<PAGE>   1
                                                                 EXHIBIT 13(a)vi

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

A. ACCOUNTING POLICIES
Principles of Consolidation

      The consolidated financial statements include all domestic and foreign
subsidiaries that are more than 50% owned and controlled. CLARCOR Inc. and its
subsidiaries are hereinafter collectively referred to as the "Company" or
CLARCOR.

      Minority interests represent an outside shareholder's 10% ownership of the
common stock of Filtros Baldwin de Mexico (FIBAMEX) and outside shareholders'
20% ownership of Baldwin-Unifil S.A.

FOREIGN CURRENCY TRANSLATION

      Financial statements of foreign subsidiaries are translated into U.S.
dollars at current rates, except that revenues, costs and expenses are
translated at average current rates during each reporting period. Net exchange
gains or losses resulting from the translation of foreign financial statements
and the effect of exchange rate changes on intercompany transactions of a
long-term investment nature are accumulated with other comprehensive earnings as
a separate component of shareholders' equity and are presented, net of tax, in
the Consolidated Statements of Shareholders' Equity.

PLANT ASSETS

      Depreciation is provided by the straight-line and accelerated methods for
financial statement purposes and by the accelerated method for tax purposes. The
provision for depreciation is based on the estimated useful lives of the assets
(15 to 40 years for buildings and improvements and 3 to 15 years for machinery
and equipment). It is the policy of the Company to capitalize renewals and
betterments and to charge to expense the cost of current maintenance and
repairs.

EXCESS OF COST OVER FAIR VALUE OF ASSETS
ACQUIRED AND OTHER INTANGIBLE ASSETS

      The excess of cost over fair value of assets acquired is being amortized
over a forty-year period using the straight-line method. Other acquired
intangible assets are being amortized over the estimated periods to be benefited
using the straight-line method. These intangibles include trademarks (40 year
life), patents (average 14 year life), and other identifiable intangible assets
with lives ranging from one to thirty years.

      Impairment losses, as determined by underlying cash flows related to
specific groups of plant assets, identifiable intangibles and excess cost over
fair value of assets acquired, are applied first to related goodwill.

STATEMENTS OF CASH FLOWS

      All highly liquid investments that are readily saleable are considered to
be short-term cash investments. The carrying amount approximates fair value.

CONCENTRATIONS OF CREDIT AND
FINANCIAL INSTRUMENTS

      Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of short-term cash investments
and trade receivables. The Company places its short-term cash investments in
high-grade municipal securities and classifies them as trading securities. At
November 30, 1999 and 1998, the Company held short-term municipal securities
with a total cost of $12,720 and $32,420, respectively, with original maturities
through October 2005. Cost approximates market for these securities.
Concentrations of credit risk with respect to trade receivables are limited due
to the Company's large number of customers and their dispersion across many
different industries and locations.

INCOME TAXES

      The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." SFAS 109 requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
financial statement carrying amounts and the tax basis of assets and
liabilities.

REVENUE RECOGNITION

      Revenue is recognized upon shipment of goods to customers.

COMPREHENSIVE EARNINGS

      Effective December 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income," which
establishes standards for reporting and displaying comprehensive income and its
components. Foreign currency translation adjustments and unrealized holding
gains, which the Company previously reported separately in shareholders' equity,
are now included in other comprehensive earnings. The adoption of this Statement
has no impact on the Company's net earnings or shareholders' equity. Prior year
financial statements have been reclassified to conform to the requirements of
SFAS 130.

USE OF MANAGEMENT'S ESTIMATES

      The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.




                                       19
<PAGE>   2
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

ACCOUNTING PERIOD

      The Company's fiscal year ends on the Saturday closest to November 30.
Each of the fiscal years ended November 27, 1999, November 28, 1998 and November
29, 1997, was comprised of fifty-two weeks. In the consolidated financial
statements, all fiscal years are shown to begin as of December 1 and end as of
November 30 for clarity of presentation.

RECLASSIFICATIONS

      Certain reclassifications have been made to conform prior years' data to
the current presentation. These reclassifications had no effect on reported
earnings.

B. BUSINESS COMBINATIONS, INVESTMENTS IN AFFILIATES, AND DIVESTITURE

      On September 10, 1999, the Company completed its acquisitions of Purolator
Air Filtration (Purolator), Facet International (Facet), and Purolator Facet,
Inc. (PFI), manufacturers of air and liquid filtration products, for
approximately $142,400, net of cash received, including acquisition expenses.
The purchase price was paid in cash with available funds and proceeds from
long-term borrowings of approximately $115,000 from a revolving credit facility.
(See Note H.) As a result of the acquisitions, Purolator, Facet, and PFI became
subsidiaries of the Company and are included in the Company's Industrial/
Environmental Filtration segment. The Company's non-cash investing and financing
activities related to this acquisition included assumed liabilities of $25,783.

