<PAGE>

                                                                EXHIBIT 13(a)(x)

FINANCIAL REVIEW
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

CLARCOR's operating results for fiscal 2002 were at record levels for sales,
cash flow and earnings. Fiscal 2002 also marked CLARCOR's tenth consecutive year
of earnings growth. The results of operations and financial position reflect
acquisitions the Company made in each of the periods presented and these
acquisitions are described in Note B to the Consolidated Financial Statements.
The acquisitions that most impacted the periods presented were Locker Filtration
(Locker) and Total Filtration Services (TFS). In June 2002, Locker was acquired,
adding approximately $7.5 million in sales for the second half of fiscal 2002.
In June 2001, TFS was acquired, adding approximately $28 million in sales for
the second half of fiscal 2001. Several smaller acquisitions also occurred that
were not material to the sales or results of operations for the periods
presented. In addition, results of operations were impacted by a non-recurring
contract cancellation payment that was received from a customer of the Company's
Packaging segment in 2001. 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 Company adopted Statement of Financial Accounting Standards No. 142 (SFAS
142) at the beginning of the first quarter of 2002 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.
In the fourth quarter of 2002 upon resolution 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.

The information presented in this financial review should be read in conjunction
with other financial information provided throughout this 2002 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. Fiscal 2002 was a fifty-two week year for the Company
and fiscal years 2001 and 2000 were fifty-two and fifty-three week years,
respectively.

OPERATING RESULTS
SALES
Net sales in fiscal 2002 were $715.6 million, a 7.3% increase from $667.0
million in fiscal 2001. The 2002 sales increase was the 16th consecutive year of
sales growth for the Company. Net sales increased 2.3% in fiscal 2001 over the
2000 level of $652.1 million. The sales increases in 2002 and 2001 included
sales from acquisitions in each year and fiscal 2001 included $7.0 million from
a non-recurring customer cancellation payment. Fiscal 2000 included
approximately $12-$13 million in additional sales compared to fiscal 2001
because fiscal year 2000 was a fifty-three week year for the Company. Excluding
the impact of acquisitions, the non-recurring payment in 2001 and the additional
week in fiscal 2000, sales increased approximately 2% in 2002 compared with 2001
and fiscal 2001 sales decreased approximately 1% from 2000. Overall sales levels
in 2002 and 2001 were reduced by weakened U.S. and world economies, reduced
customer demand and competitive pricing pressures.

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

<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>

<Table>
<Caption>
                                                                            2001 vs. 2000
                                                                               Change
                                                                      ------------------------
NET SALES                                     2001       % Total           $             %
---------                                  ----------   ----------    ----------    ----------
<S>                                        <C>          <C>           <C>           <C>
Engine/Mobile Filtration ................  $    251.0         37.6%   $     (8.8)         -3.4%
Industrial/Environmental Filtration .....       346.4         52.0%         26.7           8.3%
Packaging ...............................        69.6         10.4%         (3.0)         -4.1%
                                           ----------   ----------    ----------    ----------
      Total .............................  $    667.0        100.0%   $     14.9           2.3%
                                           ==========   ==========    ==========    ==========
</Table>

The Engine/Mobile Filtration segment's sales increased 5.0% in 2002 from 2001 or
approximately 2% excluding the sales from Locker which was acquired in June
2002. Excluding Locker, 2002 sales growth was primarily due to increased
domestic and international heavy-duty filter sales. Railroad filtration product
sales decreased approximately 4% in 2002 due to soft market conditions,
including reduced locomotive mileage, extended filter drain intervals and lower
new locomotive sales. The segment's sales decreased 3.4% in 2001 from 2000 or
approximately 1.5% excluding the additional week in fiscal 2000. Sales decreased
in fiscal 2001 primarily due to the slowdown in the U.S. economy, competitive
pricing pressures, and a reduction in both inventory levels and product demand
by our customers.

The Company's Industrial/Environmental Filtration segment recorded a 10.7%
increase in sales in 2002 over 2001. Fiscal 2002 included the full-year impact
from TFS, while 2001 included only six months. Excluding the impact of an
additional six months of sales from TFS in 2002, the segment's sales grew
approximately 2% over 2001. Growth resulted from sales of environmental air
filters, specialty industrial filters and the Total Filtration Program.
Partially offsetting this increase in sales were reduced sales of air quality
equipment and filtration systems that are sold primarily into the capital goods
markets. The segment recorded an 8.3% increase in sales in 2001 over 2000.
Excluding the sales increase from TFS in 2001 and the additional week in fiscal
2000, sales for the segment increased approximately 1.5% in 2001 compared to
fiscal 2000. Fiscal 2001 results benefited from additional sales of new products
introduced late in fiscal 2000 and greater distribution coverage for
environmental filters. This increase was partially offset by lower sales due to
the U.S. economic recession which primarily affected sales of filtration
equipment and systems.

