<PAGE>   1

FINANCIAL REVIEW
(Dollars in millions except per share data)                    EXHIBIT 13(a)(x)
===============================================================================

     Record operating results were achieved by CLARCOR in 1998 and the year-end
financial condition reflected a continued strong balance sheet and cash flow.
All per share amounts have been restated to reflect a three-for-two stock split
of the Company's common shares in the form of a 50% stock dividend effective
April 24, 1998.

     The information presented in this financial review should be read in
conjunction with other financial information provided throughout this 1998
Annual Report.

OPERATING RESULTS

SALES

     Net sales in 1998 of $426.8 million were 8.2% greater than net sales of
$394.3 million in 1997. This was the 12th consecutive year of sales growth for
the Company and reflected strong sales from both filtration segments, but lower
sales from the Packaging segment. Domestic sales of $355.5 million increased
9.3% over the 1997 level of $325.4 million. Total international sales of $71.3
million, or 16.7% of total sales, increased from $68.9 million in 1997. The
growth in international sales was 3.4% over the 1997 level as worldwide economic
uncertainty and currency changes reduced the Company's anticipated growth in
international sales in 1998. Total net sales in 1997 grew 5.9% over the 1996
level of $372.4 million. Each business segment recorded higher sales in 1997
than in 1996 and international sales grew at a rate of 11.5% in 1997 over the
1996 level.

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

<TABLE>
<CAPTION>
                                                                 1998 vs. 1997
                                                                    Change
                                                                ---------------
NET SALES                                      1998   % Total     $         %
-------------------------------------------------------------------------------
<S>                                           <C>      <C>      <C>      <C>
Engine/Mobile Filtration................      $223.8    52.4%   $16.1      7.8%
Industrial/Environmental Filtration.....       135.8    31.8%    24.3     21.8%
Packaging...............................        67.2    15.8%    (7.9)   -10.6%
                                            -----------------------------------
   Total................................      $426.8   100.0%   $32.5      8.2%
                                            ===================================

                                                                 1997 vs. 1996
                                                                    Change
                                                                ---------------
NET SALES                                      1997   % Total     $         %
-------------------------------------------------------------------------------
<S>                                           <C>      <C>      <C>      <C>
Engine/Mobile Filtration................      $207.7    52.7%   $12.5      6.4%
Industrial/Environmental Filtration.....       111.5    28.3%     8.1      7.8%
Packaging...............................        75.1    19.0%     1.3      1.8%
                                            -----------------------------------
   Total................................      $394.3   100.0%   $21.9      5.9%
                                            ===================================
</TABLE>


     The Engine/Mobile Filtration segment's sales increased 7.8% in 1998 over
1997 on the strength of aftermarket sales of heavy-duty and light-duty filters
in both domestic and international markets. Increased sales in 1998 resulted
from new product introductions, additional OEM sales, and penetration into new
distribution channels, primarily sales to quick lube and truck service centers,
fleets and automotive parts buying groups. Although unit volume increased in
1998, price increases were mostly offset by competitive discounts. The segment's
1997 sales increase of 6.4% over 1996 resulted from increased heavy-duty filter
sales which more than offset lower light-duty filter sales in 1997.

     The Company's Industrial/Environmental Filtration segment recorded a 21.8%
sales increase over the 1997 level. This increase came from increased demand for
air quality products and from acquisitions made in 1998. The Company acquired
Air Technologies, Inc. (ATI) in February 1998 and a small distributor in August.
Excluding the 1998 acquisitions, net sales increased approximately 14% over
fiscal 1997 sales. Sales increased 7.8% for this segment in 1997 over the 1996
level. Several small distributors were also acquired during fiscal 1997. The
Industrial/Environmental Filtration segment continues to grow at a faster rate
than the Company's other segments as a result of new product development,
additional distribution, increased customer demand for indoor air filtration
products, and acquisitions.

     The Packaging segment, formerly referred to as Consumer Packaging, recorded
sales of $67.2 million in 1998, a reduction of $7.9 million from 1997. This
reduction is due principally to the 1997 sale of the Tube Division, which
contributed approximately $7.0 million in sales in 1997, and due to lower
promotional container sales in fiscal 1998. The Packaging segment's sales
increased 1.8% in 1997 over 1996 primarily as a result of higher sales of
plastic closures and containers.

