003 fiscal year. Total assets decreased to $538.2 million at
the end of fiscal 2003, a decrease of 1.4% from the year-end 2002 level of
$546.1 million. Total current assets decreased to $257.4 million from $259.7
million at year-end

                                                                      CLARCOR  9

<PAGE>

FINANCIAL REVIEW

(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

2002. Total current liabilities at year-end 2003 decreased to $111.4 million
from $174.3 million at year-end 2002. Current liabilities at year-end 2002
included the $62.8 million outstanding balance on a revolving credit agreement
that was replaced in April 2003. The current ratio was 2.3 at year-end 2003
compared to 1.5 at year-end 2002.

Long-term debt of $16.9 million at year-end 2003 relates primarily to various
industrial revenue bonds, as there was no outstanding amount owed at year-end
2003 under the $165 million replacement revolving credit facility. Shareholders'
equity increased to $370.4 million from $315.5 million at year-end 2002. The
increase in shareholders' equity resulted primarily from net earnings of $54.6
million offset by dividend payments of $12.4 million or $0.4925 per share. Total
debt decreased to 4.5% of total capitalization at year-end 2003 compared to
22.4% at year-end 2002.

At November 30, 2003, CLARCOR had 25,309,127 shares of common stock outstanding
at $1.00 par value, compared to 24,918,614 shares outstanding at the end of
2002.

OTHER MATTERS

MARKET RISK

The Company's market risk is primarily the potential loss arising from adverse
changes in interest rates. However, based on the low level of debt obligations
as of year-end 2003, interest rate risk is not expected to be significant to the
Company in fiscal 2004. The Company's debt obligations are primarily at variable
LIBOR-associated rates and fixed interest rates, and are denominated in U.S.
dollars. In order to minimize the long-term costs of borrowing, the Company
manages its interest rate risk by monitoring trends in rates as a basis for
determining whether to enter into fixed rate or variable rate agreements.

Market risk is estimated as the potential change in fair value of the Company's
long-term debt obligations resulting from a hypothetical 1% increase in interest
rates. A hypothetical 1% increase in interest rates on the Company's variable
rate agreements would adversely affect fiscal 2004 net earnings and cash flows
by approximately $0.1 million and reduce the fair value of fixed rate long-term
debt, as measured at November 30, 2003, by approximately $0.1 million. Last
year, a hypothetical 1% increase in interest rates would have adversely affected
fiscal 2003's net earnings and cash flows by approximately $0.4 million and
reduced the fair value of fixed rate long-term debt by approximately $0.1
million.

Although the Company continues to evaluate derivative financial instruments,
including forwards, swaps and purchased options, to manage foreign currency
exchange rate changes, the Company did not hold derivatives for trading purposes
during 2003, 2002 or 2001. The Company has used forward exchange contracts on a
limited basis to manage foreign currency exchange risk related to certain
transactions, primarily certain large purchases denominated in currencies other
than U.S. dollars. As a result of continued foreign sales and business
activities, the Company will continue to evaluate the use of derivative
financial instruments to manage foreign currency exchange rate changes in the
future.

CRITICAL ACCOUNTING POLICIES

The Company's critical accounting policies, including the assumptions and
judgments underlying them, are disclosed in the Notes to the Consolidated
Financial Statements. These policies have been consistently applied in all
material respects and address such matters as revenue recognition, depreciation
methods, inventory valuation, asset impairment recognition, business combination
accounting and pension and postretirement benefits.

While the estimates and judgments associated with the application of these
critical accounting policies may be affected by different assumptions or
conditions, the Company believes the estimates and judgments associated with the
reported amounts are appropriate in the circumstances. The following explains
several of the Company's critical accounting policies that are used in preparing
its consolidated financial statements which require the Company's management to
use significant judgment and estimates:

         Allowance for Losses on Accounts Receivable - Allowances for losses on
customer accounts receivable balances are estimated based on economic conditions
in the industries to which the Company sells and on historical experience by
evaluating specific customer accounts for risk of loss, fluctuations in amounts
owed and current payment trends. The Company's concentration of risk is also
monitored and at year-end 2003, the largest outstanding customer account balance
was $4.9 million. The allowances provided are estimates that may be impacted
by economic and market conditions which could have an effect on future allowance
requirements and results of operations.

         Pensions - The Company's pension obligations are determined using
estimates including those related to discount rates, asset values and changes in
compensation. Actual results and future obligations will vary based on changes
in interest rates, stock and bond market valuations and employee compensation.
For example, for the Company's pension plan for U.S. covered employees, a
reduction in the expected return on plan assets to 8.25% from 8.5% would result
in additional expense in fiscal 2004 of approximately $0.2 million, while a
reduction in the discount rate to 6.00% from 6.75% would result in additional
expense of approximately $0.9 million. Interest rates and pension plan
valuations may vary significantly based on worldwide economic conditions and
asset investment decisions.

         Income Taxes - The Company is required to estimate and record income
taxes payable for each of the U.S. and international jurisdictions in which the
Company operates. This process involves estimating actual current tax expense
and assessing temporary differences resulting from differing accounting
treatment between tax and book which result in deferred tax assets and
liabilities. In addition, accruals are also estimated for federal, state and
international tax matters that are subject to judgment. Taxes payable and the
related deferred tax differences may be impacted by changes to tax codes,
changes in tax rates and changes in taxable profits and losses.

         Goodwill and Indefinite-lived Intangible Assets - The Company
periodically reviews goodwill and indefinite-lived intangible assets for
impairment. These reviews of fair value involve judgment and estimates of
discount rates, transaction multiples and future cash flows for the reporting
units that may be impacted by market conditions and worldwide economic
conditions.