The Packaging segment's sales were $68.5 million in 2002, a 1.7% reduction from
2001. 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 this
non-recurring payment, sales increased approximately 9% 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.
The segment continues to focus on sales of non-promotional packaging products
such as metal and plastic closures and containers for food, confectionary and
beverage containers and film and battery cartridges.


<PAGE>

FINANCIAL REVIEW
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

OPERATING PROFIT

Operating profit of $77.8 million in 2002 was 2.6% higher than in 2001. Fiscal
2001 operating profit of $75.8 million was slightly lower than the $76.0 million
recorded in 2000. The 2002 operating profit 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 included
approximately $4.5 million from a non-recurring customer contract cancellation
payment. Excluding these two items, operating profit increased approximately 5%
in 2002. Operating margin was 10.9% in 2002 compared to 11.4% in 2001 and 11.7%
in fiscal 2000. 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.

Continued cost reductions, improved manufacturing productivity and the
integration of acquired businesses positively impacted operating profit in both
fiscal 2002 and 2001. The profit improvements in 2002 offset, in part,
competitive pricing pressures and cost increases the Company experienced for
certain raw materials, health care, incentive compensation programs, insurance
and pensions. Pension cost increased approximately $2.2 million in 2002 from
2001, primarily due to a reduction in the discount rate and reduced pension
asset values. Discretionary cost reduction programs, particularly in 2001, were
effective in offsetting reduced customer demand. Foreign currency fluctuations
did not have a material impact on consolidated operating profit in 2002, 2001 or
2000.

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

<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>
                                                                           2001 vs. 2000
                                                                              Change
                                                                      ------------------------
OPERATING PROFIT                              2001       % Total           $            %
----------------                           ----------   ----------    ----------    ----------
<S>                                        <C>          <C>           <C>           <C>
Engine/Mobile Filtration ...............   $     51.8         68.3%   $      2.6           5.3%
Industrial/Environmental Filtration ....         16.8         22.1%         (1.6)         -9.1%
Packaging ..............................          7.2          9.6%         (1.2)        -13.4%
                                           ----------   ----------    ----------    ----------
      Total ............................   $     75.8        100.0%   $     (0.2)         -0.2%
                                           ==========   ==========    ==========    ==========
</Table>

<Table>
<Caption>
OPERATING MARGIN AS A
PERCENT OF NET SALES                              2002             2001             2000
----------------------                         ----------       ----------       ----------
<S>                                            <C>              <C>              <C>
Engine/Mobile Filtration ...............             20.0%            20.6%            18.9%
Industrial/Environmental Filtration ....              5.4%             4.8%             5.8%
Packaging ..............................              6.3%            10.4%            11.6%
                                               ----------       ----------       ----------
      Total ............................             10.9%            11.4%            11.7%
                                               ==========       ==========       ==========
</Table>

Operating profit for the Engine/Mobile Filtration segment increased to $52.8
million in 2002 from $51.8 million in 2001, an increase of 1.9%. Operating
profit improved in 2002 as a result of increased sales, productivity improvement
programs and reduced amortization expense. Offsetting these profit improvements
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 Locker. In
fiscal 2001, the segment's operating margin improved to 20.6% from 18.9% in 2000
as a result of material and labor cost reductions and improved productivity in
its main distribution and light-duty filter manufacturing facilities. These
improvements more than offset increased energy and employee insurance costs and
competitive pricing pressures.

The Industrial/Environmental Filtration segment's operating profit improved to
$20.7 million in 2002 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.
Operating margin as a percent of sales improved to 5.4% compared to 4.8% in
2001. Operating profit decreased in 2001 to $16.8 million from $18.4 million in
2000 primarily as a result of start-up costs early in fiscal 2001 related to two
new production facilities and reduced sales of filtration equipment and systems.
The start-up costs associated with the new facilities and new product
introductions decreased during the third quarter of 2001 as production
efficiencies and capacity utilization improved. Fiscal 2001 also included
approximately $1.2 million of operating profit from TFS for the six-month period
from its acquisition in June 2001.