OPERATING PROFIT

     On the strength of the 8.2% increase in sales, the Company's operating
profit increased 16.3% in 1998 to $51.7 million, or 9.0% excluding the impact of
$3.0 million in merger-related costs recorded in 1997. Operating profit grew for
the sixth consecutive year and resulted in an operating margin of 12.1%. Gross
margin improved to 31.7% from 30.6% in 1997 as a result of continued cost
reductions and improved manufacturing productivity. Raw material price increases
in 1998 were modest in all significant categories. Gross margins in 1997
increased to 30.6% from 29.2% in 1996 due to increased sales, material cost
containment, and higher productivity levels. Selling and administrative expenses
increased to $83.6 million in 1998, from $73.2 million in 1997, as a result of
higher sales activities, new product development programs and a $2.1 million
charge related to an uncollectible customer 


10


<PAGE>   2


===============================================================================


account. Operating profit was reduced by unfavorable currency translation
adjustments in each year although the amounts were not material to consolidated
operating profit.

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

<TABLE>
<CAPTION>
                                                                 1998 vs. 1997*
                                                                    Change
                                                                ---------------
OPERATING PROFIT                               1998   % Total     $         %
-------------------------------------------------------------------------------
<S>                                           <C>      <C>      <C>      <C>
Engine/Mobile Filtration................      $ 39.0    75.4%   $ 4.5     12.9%
Industrial/Environmental Filtration.....         7.0    13.5%     2.8     66.3%
Packaging...............................         5.7    11.1%    (3.0)   -34.1%
                                            -----------------------------------
   Total................................      $ 51.7   100.0%   $ 4.3      9.0%
                                            ===================================

                                                                1997* vs. 1996
                                                                    Change
                                                                ---------------
OPERATING PROFIT                               1997   % Total     $         %
-------------------------------------------------------------------------------
<S>                                           <C>      <C>      <C>      <C>
Engine/Mobile Filtration................      $ 34.5    72.9%   $ 3.3     10.8%
Industrial/Environmental Filtration.....         4.2     8.8%     0.2      3.5%
Packaging...............................         8.7    18.3%     1.3     17.5%
                                            -----------------------------------
   Total................................      $ 47.4   100.0%   $ 4.8     11.3%
                                            ===================================

OPERATING PROFIT
AS A PERCENT OF NET SALES                               1998     1997*      1996
-------------------------------------------------------------------------------
<S>                                                    <C>      <C>       <C>
Engine/Mobile Filtration................                17.4%    16.6%    16.0%
Industrial/Environmental Filtration.....                 5.1%     3.8%     3.9%
Packaging...............................                 8.5%    11.5%    10.0%
                                                        -----------------------
   Total................................                12.1%    12.0%    11.4%
                                                        =======================
*Excluding merger-related costs in 1997.

</TABLE>


     Operating profit for the Engine/Mobile Filtration segment improved to
$39.0 million or 17.4% of sales in 1998. The segment's 1998 operating profit
increase of 12.9% over the 1997 level resulted primarily from higher sales
volumes, cost reductions and productivity improvements that more than offset
competitive pricing discounts. In addition, the integration of the Hastings
Filters light-duty filter line with Baldwin Filters continued in 1998 and
favorably impacted the segment's profit. In 1997 the segment recorded a 10.8%
increase in operating profit over 1996, which came from higher sales, material
cost containment, manufacturing cost reductions, and improvements to
manufacturing, distribution and administration of the light-duty filter line.

     The Industrial/Environmental Filtration segment's operating profit of $7.0
million increased 66.3% over the 1997 level. The increase resulted from improved
productivity and cost reductions and from increased sales volume and capacity
utilization. The 1998 acquisitions also favorably impacted operating profit.
Operating profit in 1997 increased 3.5% over 1996. The segment's profit in 1997
was affected by costs related to investment in additional distribution,
marketing, product development and manufacturing processes that are expected to
benefit future years. Operating profit as a percent of sales increased to 5.1%
in 1998 from 3.8% in 1997 and 3.9% in 1996.

     The Packaging segment's operating profit in 1998 was impacted by the $2.1
million charge for the write-off of a customer account and the sale of the Tube
Division in 1997. As a result, operating profit of $5.7 million in 1998 was $3.0
million lower than the 1997 level. Lower promotional sales in 1998 also reduced
operating profit. In 1997 operating profit increased 17.5% over the 1996 level
as a result of significantly higher sales of plastics products and continued
productivity improvements for the metals business.