      The transaction was accounted for under the purchase method of accounting
with the excess of the initial purchase price over the preliminary estimated
fair value of the net tangible and identifiable intangible assets acquired
recorded as goodwill and amortized over 40 years by the straight-line method.
Other acquired intangible assets are being amortized as discussed in Note A. The
initial purchase price was based on the net assets of the businesses acquired as
shown on a February 28, 1999 balance sheet and is subject to a final adjustment
based on the net assets of the businesses. A preliminary allocation of the
initial purchase price has been made to major categories of assets and
liabilities. The allocation will be completed when the Company finalizes a
closing balance sheet in accordance with the purchase agreement, completes the
estimates of liabilities assumed, and finalizes the estimates associated with
exit and other costs of the acquisitions. The Company expects to finalize its
plans for integrating the acquired businesses with its existing operations by
the end of the third quarter of fiscal 2000 and any resulting changes to the
estimated $285 accrued for severance and exit costs will be reflected as an
adjustment to the allocation of the purchase price. The operating results are
included in the Company's consolidated results of operations from September 1,
1999, the effective date of the acquisitions.

      The following unaudited pro forma information summarizes the results of
operations for the periods indicated as if the acquisitions had been completed
as of the beginning of the periods presented. The pro forma information gives
effect to actual operating results prior to the acquisitions, adjusted to
include the pro forma effect of interest expense, depreciation, amortization of
intangibles and income taxes. These pro forma amounts do not purport to be
indicative of the results that would have actually been obtained if the
acquisitions had occurred as of the beginning of the periods presented or that
may be obtained in the future.


<TABLE>
<CAPTION>
                                             Years Ended November
                                            ----------------------
                                               1999       1998
                                            ---------------------
<S>                                         <C>        <C>
Net sales...............................    $ 591,869  $ 576,973
Net earnings............................       36,625     32,277
Basic earnings per share................         1.53       1.33
Diluted earnings per share..............         1.51       1.31
</TABLE>


      During 1998, the Company purchased Air Technologies, Inc. (ATI), an
Ottawa, Kansas manufacturer of air filtration products, and a small filter
distributor. Each acquisition was made for cash and accounted for under the
purchase method of accounting. Both of these companies became wholly-owned
subsidiaries of the Company. Also during 1998, the Company purchased the
remaining 50% interest in Baldwin Australia and an additional 10% interest in
Baldwin-Unifil S.A. These acquisitions did not have a significant impact on the
results of the Company.

      On February 28, 1997, the Company completed its acquisition of United Air
Specialists, Inc. (UAS), a manufacturer of air quality equipment based in
Cincinnati, Ohio. The Company issued 1,622,612 shares of its common stock in
exchange for all the shares of UAS stock. Additional shares of the Company's
common stock will be issued upon exercise of UAS options. (See Note N for a
discussion of the additional shares to be issued.) The transaction was
structured as a statutory merger accounted for as a pooling of interests. As a
result of the acquisition, UAS became a subsidiary of the Company. A one-time,
pre-tax charge of $2,972 ($2,390 net of tax) covering the costs of the merger
includes legal and professional fees, non-compete agreements, and costs to
integrate the businesses of the two companies.

      Other business acquisitions in fiscal 1997 included Airklean Engineering
Pte. Ltd., an Airguard distributor in Singapore; a filter distributor in Toledo,
Ohio; and The Filtair Company in Arlington, Texas. Each company was purchased
for cash. None of these acquisitions had a significant impact on the results of
the Company.

      Also during 1997, the Company sold the assets of its Tube division located
in Downers Grove, Illinois. The divestiture did not have a significant impact on
the results of the Company.



                                       20
<PAGE>   3

C. INVESTMENT IN MARKETABLE SECURITIES

      In December 1996, the Company sold its remaining 2.5% investment interest
in G.U.D. Holdings Limited, an Australian company, recognizing a pretax gain on
the sale of $1,706 in fiscal 1997. The unrealized holding gains, net of deferred
income taxes of $992, were included as a component of accumulated other
comprehensive earnings at November 30, 1996.

D. INVENTORIES

      Inventories are stated at the lower of cost or market. Cost is determined
by the last-in, first-out (LIFO) method for approximately 52% and 60% of the
Company's inventories at November 30, 1999 and 1998, respectively, and by the
first-in, first-out (FIFO) method for all other inventories. The FIFO method
approximates current cost. Inventories are summarized as follows:


<TABLE>
<CAPTION>
                                               1999       1998
                                            ---------------------
<S>                                         <C>        <C>
Raw materials...........................    $  33,274  $  20,657
Work-in-process.........................       15,203      9,231
Finished products.......................       42,978     30,767
                                            --------------------
Total at FIFO...........................       91,455     60,655
Less excess of FIFO over LIFO...........        1,605      2,041
                                            --------------------
                                            $  89,850  $  58,614
                                            ====================
</TABLE>


E. PLANT ASSETS

      Plant assets at November 30, 1999 and 1998 were as follows:


<TABLE>
<CAPTION>
                                              1999       1998
                                            --------------------
<S>                                        <C>        <C>
Land....................................   $    3,853 $    2,491
Buildings and building fixtures.........       65,845     53,392
Machinery and equipment.................      163,481    128,467
Construction-in-process.................       11,108      9,322
                                            --------------------
                                              244,287    193,672
Less accumulated depreciation...........      118,261    107,283
                                            --------------------
                                            $ 126,026  $  86,389
                                            ====================
</TABLE>