The Packaging segment's operating profit was $4.3 million in fiscal 2002. In
fiscal 2001, the segment reported operating profit of $7.2 million that included
the non-recurring item discussed previously. Excluding that item from 2001, 2002
operating profit increased over 50% compared to 2001 primarily as a result of
increased metal lithography sales, improved leverage of fixed costs and improved
productivity from equipment installed in 2001. The fiscal 2001 results included
approximately $7.0 million related to a non-recurring cancellation payment from
a customer that was reduced by $2.4 million for related asset impairment
charges. Excluding this item, operating profit in 2001 was lower than 2000 due
to the lower sales of plastic closures to this customer, reduced capacity
utilization, higher energy and pension costs, and increased costs related to the
installation of new lithography equipment in early 2001. Due to difficulties
with the start-up of this new equipment, plant utilization was reduced
throughout 2001 from expected levels and additional costs were incurred for
product scrap and rework.

OTHER INCOME & EXPENSE

Net other expense totaled $6.3 million in 2002, $10.1 million in 2001 and $12.5
million in 2000. Interest expense of $6.1 million was lower in 2002 compared
with $10.3 million in 2001 and $11.5 million in 2000, due to declining interest
rates and reduced overall borrowings during the year. Interest income was
reduced to $0.5 million in 2002 from $0.7 million for both 2001 and 2000,
primarily as a result of lower interest rates. Currency losses of $0.2 million
in 2002, gains of $0.2 million in 2001 and losses of $1.2 million in 2000
resulted primarily from fluctuations in European currency exchange rates against
the U.S. dollar.

PROVISION FOR INCOME TAXES

The provision for income taxes in 2002 was $24.8 million and resulted in an
effective tax rate of 34.7%. The 2002 provision includes approximately $1.0
million related to a research and experiment tax credit recorded in the fourth
quarter of 2002. Excluding this credit, which should not be as large in future
years, the effective rate in 2002 would


<PAGE>

have been approximately 36.1%. The provision for taxes was $23.8 million and
$23.2 million in 2001 and 2000, respectively, and resulted in effective tax
rates of 36.2% and 36.5%, respectively. The effective tax rate in 2003 is
expected to be approximately 36.0% to 36.5%.

NET EARNINGS AND EARNINGS PER SHARE

Net earnings were a record $46.6 million in 2002 or diluted earnings per share
of $1.85, compared to $41.9 million or $1.68 per diluted share in 2001. Net
earnings in 2000 were $40.2 million or $1.64 per diluted share. As described in
Note M to the Consolidated Financial Statements, diluted earnings per share
would have been $1.79, $1.64 and $1.61 for 2002, 2001 and 2000, respectively,
had compensation expense for stock options been recorded in accordance with SFAS
123. Diluted average shares outstanding for fiscal 2002 were 25,171,931 compared
to 24,892,062 for 2001, an increase of 1.1%. Diluted average shares outstanding
for fiscal 2000 were 24,506,171. The increase in outstanding shares 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 increased to $13.7 million at year-end 2002
from $7.4 million at year-end 2001. Cash provided by operating activities
totaled $85.0 million in 2002 compared to $63.3 million in 2001 and $54.1
million in 2000. The increases in cash provided by operating activities in 2002
and 2001 resulted from higher net earnings and depreciation and as a result of
improvement in working capital management during fiscal 2002 and 2001. In fourth
quarter 2002, a $5.0 million voluntary contribution was made to the Company's
pension trust for covered U.S. employees. Depending on future pension plan asset
returns and benefit costs, annual contributions of approximately $3-$5 million
are expected to be required beginning in 2005.

The Company used cash of $19.0 million for investing activities in 2002, $51.4
million in 2001 and $42.1 million in 2000. 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, while cash used for the acquisition of several small filtration
businesses in 2000 totaled $12.7 million. Additions to plant assets totaled
$12.2 million in 2002 and were primarily for new products, productivity
improvement programs and cost reduction programs. Plant asset additions totaled
$18.2 million in 2001 and included final payments on several projects begun in
fiscal 2000. Additions to plant assets in 2000 totaled $29.0 million and
included payments on new state-of-the-art lithography equipment, the purchase
and refurbishment of a manufacturing building in Campbellsville, Kentucky, and
additional manufacturing capacity throughout the Company.