OTHER INCOME & EXPENSE

     Other expense totaled $0.3 million in 1998, $0.2 million in 1997 and $1.2
million in 1996. Interest expense, which totaled $2.3 million in 1998, was lower
in both 1998 and 1997 as a result of a lower level of debt during each year.
Interest income increased to $1.3 million in 1998 as a result of higher average
cash and short-term cash investment balances during fiscal 1998 which was offset
by somewhat lower interest rates. Other expense included gains on the
dispositions of plant assets of $1.3 million in 1998, $0.5 million in 1997 and
$0.2 million in 1996. The 1998 gains included approximately $1.3 million from
the sale of a building. In both 1997 and 1996, gains of $1.7 million were
recorded from the sale of securities in a former Australian joint venture
partner.

PROVISION FOR INCOME TAXES

     The provision for income taxes in 1998 of $19.3 million resulted in an
effective tax rate of 37.5%. This effective rate compares to 38.8% in 1997,
which was higher than the 1998 rate due to merger costs recorded in 1997 that
were not fully deductible for tax purposes. The effective rate in 1996 was
37.0%.

NET EARNINGS AND EARNINGS PER SHARE

     Net earnings of $32.1 million in 1998 set a new record for the Company and
resulted in diluted earnings per share of $1.30 compared to $1.11 diluted
earnings per share in 1997. Diluted average shares outstanding for fiscal 1998
were 24,648,623 compared to 24,343,881 for 1997, an increase of 1.3%. Net
earnings in 1997 of $26.9 million increased from the 1996 level of $25.9
million, or $1.07 diluted earnings per share based on 24,217,453 



                                                                              11



<PAGE>   3


FINANCIAL REVIEW
(Dollars in millions except per share data)
===============================================================================

diluted average shares outstanding. All share amounts reflect the April 1998
three-for-two stock split.

EURO INTRODUCTION
     The Company does not expect the introduction of the Euro resulting from the
European Monetary Union to have significant impact on the competitive position
or operations of the Company.

MARKET RISK 
     The Company's market risk is the potential loss arising from adverse
changes in interest rates. The Company's long-term debt obligations are mostly
at fixed interest rates and denominated in U.S. dollars. 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 increase in fair value of the Company's long-term
debt obligations resulting from a hypothetical one-percent decrease in interest
rates and amounts to approximately $2.1 million over the term of the debt.

     The Company places its short-term cash investments in high grade, primarily
tax-exempt municipal securities. For the most part, the interest rates on these
investments are reset weekly and consequently, the cost of these securities
approximates market value.

     Although the Company continues to evaluate derivative financial
instruments, including forwards, swaps and purchased options, to manage foreign
currency exchange rate changes, the Company does not currently hold derivatives
for managing these risks or for trading purposes.

RECENT ACCOUNTING PRONOUNCEMENTS
     In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components (revenue, expenses, gains, and losses)
in a full set of general-purpose financial statements. The Company will adopt
SFAS 130 in its fiscal year 1999.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131 (SFAS 131), "Disclosure about Segments of an Enterprise and Related
Information," which changes the way public companies report information about
operating segments. SFAS 131, which is based on the management approach to
segment reporting, establishes the requirement to report selected segment
information quarterly and to report entity-wide disclosures about products and
services, major customers, and the material countries in which the entity holds
assets and reports revenue. The Company will adopt SFAS 131 in its fiscal year
1999. Management does not expect the adoption of SFAS 131 to significantly
change the way it currently reports the Company's segment information.

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 requires a company to recognize all derivatives on the
balance sheet as either an asset or a liability measured at fair value. The
statement also requires a company to recognize changes in the derivative's fair
value currently in earnings unless it meets specific hedge accounting criteria.
The Company will adopt SFAS 133 in fiscal year 2000. Management does not expect
the adoption of SFAS 133 to have a material impact on the Company's consolidated
financial statements.