F. ACQUIRED INTANGIBLES

      Acquired intangibles, net of accumulated amortization at November 30, 1999
and 1998 consisted of the following:


<TABLE>
<CAPTION>
                                                           1999     1998
                                                         ------------------
<S>                                                      <C>       <C>
Excess of cost over fair value of assets acquired ....   $49,784   $21,665
Trademarks ...........................................    30,140      --
Other acquired intangibles ...........................    11,227      --
                                                         -----------------
                                                         $91,151   $21,665
                                                         =================
</TABLE>


      Accumulated amortization was $9,890 and $8,306 at November 30, 1999 and
1998, respectively.

G. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

      Accounts payable and accrued liabilities at November 30, 1999 and 1998
were as follows:


<TABLE>
<CAPTION>
                                                  1999     1998
                                                -----------------
<S>                                             <C>       <C>
Accounts payable ............................   $42,477   $26,528
Accrued salaries, wages and commissions .....    10,875     8,249
Compensated absences ........................     6,224     3,967
Accrued pension liabilities .................     6,711       263
Other accrued liabilities ...................    21,306    15,518
                                                -----------------
                                                $87,593   $54,525
                                                =================
</TABLE>


H. LONG-TERM DEBT

      Long-term debt at November 30, 1999 and 1998 consisted of the following:


<TABLE>
<CAPTION>
                                                   1999       1998
                                                 -------------------
<S>                                              <C>        <C>
Multicurrency revolving credit agreement,
      interest payable at the end of each
      funding period at an adjusted LIBOR ....   $115,000   $   --
Promissory note, interest payable
      semi-annually at 6.69% .................     25,000     25,000
Industrial Revenue Bonds, at 2.20% to
      4.55% interest rates ...................     10,438     10,710
Other obligations, at 7% to 10%
      interest rates .........................        983      1,179
                                                 -------------------
                                                  151,421     36,889
Less current portion .........................      5,440        470
                                                 -------------------
                                                 $145,981   $ 36,419
                                                 ===================
</TABLE>


      A fair value estimate of $143,867 and $34,631 for the long-term debt in
1999 and 1998, respectively, is based on the current interest rates available to
the Company for debt with similar remaining maturities.

      In September 1999, the Company entered into a three-year, multicurrency
revolving credit agreement with a group of participating financial institutions
under which it may borrow up to $185,000. The agreement provides that loans may
be made under a selection of currencies and rate formulas. The interest rate is
based upon either a defined Base Rate or the London Interbank Offered Rate
(LIBOR) plus applicable margins. Facility fees and other fees on the entire loan
commitment are payable for the duration of this facility. At November 30, 1999,
$115,000 was outstanding under this agreement and the interest rate was 6.51%.

      Borrowings under the credit facility are uncollateralized but are
guaranteed by certain of the Company's subsidiaries. The agreement related to
this borrowing includes certain restrictive covenants that include maintaining
minimum consolidated net worth of $160,000, limiting new borrowings, maintaining
a minimum interest coverage, and restricting certain changes in ownership as
stipulated in the agreement. This agreement also includes a letter of credit
facility,



                                       21
<PAGE>   4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


against which $11,405 in letters of credit had been issued at November 30, 1999,
that replaced a $25,000 revolving credit facility with a financial institution,
against which $10,305 letters of credit had been issued at November 30, 1998.

      Subsequent to the end of the fiscal year, the Company entered into an
interest swap agreement to manage its interest exposure under the multicurrency
credit revolver. The agreement provides for the Company to pay a 6.04% fixed
interest rate on a notional amount of $115,000 and to receive interest at
floating rates based on LIBOR. The agreement matures in March 2000.

      The 6.69% promissory note matures July 25, 2004, but the Company is
required to prepay, without premium, certain principal amounts as stated in the
agreement. Under the note agreements, the Company must meet certain restrictive
covenants. The covenants were amended during 1999 to be similar to those
contained in the multicurrency revolving credit facility.

      On February 1, 1996, the Company, in cooperation with the South Dakota
Economic Development Finance Authority, issued $8,410 of Industrial Revenue
Bonds. The bonds are due February 1, 2016, with a variable rate of interest that
is reset weekly. The Company has other outstanding Industrial Revenue Bonds of
$2,028 and $2,300 as of November 30, 1999 and 1998, respectively. These mature
in 2005 and are backed by a letter of credit that requires an annual fee of
1.25% of the outstanding balance. This letter of credit expires in May 2001.

      Exclusive of the multicurrency revolving credit facility, principal
maturities of long-term debt for the next five fiscal years ending November 30
approximates: $5,440 in 2000, $5,462 in 2001, $5,488 in 2002, $5,515 in 2003,
$5,570 in 2004 and $8,946 thereafter. The borrowings under the revolving credit
facility that matures in 2002 have been classified as long-term as the Company
has both the intent and ability to refinance this amount on a long-term basis.