Net cash used in financing activities totaled $59.8 million and $15.3 million in
2002 and 2001, respectively. In 2002, net repayments of $44.2 million were made
on a revolving credit agreement and an additional $5.6 million was repaid on
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. The Company
received $8.0 million in 2001 from the issuance of industrial revenue bonds
related to a manufacturing facility in Campbellsville, Kentucky. Net cash
provided by financing activities in fiscal 2000 totaled $15.9 million and
included a net additional $1.0 million borrowed under the revolving credit
agreement. The Company did not repurchase any shares in 2002, 2001 or 2000 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. Dividend payments totaled $12.0 million, $11.6 million
and $11.2 million in 2002, 2001 and 2000, 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 2002, $5.6 million was repaid on
long-term notes and a net repayment of $44.2 million was made on the outstanding
balance on the revolving credit facility. This $185 million credit facility was
established in 1999 with several financial institutions and the outstanding
balance was $62.8 million at the end of 2002 with $12.7 million outstanding for
letters of credit. This facility expires in September 2003 and the Company is
currently negotiating a $150 million replacement credit facility that is
expected to be finalized in 2003. The Company expects to continue to use future
additional cash flow to further reduce outstanding borrowings. Capital
expenditures for normal facility maintenance, productivity improvements and new
products are expected to total $21-$23 million in 2003. Principal payments on
long-term debt will be approximately $5.6 million in 2003 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's off-balance sheet arrangements relate to
various operating leases as discussed in Note H to the Consolidated Financial
Statements. Commitments for noncancelable leases in 2003 total approximately
$8.5 million. The Company had no derivative, swap, hedge or special purpose
entity agreements at year-end 2002.

The following table summarizes the Company's fixed cash obligations as of
November 30, 2002 over the next five years:

<Table>
<Caption>
                           2003         2004         2005         2006         2007
                        ----------   ----------   ----------   ----------   ----------
<S>                     <C>          <C>          <C>          <C>          <C>
Long-Term Debt ......   $      5.6   $      5.7   $      0.4   $      0.2   $       --

Credit Facility .....         62.8           --           --           --           --

Operating Leases ....          8.5          6.9          4.8          3.3          2.7
</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.
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, 2002, 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 2002 fiscal year. Total assets increased to $546.1 million at
the end of fiscal 2002, an increase of 2.9% from the year-end 2001 level of
$530.6 million. Total current assets increased to $259.7 million from $244.4
million at year-end 2001. Total current liabilities at year-end 2002 increased
to $174.3 million from $94.9 million at year-end 2001. Included in current
liabilities in 2002 is the $62.8 million outstanding balance on a revolving


<PAGE>

FINANCIAL REVIEW
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)

credit agreement that expires in September 2003. The current ratio was 1.5 at
year-end 2002 or 2.3 excluding the revolving credit balance, compared to 2.6 at
year-end 2001. Inventories decreased during fiscal 2002 primarily due to
increased emphasis on working capital management. Net plant assets also
decreased during 2002 as depreciation expense exceeded 2002 expenditures for
plant assets. Acquired intangibles increased to $122.5 million primarily due to
the acquisition of Locker, which was offset by reduced goodwill related to
purchase accounting adjustments for TFS. Accounts payable and accrued
liabilities at year-end 2002 were higher primarily due to increased accruals for
incentive plans and increased payables to vendors.

Long-term debt of $22.6 million at year-end 2002 excludes the $62.8 million
borrowing under the revolving credit facility, since it expires in September
2003 and is classified as a short-term obligation. A replacement credit facility
is expected to be finalized in 2003 and at that time the full amount outstanding
under the new facility will be included in long-term debt. Shareholders' equity
increased to $315.5 million from $274.3 million at year-end 2001. The increase
in shareholders' equity resulted primarily from net earnings of $46.6 million
offset by dividend payments of $12.0 million or $0.4825 per share. Total debt
decreased to 22.4% of total capitalization at year-end 2002, compared to 33.9%
at year-end 2001.

At November 30, 2002, CLARCOR had 24,918,614 shares of common stock outstanding
at $1.00 par value, compared to 24,626,236 shares outstanding at the end of
2001.

OTHER MATTERS

MARKET RISK

The Company's market risk is primarily the potential loss arising from adverse
changes in interest rates. 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. In
fiscal 2000, the Company entered into an interest rate agreement, which expired
in September 2002, related to the revolving credit agreement as described in
Note G to the Consolidated Financial Statements. As a result of the expiration
of this interest rate agreement, the Company estimates that interest expense on
the notional amount of $60 million will be reduced by approximately $3 million
per year based on interest rates currently payable under the revolving credit
agreement. The Company has no other interest rate or other derivative
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 2003 net earnings and cash flows
by approximately $0.4 million and reduce the fair value of fixed rate long-term
debt, as measured at November 30, 2002, by approximately $0.1 million. Last
year, a hypothetical 1% increase in interest rates would have adversely affected
fiscal 2002's net earnings and cash flows by approximately $0.4 million and
reduced the fair value of fixed rate long-term debt by approximately $0.3
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 2002, 2001 or 2000.