YEAR 2000
     For several years the Company has been reviewing Year 2000 issues related
to the impact on its computer systems and operating facilities. Management has
assigned internal project teams to review all computer-operated machinery and
related software to assure that key financial, information and operating systems
have been assessed. Key suppliers and outside parties that may also have Year
2000 issues which could impact the Company have been contacted and have been
asked to verify their Year 2000 readiness. The Company is testing interaction
with such outside party systems where appropriate. In addition, the Company has
assessed products sold by the Company and believes there is no material exposure
to contingencies related to the Year 2000 issue; however, additional testing of
date-sensitive components will continue throughout 1999. Management believes
that all key areas which may be impacted by the Year 2000 date have been
assessed and remediation plans have been developed. No significant issues have
been identified and the Company has not incurred any material costs related to
the assessment of its Year 2000 issues.

     Remediation plans have been developed to address systems modifications and
some of these modifications have already been implemented and tested. The end of
the second quarter of 1999 has been set by the Company as a target date for
assuring that all information processing and operating systems have been fully
tested and remediation plans implemented. Where outside suppliers are not able
to verify their readiness by that date, backup suppliers will be identified to
the extent possible. The Company is developing contingency plans that will
address the Company's exposure to any material 



12


<PAGE>   4

===============================================================================

failure as a result of noncompliance by third parties; however, with respect to
certain vendors, particularly utility vendors, alternative suppliers may not be
readily available. Management believes that the Company is devoting the
necessary resources to identify and resolve significant Year 2000 issues and to
minimize the risk of noncompliance in a timely manner.

     Based on the assessment and remediation plans implemented at this time, the
total cost of addressing compliance is less than $1.5 million, most of which has
already been spent. The remaining costs are not expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows in the future. However, the Year 2000 problem is pervasive and
complex as virtually every computer operation may be affected in some way.
Consequently, no assurance can be given that Year 2000 compliance can be
achieved without costs that might have a material adverse effect upon the
Company's business, financial condition, results of operation, and business
prospects.

FINANCIAL CONDITION
CORPORATE LIQUIDITY

     The Consolidated Statements of Cash Flows are shown on page 18, and the
discussion of corporate liquidity should be read in conjunction with information
presented in those statements.

     Cash and short-term cash investments increased to $33.3 million at year-end
1998 from $30.3 million at year-end 1997. Cash provided by operating activities
totaled $42.3 million in 1998 compared to $41.6 million in 1997. Increased cash
flow from net earnings, depreciation and amortization in 1998 was used for
investment in assets, net of liabilities. The 1997 level of cash provided by
operating activities was significantly higher than the 1996 level of $26.7
million and included a lower level of investment in working capital. The
Company's emphasis on measuring CLARCOR Value Added (CVA), an economic value
added system, has resulted in continued improvements in asset management.

     Net cash used in investing activities of $19.3 million increased from the
1997 level of $8.2 million. Additions to plant assets increased to $15.8 million
as a result of increased plant capacity and the expansion to a manufacturing and
distribution facility in Kearney, Nebraska. Cash of $8.0 million was invested in
the acquisition of ATI in February and a small distributor in August. Plant
asset additions were $11.3 million in 1997 and $22.2 million in 1996. The higher
level of plant asset additions in 1996 resulted from an expansion to a filter
facility in Yankton, South Dakota and related new equipment, an expansion to the
plastics packaging facility in Rockford, Illinois, and additional capital
expenditures at Corporate. In 1998, cash of $2.5 million was received as payment
on a note receivable and $2.5 million was received from the disposition of plant
assets. In 1997 and 1996, $3.3 million and $3.1 million, respectively, were
received from the sale of securities in a former Australian joint venture
partner.

     Net cash used in financing activities totaled $19.9 million in 1998 and
included repurchases of Company common stock, dividend payments and payments on
long-term debt. During 1998 the Company purchased 528,691 shares of common stock
for $8.4 million under the Board of Directors' approved plan to repurchase up to
1,500,000 shares of CLARCOR common stock. Dividend payments totaled $10.7
million, $10.3 million and $9.5 million in 1998, 1997 and 1996, respectively.
Payments on long-term debt of $2.7 million in 1998 compared to higher amounts in
1997 and 1996 of $14.0 million and $9.1 million, respectively. The borrowings
under long-term debt in 1996 of $9.9 million were primarily related to
industrial revenue bonds for the building expansion in Yankton, South Dakota.