      Interest paid totaled $2,228, $2,293 and $2,870 during 1999, 1998 and
1997, respectively.

I. LEASES

      The Company has various lease agreements for offices, warehouses,
manufacturing plants and equipment that expire on various dates through June
2007 and contain renewal options. Some of these leases provide for payment of
property taxes, utilities and certain other expenses. Commitments for minimum
rentals under noncancelable leases at November 30, 1999 for the next five years
are: $4,826 in 2000, $3,225 in 2001, $2,286 in 2002, $918 in 2003 and $419 in
2004. Rent expense totaled $6,063, $5,189 and $4,130 for the years ended
November 30, 1999, 1998 and 1997, respectively.

J. PENSION AND OTHER POSTRETIREMENT PLANS

      The Company has defined benefit pension plans and postretirement health
care plans covering certain employees and retired employees. In addition to the
plan assets related to qualified plans, the Company has funded approximately
$8,550 and $8,279 at November 30, 1999 and 1998, respectively, in restricted
trusts for its nonqualified plans. These trusts are included in other current
and other noncurrent assets in the Company's Consolidated Balance Sheets.

      The following table shows reconciliations of the pension plans and other
postretirement plan benefits as of November 30, 1999 and 1998. The accrued
pension benefit liability includes an unfunded benefit obligation of $11,445 and
$10,830 as of November 30, 1999 and 1998, respectively. The obligations have
been determined with a weighted average discount rate of 7.50% and 6.75% in 1999
and 1998, respectively, and a rate of increase in future compensation of
primarily 5.0% in both years. The expected weighted average long-term rate of
return was 9.0% in both 1999 and 1998.


<TABLE>
<CAPTION>
                                                                                       Pension             Postretirement
                                                                                       Benefits               Benefits
                                                                               --------------------------------------------
                                                                                  1999        1998        1999        1998
                                                                               --------------------------------------------
<S>                                                                            <C>         <C>         <C>         <C>
Change in benefit obligation:
Benefit obligation at beginning
       of year .............................................................   $ 75,986    $ 69,036    $  2,342    $  2,431
Service cost ...............................................................      2,364       2,248          13          13
Interest cost ..............................................................      5,251       4,882         149         167
Actuarial (gains)/losses ...................................................     (6,378)      4,065          18          15
Acquisitions ...............................................................       --          --         1,606        --
Benefits paid ..............................................................     (3,867)     (4,245)       (262)       (284)
                                                                               --------------------------------------------
Benefit obligation at end of year ..........................................     73,356      75,986       3,866       2,342
                                                                               --------------------------------------------
Change in plan assets:
Fair value of plan assets at
       beginning of year...................................................      79,828      78,046        --          --
Actual return on plan assets...............................................      11,076       5,500        --          --
Employer contribution .....................................................        --            41        --          --
Benefits paid .............................................................      (3,690)     (3,759)       --          --
                                                                               --------------------------------------------
Fair value of plan assets at end of year ..................................      87,214      79,828        --          --
                                                                               --------------------------------------------

Funded status..............................................................       13,858      3,842      (3,866)     (2,342)
Unrecognized net transition asset .........................................      (1,056)     (2,112)       --          --
Unrecognized prior service cost ...........................................         210         272        --          --
Unrecognized net actuarial
      (gain)/loss .........................................................      (5,421)      5,157         244         226
                                                                               --------------------------------------------
Net amount recognized .....................................................    $  7,591    $  7,159    $ (3,622)   $ (2,116)
                                                                               ============================================
Amounts recognized in the
       Consolidated Balance Sheets include:
            Prepaid benefit cost ..........................................    $ 17,879    $ 15,907    $   --      $   --
            Accrued benefit liability .....................................     (10,288)     (9,159)     (3,622)     (2,116)
            Intangible asset ..............................................        --           411        --          --
                                                                               --------------------------------------------
Net amount recognized .....................................................    $  7,591    $  7,159    $ (3,622)   $ (2,116)
                                                                               ============================================

</TABLE>



                                       22
<PAGE>   5

      The components of net periodic benefit cost for the pensions are shown
below.


<TABLE>
<CAPTION>
                                                     Pension Benefits
                                             ------------------------------
                                               1999       1998       1997
                                             ------------------------------
<S>                                          <C>        <C>        <C>
Components of net periodic benefit cost:
Service cost .............................   $ 2,364    $ 2,248    $ 2,029
Interest cost ............................     5,251      4,882      4,558
Expected return on plan assets ...........    (7,041)    (6,883)    (5,880)
Additional recognition amount ............       196        196        488
Amortization of unrecognized:
     Net transition asset ................    (1,056)    (1,056)    (1,087)
     Prior service cost ..................        62         63        342
     Net actuarial loss ..................        54         64         13
                                             ------------------------------
Net periodic benefit (income)/cost .......   $  (170)   $  (486)   $   463
                                             =============================
</TABLE>


      The postretirement obligations represent a fixed dollar amount per
retiree. The Company has the right to modify or terminate these benefits. The
participants will assume substantially all future health care benefit cost
increases, and therefore, future increases in health care costs will not
increase the postretirement benefit obligation or cost to the Company.
Therefore, the Company has not assumed any annual rate of increase in the per
capita cost of covered health care benefits for future years and, therefore, a
one percentage point change in the assumed health care cost trend rate would not
have an effect. The components of net periodic benefit cost for the
postretirement health care are shown below.