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. At the beginning of fiscal
year 2002 as described in Note A to the Consolidated Financial Statements, the
Company adopted SFAS 142 which changed the Company's accounting policy related
to goodwill and intangible assets. Goodwill and indefinite-lived intangible
assets are no longer amortized but are subject to periodic impairment
assessment. The transitional impairment testing for such assets was completed
during the first quarter of 2002, which determined that at the December 1, 2001
transition date there was no impairment to such assets.

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 historical
experience, by evaluating specific customer accounts for risk of loss and
current payment trends, and economic conditions in the industries to which the
Company sells. The Company's concentration of risk is also monitored and at
year-end 2002, the largest outstanding customer account balance was $4.2
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 8.5% from 9.0% will result in
additional expense in fiscal 2003 of approximately $0.3 million, while a
reduction in the discount rate to 6.75% from 7.25% will result in additional
expense of approximately $0.6 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


<PAGE>

are also estimated for federal, state and international tax matters that are
subject to judgment. In fiscal 2002, the Company's effective tax rate was 34.7%
which included a $1.0 million research and experiment tax credit recorded upon
resolution of specific tax reviews. Excluding this credit, the effective rate
for 2002 would have been approximately 36.1%. 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 - As described earlier,
the Company has adopted SFAS 142 and goodwill and indefinite-lived intangible
assets are now reviewed periodically 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

The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards (SFAS) No. 143, "Accounting for Asset Retirement
Obligations," SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," and SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities." These standards will be effective for the Company
beginning in fiscal 2003. The Company has not completed the evaluation of the
impact of these standards on its financial statements but it does not expect
these standards to have a material impact on its results of operations or
financial condition.

OUTLOOK

The Company's long-term objective to record compound annual growth rates in
diluted earnings per share of 10% to 15% will continue to 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 2003, making it the 11th consecutive year of
earnings per share growth for the Company. Unless worldwide economic conditions
change, the Company's internal sales growth is not expected to differ
significantly in 2003 from 2002. Sales growth for the Engine/Mobile Filtration
segment is expected to grow approximately at the same rate as in 2002, excluding
acquisitions. This increase will result from new product introductions and the
continued benefit from sales and marketing initiatives begun over the past year.
Sales of filters used for railroad locomotives are expected to be lower due to a
continuation of reduced filter usage and reduced production of new locomotives.
Sales growth for the Industrial/Environmental segment is also expected to grow
at about the 2002 rate, excluding acquisitions. Reduced sales for air quality
systems and filtration equipment are expected to continue throughout 2003.
Several new products for the air quality equipment market are expected to be
introduced in 2003 and the potential for these products is favorable when that
sector of the economy recovers. The Packaging segment's sales are expected to
grow in 2003 as emphasis continues on increasing sales of flat sheet metal
decorating and non-promotional metal and plastic packaging products.

The Total Filtration Program is also expected to favorably impact sales.
Double-digit growth for this Program is expected in 2003, continuing the pace of
2002. This is expected to be accomplished through (1) a continued focus on
selling the Total Filtration Program to major industrial companies, especially
those outside the automotive industry; (2) a major effort to enable thousands of
our distributors throughout North America to become Total Filtration
Distributors; and (3) a change in focus at our 22 company-owned branches and
stores from selling primarily air filtration HVAC products to selling our entire
range of liquid, air and process filtration products. These initiatives will be
supported by our expertise in product acquisition, training, logistics and in
selling a broad line of filtration products for thousands of different end uses.

Continued emphasis on cost reductions and improved pricing programs within each
business unit are expected to offset cost increases for materials, including
filter media and steel, health care, insurance and pensions. Due to reduced
pension asset valuations and lower discount and asset return rates, pension
expense is expected to increase by $2.0 million in fiscal 2003 from 2002. Costs
for property and liability insurance and pensions are particularly impacted by
economic conditions and by interest rates, stock market valuations and
reinsurance availability. These costs for the Company may change significantly
based on future changes in the U.S. and world economies. Capital investments
will continue to be made in each segment's facilities to improve productivity
and to support the Total Filtration Program and new products. While the Company
fully anticipates that sales and profits will improve as a result of sales
initiatives and cost reductions, the Company has developed contingency plans to
reduce discretionary spending if recessionary economic conditions persist.

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 distributors 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; the
finalization of a replacement credit facility; 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.