RECENT RELEVANT ACCOUNTING PRONOUNCEMENTS

In November 2002, the FASB issued Interpretation No. 45 (FIN 45), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." The interpretation requires disclosure
in periodic financial statements of certain guarantee arrangements. The
implementation of this interpretation requires certain disclosures regarding
guarantees of the indebtedness of others as provided in Note A to the
Consolidated Financial Statements. The requirements of FIN 45 did not have a
significant impact on the Company's results of operations or financial
condition.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS 148 provides alternative methods
of transition for a voluntary change to the fair

10   CLARCOR

<PAGE>

                                                   [A WORLD OF OPPORTUNITY LOGO]

value-based method of accounting for stock-based employee compensation and
amends certain requirements of SFAS 123. The transition provisions were
effective for the Company in fiscal 2003 and the disclosure requirements were
effective for the Company beginning with its second quarter 2003 consolidated
financial statements. The Company currently plans to continue to apply the
intrinsic value method to account for stock-based employee compensation. Diluted
earnings per share would have been reduced by approximately $0.09 for fiscal
2003 based on the fair value calculation as described in Note A to the
Consolidated Financial Statements.

OUTLOOK

The Company's objective to record compound annual growth rates in diluted
earnings per share of 10% to 15% over a five to seven year period will require
internally generated sales growth, improved profitability and additional
acquisitions. Excluding acquisitions, the Company expects that sales and diluted
earnings per share will continue to grow in 2004, making it the 12th
consecutive year of earnings per share growth for the Company. The Company
expects diluted earnings per share to be in the range of $2.25 to $2.35 in 2004.
The Company has announced that the corporate headquarters will move to
Nashville, TN in 2004. Costs for this move, which will largely be a one-time
expense incurred primarily in 2004, are still being finalized and have not been
reflected in the earnings per share estimate for 2004. These costs have been
estimated to not exceed $0.07 per share.

Sales growth and increased operating profits are expected for the Engine/Mobile
Filtration segment as product demand for aftermarket heavy-duty filtration
products remains good. This growth is expected due to a continuation of new
product introductions and from sales and marketing initiatives begun over the
past two years.

Sales growth for the Industrial/Environmental segment is also expected due to
specialty process liquid filters, while HVAC filtration sales are expected to be
stable. The Company remains optimistic that there will be an upturn in demand
for filtration systems sold into capital goods markets and that the Total
Filtration Program will grow in 2004. The Total Filtration Program had a slow
2003 caused by lower sales of maintenance filters to automobile and automotive
parts manufacturers. The Total Filtration Program's growth in the future will
come from increasing sales to non-automotive customers and expansion of the fil-
ter service business. The Total Filtration Program is also expected to benefit
from the completion of the conversion in early 2004 of a group of 20
company-owned branches from selling primarily HVAC filtration products to
selling the Company's entire range of liquid and air filter products. The
operating margin for the Industrial/Environmental segment is expected to
continue to improve towards the Company's goal of a 10% annual margin for the
segment.

The Packaging segment's sales are expected to grow in 2004 as emphasis continues
on increasing sales of flat sheet metal decorating and non-promotional metal and
plastic packaging products. The Packaging segment is reviewing customer
profitability and expects that certain customer relationships may be terminated
or changed during 2004 where profitability is unacceptable and unlikely to
improve.

Capital investments will continue to be made in each segment's facilities to
improve productivity, expand technical centers, support the Total Filtration
Program and produce new products. As a result of recent changes to the qualified
pension plan and defined contribution plans for U.S. employees, the total cost
of these plans is not expected to change significantly; however, the expense for
pensions is expected to be reduced in future periods while costs for the defined
contribution plan will increase. While the Company fully anticipates that sales
and profits will improve as a result of sales initiatives and cost reduction
efforts, the Company has developed contingency plans to reduce discretionary
spending as necessary.

The Company continues to assess acquisition opportunities, primarily in related
filtration businesses. It is expected that these acquisitions would expand the
Company's market base, distribution coverage and product offerings. The Company
has established financial standards that will continue to be vigorously applied
in the review of all acquisition opportunities and the Company believes that
it has sufficient additional borrowing capacity to continue this acquisition
program.

FORWARD-LOOKING STATEMENTS

Certain statements quoted in this Annual Report are forward-looking. These
statements involve risk and uncertainty. Actual future results and trends may
differ materially depending on a variety of factors including: the volume and
timing of orders received during the year; the mix of changes in distribution
channels through which the Company's products are sold; the success of the
Company's Total Filtration Program; the timing and acceptance of new products
and product enhancements by the Company or its competitors; changes in
pricing, labor availability and related costs, product life cycles, raw material
costs, insurance, pension and energy costs, and purchasing patterns of dis-
tributors and customers; competitive conditions in the industry; business
cycles affecting the markets in which the Company's products are sold; the
effectiveness of plant conversions, plant expansions and productivity
improvement programs; the management of both growth and acquisitions; the
fluctuation in foreign and U.S. currency exchange rates; the fluctuation in
interest rates, primarily LIBOR, which affect the cost of borrowing under its
revolving credit facility; market disruptions caused by domestic or
international conflicts; extraordinary events such as litigation, acquisitions
or divestitures including related charges; and economic conditions generally or
in various geographic areas. All of the foregoing matters are difficult to
forecast. The future results of the Company may fluctuate as a result of these
and the other risk factors detailed from time to time in the Company's filings
with the Securities and Exchange Commission.

Due to the foregoing items, it is possible that, in the future, the Company's
operating results will be below the expectations of stock market analysts and
investors. In such event, the price of CLARCOR common stock could be materially
adversely affected.

                                                                   CLARCOR    11