<TABLE>
<CAPTION>
                                                   Postretirement Benefits
                                                   -----------------------
                                                      1999   1998   1997
                                                   -----------------------
<S>                                                <C>      <C>    <C>
Components of net periodic benefit cost:
     Service cost .................................   $ 13   $ 13   $  7
     Interest cost ................................    149    166    162
                                                      ------------------
     Net periodic benefit cost ....................   $162   $179   $169
                                                      ==================
</TABLE>


      The Company also sponsors various defined contribution plans that provide
employees with an opportunity to accumulate funds for their retirement. The
Company matches the contributions of participating employees based on the
percentages specified in the respective plans. The Company recognized expense
related to these plans of $1,211, $1,037 and $941 in 1999, 1998 and 1997,
respectively.

K. INCOME TAXES

      The provision for income taxes consisted of:

<TABLE>
<CAPTION>
                                    1999      1998       1997
                                  -----------------------------
<S>                               <C>        <C>        <C>
Current:
     Federal....................  $17,909    $16,976    $15,095
     State......................    2,177      2,784      2,356
     Foreign....................    1,036        585        446
Deferred........................     (985)    (1,083)      (733)
                                  -----------------------------
                                  $20,137    $19,262    $17,164
                                  =============================
</TABLE>


      Income taxes paid, net of refunds, totaled $22,234, $16,199 and $15,112
during 1999, 1998 and 1997, respectively.

      The components of the net deferred tax liability as of November 30, 1999
and 1998 were as follows:


<TABLE>
<CAPTION>
                                                       1999         1998
                                                     --------    --------
<S>                                                  <C>         <C>
Deferred tax assets:
     Deferred compensation .......................   $  2,792    $  2,296
     Other postretirement benefits ...............        719         741
     Foreign net operating loss carryforwards ....        203         422
     Accounts receivable .........................      1,538         833
     Inventories .................................      1,975       1,397
     Other .......................................        751       1,487
                                                     --------    --------
Total gross deferred tax assets ..................      7,978       7,176
                                                     --------    --------
Deferred tax liabilities:
     Pensions ....................................     (2,656)     (2,506)
     Plant assets ................................     (7,911)     (7,981)
     Other .......................................       (390)       (372)
                                                     --------    --------
Total gross deferred tax liabilities .............    (10,957)    (10,859)
                                                     --------    --------
Net deferred tax liability .......................   $ (2,979)   $ (3,683)
                                                     ========    ========
</TABLE>

      The Company expects to realize the deferred tax assets, including foreign
net operating loss carryforwards, through the reversal of taxable temporary
differences and future earnings.

      Earnings before income taxes and minority interests included the following
components:


<TABLE>
<CAPTION>
                         1999      1998      1997
                       ---------------------------
<S>                    <C>       <C>       <C>
Domestic income ....   $53,467   $49,762   $42,874
Foreign income .....     2,148     1,585     1,318
                       ---------------------------
     Total .........   $55,615   $51,347   $44,192
                       ===========================
</TABLE>

      The provision for income taxes resulted in effective tax rates that differ
from the statutory federal income tax rates. The reasons for these differences
are as follows:


<TABLE>
<CAPTION>
                                                       Percent of Pretax Earnings
                                                      ----------------------------
                                                        1999       1998       1997
                                                      ----------------------------
<S>                                                     <C>        <C>        <C>
Statutory U.S. tax rates ..........................     35.0%      35.0%      35.0%
State income taxes, net of federal benefit ........      2.6        3.4        3.2
Foreign sales .....................................     (0.8)      (0.7)      (0.8)
Merger-related costs ..............................      --         --         0.8
Other, net ........................................     (0.6)      (0.2)       0.6
                                                        --------------------------
Consolidated effective income tax rate ............     36.2%      37.5%      38.8%
                                                        ==========================
</TABLE>


L. CONTINGENCIES

      The Company is involved in legal actions arising in the normal course of
business. Additionally, the Company is party to various proceedings relating to
environmental issues. The U.S. Environmental Protection Agency (EPA) and/or
other responsible state agencies have designated the Company as a potentially
responsible



                                       23
<PAGE>   6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)


party (PRP), along with other companies, in remedial activities for the cleanup
of waste sites under the federal Superfund statute.

      Environmental and related remediation costs are difficult to quantify for
a number of reasons, including the number of parties involved, the difficulty in
determining the extent of the contamination, the length of time remediation may
require, the complexity of the environmental regulation and the continuing
advancement of remediation technology. Applicable federal law may impose joint
and several liability on each PRP for the cleanup.