     In 1998 CLARCOR continued to generate sufficient cash to maintain current
operating levels, to pay dividends, to provide for additions and the replacement
of necessary plant facilities, and to service and repay long-term debt.
Sufficient lines of credit remain available to fund the Company's current
operations and planned future growth. Total capital expenditures in 1999,
including the completion of the expansion to the manufacturing and distribution
facility in Kearney, Nebraska, will be approximately $25.0 million. Principal
payments on long-term debt will be lower than in 1998 based on scheduled
payments in current debt agreements.

CAPITAL RESOURCES

     The Company's financial position at November 30, 1998 continued to be
sufficiently liquid to support current operations. Total assets of $305.8
million at November 30, 1998 increased 8.2% from the prior year-end level of
$282.5 million. Total current assets increased to $168.2 million from $160.5
million at year-end 1997 and total current liabilities increased to $61.2
million from $54.2 million at year-end 1997. The increases in current assets and
current liabilities relate primarily to the higher level of business activity at
year-end 1998 compared to year-end 1997. The current ratio was 2.7 at year-end
1998 compared to 3.0 at year-end 1997.



                                                                              13


<PAGE>   5



FINANCIAL REVIEW
(Dollars in millions except per share data)
===============================================================================

     Long-term debt of $36.4 million at year-end 1998 compares to $37.7 million
at year-end 1997 and reflects payments made during 1998. Shareholders' equity
increased to $186.8 million from $171.2 million at year-end 1997. The increase
in shareholders' equity resulted primarily from net earnings of $32.1 million
offset by dividend payments of $10.7 million, or $0.4425 per share, and common
stock repurchases of $8.4 million. Long-term debt was 16.3% of total
capitalization at year-end 1998 compared to 18.0% at year-end 1997.

     At November 30, 1998, CLARCOR had 23,949,358 shares of common stock
outstanding at $1.00 par value, compared to 24,243,603 shares outstanding at the
end of 1997. These share amounts have been adjusted to reflect the three-for-two
stock split effective April 24, 1998.

OUTLOOK
     The Company's operating results and financial condition are expected to
continue to improve during fiscal 1999. Each business segment is expected to
increase sales and operating profit in 1999 as a result of new products and new
marketing and sales programs.

     The Engine/Mobile Filtration segment expects further growth in sales from
quick lube and service centers and from continuing product development
throughout its product range. Additional growth is also expected from sales to
light-duty and automotive parts buying groups and from increased emphasis on
selling heavy-duty filters through the light-duty distribution channels.
Expanded relationships with locomotive engine manufacturers and further
development of air filter products for diesel locomotives are expected to
bolster sales.

     The Industrial/Environmental Filtration segment expects to capitalize on
investments made in 1997 and 1998 to develop new dust collector products and
related specialty filters during 1999 and future years. Investments in direct
sales offices and acquisitions of ATI and filter distributors in 1997 and 1998
are expected to positively impact sales and profitability in 1999 as these
operations become more effectively integrated into UAS and Airguard.

     The Packaging segment expects to increase its flat sheet decorating
business through selling its metal decorating and printing capabilities directly
to other packaging and closure companies. Marketing efforts in promotional
container sales will emphasize selling through specialty promotional agencies in
addition to traditional sales made directly to major U.S. companies. In the
plastics area, the segment expects to continue its development of plastic and
combination metal and plastic containers and closures.

     The Company will continue to implement cost reductions and make
productivity improvements, although competitive pricing pressures and
international business conditions may reduce the overall profit improvement.
Additional plant asset additions will be made in each segment's facilities
during 1999 that are expected to improve productivity and support new product
introductions. While the Company fully expects that sales and profits will
improve as a result of these efforts, contingency plans are in place to reduce
costs depending on industry and economic conditions.

     The Company continues to look at acquisition opportunities, especially in
related filtration businesses. It is expected that these acquisitions would
expand the Company's distribution and product offerings. The Company has
established financial standards that will continue to be vigorously applied in
the review of all acquisition opportunities.

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 timing and
acceptance of new products and product enhancements by the Company or its
competitors, changes in pricing, product life cycles, 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 and productivity improvement programs, the
management of both growth and acquisitions, third-party compliance with Year
2000 readiness, the Company's internal Year 2000 readiness, extraordinary
events, such as litigation or acquisitions, 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.



14