      It is the opinion of management after consultation with legal counsel that
additional liabilities, if any, resulting from these legal or environmental
issues, are not expected to have a material adverse effect on the Company's
financial condition or consolidated results of operations.

M. PREFERRED STOCK PURCHASE RIGHTS

      In March 1996, the Board of Directors of CLARCOR adopted a Shareholder
Rights Plan to replace an existing plan that expired on April 25, 1996. Under
the terms of the Plan, each shareholder received rights to purchase shares of
CLARCOR Series B Junior Participating Preferred Stock. The rights become
exercisable only after the earlier to occur of (i) 10 business days after the
first public announcement that a person or group (other than a CLARCOR related
entity) has become the beneficial owner of 15% or more of the outstanding shares
of CLARCOR Common Stock; or (ii) 10 business days (unless extended by the
CLARCOR Board in accordance with the Rights Agreement) after the commencement
of, or the intention to make, a tender or exchange offer, the consummation of
which would result in any person or group (other than a CLARCOR related entity)
becoming such a 15% beneficial owner. Each right entitles the holder to buy
one-hundredth of a share of such preferred stock at an exercise price of $80
subject to certain adjustments.

      Once the rights become exercisable, each right will entitle the holder,
other than the acquiring individual or group, to purchase a number of CLARCOR
common shares at a 50% discount to the then-market price of CLARCOR Common
Stock. In addition, under certain circumstances, if the rights become
exercisable, the holder will be entitled to purchase the stock of the acquiring
individual or group at a 50% discount. The Board may also elect to redeem the
rights at $.01 per right. The rights expire on April 25, 2006.

      The authorized preferred stock includes 300,000 shares designated as
Series B Junior Participating Preferred Stock.

N. INCENTIVE PLAN

      In 1994, the shareholders of CLARCOR adopted the 1994 Incentive Plan,
which allows the Company to grant stock options, restricted stock and
performance awards to officers, directors and key employees. The 1994 Incentive
Plan incorporates the various incentive plans in existence prior to March 1994.
In addition, the Company has, in connection with the acquisition of UAS, assumed
the stock option plans of UAS and has reserved 29,005 shares of the Company's
common stock for issuance under the assumed UAS stock option plans.

      At the inception of the 1994 Incentive Plan, there were 1,500,000 shares
authorized for future grants. In 1998, the shareholders approved an amendment to
the 1994 Incentive Plan to allow grants and awards of up to 1.5% of the
outstanding common stock as of January 1 of each calendar year. Any portion of
the 1.5% that is not granted in a given year is available for future grants. In
addition, the Compensation and Stock Option Committee of the Company's Board of
Directors may approve an additional 1% of outstanding common stock to be awarded
during any calendar year. After the close of fiscal year 1999, 391,708 shares
were granted.

      The following is a description and a summary of key provisions related to
this plan.

STOCK OPTIONS

      On November 30, 1997, the Company adopted the disclosure-only provisions
of Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting
for Stock-Based Compensation." The Company continues to account for stock-based
compensation using the intrinsic value method as prescribed under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations.

      Nonqualified stock options may, at the discretion of the Board of
Directors, be granted at the fair market value at the date of grant or at an
exercise price less than the fair market value at the date of grant. All options
granted in 1999, 1998 and 1997 were at the fair market value at the dates of the
grants. Options granted to key employees vest 25% per year beginning at the end
of the third year; therefore, they become fully exercisable at the end of six
years. Options granted to non-employee directors vest immediately. All options
expire ten years from the date of grant unless otherwise terminated.




                                       24



<PAGE>   7
      The following table summarizes the activity under the nonqualified stock
option plans.

<TABLE>
<CAPTION>
                                 1999                      1998                    1997
                        -----------------------  -----------------------   -----------------------
                                      Weighted                  Weighted                 Weighted
                                       Average                   Average                  Average
                                      Exercise                  Exercise                 Exercise
                          Shares       Price        Shares        Price       Shares       Price
                        -----------------------  -----------------------   -----------------------
<S>                      <C>            <C>        <C>           <C>         <C>           <C>
Outstanding at
  beginning of year...   2,116,182      $14.18     1,895,086     $12.15      2,002,200     $11.44
Granted...............     287,982       18.00       518,239      19.86        290,625      14.63
Exercised/
  surrendered.........    (165,002)      12.93      (297,143)     11.10       (397,739)     10.39
                        --------------------------------------------------------------------------
Outstanding at
  end of year.........   2,239,162      $14.83     2,116,182     $14.18      1,895,086     $12.15
                        ==========================================================================
Options exercisable
  at end of year......   1,159,462      $12.62     1,110,433     $12.12      1,106,931     $11.13
                        ==========================================================================
</TABLE>

      The following table summarizes information about the options at November
30, 1999:

                         Options Outstanding             Options Exercisable
                   ------------------------------------  -------------------
                              Weighted     Weighted                 Weighted
   Range of                    Average      Average                  Average
   Exercise                   Exercise     Remaining                Exercise
    Prices          Number      Price    Life in Years    Number      Price
---------------    -----------------------------------   -------------------
$8.45 - $12.33      707,259     $11.15       2.73         688,509    $11.12
$12.58 - $17.94     779,347     $13.75       5.95         380,722    $13.45
$18.50 - $22.67     752,556     $19.42       8.00         90,231     $20.61


      In addition, stock options outstanding and exercisable at November 30,
1999 and 1998 assumed as part of the UAS acquisition were 29,005 and 41,511,
respectively. These substitute options have an exercisable price range per share
of $2.40 to $5.94 at November 30, 1999 and expire between 2002 and 2005. No
grants were made under these plans in 1997, 1998 or 1999 and no future
additional awards will be granted.

LONG RANGE PERFORMANCE AWARDS

      Officers and key employees may be granted target awards of Company shares
of common stock and performance units, which represent the right to a cash
payment. The awards are earned and shares are issued only to the extent that the
Company achieves performance goals determined by the Board of Directors during a
three-year performance period. The Company granted 26,656 and 15,063 performance
shares on December 1, 1998 and 1997, respectively. As of November 30, 1999,
2,515 shares of the 1999 grant and 802 shares of the 1998 grant have been
cancelled. The shares vest at the end of three years.

      During the performance period, officers and key employees are permitted to
vote the restricted stock and receive compensation equal to dividends declared
on common shares. The Company accrues compensation expense assuming attainment
of the performance goals ratably during the performance cycle. Compensation
expense for the plan totaled $534, $435 and $547 in 1999, 1998 and 1997,
respectively. Distribution of Company common stock and cash for the performance
periods ended November 30, 1999, 1998 and 1997 were $485, $537 and $341,
respectively.

DIRECTORS' RESTRICTED STOCK COMPENSATION

      The 1994 Incentive Plan grants all non-employee directors, in lieu of
cash, shares of common stock equal to five years of directors' annual retainers.
The directors' rights to the shares vest 20% on date of grant and 20% annually
during the next four years. The directors are entitled to receive dividends and
exercise voting rights with respect to all shares prior to vesting. Any unvested
shares are forfeited if the director ceases to be a non-employee director for
any reason.

      Compensation expense for the plan totaled $191, $149 and $121 in 1999,
1998 and 1997, respectively. During 1999 and 1998, respectively, 16,002 and
7,122 shares of Company common stock were issued under the plan. As of November
30, 1999, 1,321 shares from a prior year grant were forfeited.

FAIR VALUE ACCOUNTING (SFAS 123)

      Had compensation expense for the Company's stock-based compensation plans
been determined based on the fair value at the grant dates consistent with the
method of SFAS 123, the Company's pro forma net earnings and diluted earnings
per share would have been $34,848, $31,520 and $26,702 and $1.43, $1.28 and
$1.10 for 1999, 1998 and 1997, respectively.

      The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions for 1999, 1998 and 1997. Adjustments for forfeitures are made as
they occur.

                                      1999      1998      1997
                                  -------------------------------
Risk-free interest rate...........    4.87%     5.90%     5.98%
Expected dividend yield...........    2.35%     2.60%     3.05%
Expected volatility factor........   24.50%    25.80%    26.10%
Expected option term (in years)...    7.0       7.0       7.0

      The weighted average fair value per option at the date of grant for
options granted in 1999, 1998 and 1997 was $4.88, $5.63 and $4.05, respectively.

      The above pro forma disclosures may not be representative of the effects
on reported net income and earnings per share for future years because
compensation cost under SFAS 123 is amortized over the options' vesting period
and compensation cost for options granted prior to fiscal year 1996 is not
considered.


                                       25
<PAGE>   8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)

O. STOCK SPLIT, TREASURY STOCK TRANSACTIONS AND EARNINGS PER SHARE

      On March 24, 1998, the Company declared a three-for-two stock split in the
form of a 50% stock dividend distributable April 24, 1998 to shareholders of
record April 10, 1998. In connection therewith, the Company transferred $8,145
from retained earnings to common stock, representing the par value of additional
shares issued. All share and per share amounts for all periods presented have
been adjusted to reflect the stock split.

      During 1999 and 1998, the Company purchased and retired 50,000 and 528,691
shares of common stock, respectively. The number of issued shares was reduced as
a result of the retirement of these shares.

      During the quarter ended February 28, 1998, the Company adopted Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share,"
which simplifies the calculation of earnings per share and requires presentation
of both basic and diluted earnings per share on the Consolidated Statements of
Earnings. Diluted earnings per share reflects the impact of outstanding stock
options if exercised during the periods presented using the treasury stock
method. The following table provides a reconciliation of the numerators and
denominators utilized in the calculation of basic and diluted earnings per
share.

                                              1999         1998           1997
                                          --------------------------------------
Net Earnings (numerator)................     $35,412      $32,079       $26,918
Basic EPS:
    Weighted average number of
      common shares outstanding
      (denominator).....................  23,970,011   24,268,250    24,133,472
      Basic per share amount............       $1.48        $1.32         $1.12
                                          ======================================
Diluted EPS:
     Weighted average number
       of common shares
       outstanding......................  23,970,011   24,268,250    24,133,472
     Dilutive effect of stock options...     343,596      380,373       210,409
                                          --------------------------------------
          Diluted weighted average
            number of common
            shares outstanding
            (denominator)................  24,313,607  24,648,623    24,343,881
          Diluted per share amount.......       $1.46       $1.30         $1.11
                                          ======================================

      For the fiscal years ended November 30, 1999 and 1998, respectively,
525,156 and 508,864 options with a weighted average exercise price of $19.81 and
$19.86 were not included in the computation of diluted earnings per share as the
options' exercise prices were greater than the average market price of the
common shares during the respective periods.

P. UNAUDITED QUARTERLY FINANCIAL DATA
      The unaudited quarterly data for 1999 and 1998 were as follows:

                            First      Second      Third     Fourth
                           Quarter     Quarter    Quarter    Quarter     Total
--------------------------------------------------------------------------------
1999:
     Net sales..........   $99,166    $110,483   $112,090   $156,130    $477,869
     Gross profit.......    31,379      34,983     34,190     48,035     148,587
     Net earnings.......     6,210       8,650      9,736     10,816      35,412
     Net earnings per
     common share:
          Basic.........     $0.26       $0.36      $0.41      $0.45       $1.48
          Diluted.......     $0.25       $0.36      $0.40      $0.45       $1.46

1998:
     Net sales..........   $97,786    $107,266   $110,058   $111,663    $426,773
     Gross profit.......    28,775      34,849     34,698     36,914     135,236
     Net earnings.......     5,337       8,030      8,769      9,943      32,079
     Net earnings per
     common share:
          Basic.........     $0.22       $0.33      $0.36      $0.41       $1.32
          Diluted.......     $0.22       $0.32      $0.35      $0.41       $1.30

      Fourth quarter 1999 includes the acquisition of three industrial
filtration businesses as discussed in Note B.

Q. SEGMENT INFORMATION

      The Company adopted Statement of Financial Accounting Standards No. 131
(SFAS 131), "Disclosures About Segments of an Enterprise and Related
Information," effective with year-end 1999. This standard requires that
companies disclose selected information by operating segment. SFAS 131 defines
an operating segment as a component of a company which engages in business
activities from which it may earn revenues and incur expenses; has its operating
results regularly reviewed by the entity's chief operating decision makers to
make decisions about the allocation of resources and the assessment of
performance; and has discrete financial information available. Based on the
economic characteristics of the Company's business activities, the nature of
products, customers and markets served, and the performance evaluation by
management and the Company's Board of Directors, the Company has identified
three reportable segments: Engine/Mobile Filtration, Industrial/ Environmental
Filtration and Packaging. The adoption of SFAS 131 did not change the Company's
identification of segments as reported in prior years.

                                       26
<PAGE>   9

      The Engine/Mobile Filtration segment manufactures and markets a complete
line of filters used in the filtration of oil, air, fuel, coolant, hydraulic and
transmission fluids in both domestic and international markets. The
Engine/Mobile Filtration segment provides filters for certain types of
transportation equipment including automobiles, heavy-duty and light trucks,
buses and locomotives, marine and mining equipment, and heavy-duty construction
and agricultural equipment. The products are sold to aftermarket distributors,
original equipment manufacturers and dealer networks, private label accounts and
directly to truck service centers and large national accounts.

      The Industrial/Environmental Filtration segment manufactures and markets a
complete line of filters, cartridges, dust collectors and filtration systems
used in the filtration of air and industrial fluid processes in both domestic
and international markets. The filters and filter systems are used in commercial
and industrial buildings, hospitals, manufacturing processes, clean rooms,
airports, shipyards, refineries, power generation plants and residences. The
products are sold to commercial and industrial distributors, original equipment
manufacturers and dealer networks, private label accounts, retailers and
directly to large national accounts.

      The Packaging segment manufactures and markets consumer and industrial
packaging products including custom-designed plastic and metal containers and
closures and lithographed metal sheets in both domestic and international
markets. The products are sold directly to consumer and industrial packaging
customers.

      Net sales represent sales to unaffiliated customers. No single customer or
class of product accounted for 10% or more of the Company's consolidated 1999
sales. Intersegment sales are not material. Assets are those assets used in each
business segment. Corporate assets consist of cash and short-term cash
investments, deferred income taxes, headquarters facility and equipment, pension
assets and various other assets that are not specific to an operating segment.
Unallocated amounts include interest income and expense and other non-operating
income and expense items.

      The segment data for the years ended November 30, 1999, 1998 and 1997 were
as follows:


<TABLE>
<CAPTION>
                                                             1999         1998         1997
                                                           -----------------------------------
<S>                                                        <C>          <C>          <C>
Net sales:
Engine/Mobile Filtration ...............................   $ 238,680    $ 223,761    $ 207,640
Industrial/Environmental Filtration ....................     174,889      135,828      111,491
Packaging ..............................................      64,300       67,184       75,133
                                                           -----------------------------------
                                                           $ 477,869    $ 426,773    $ 394,264
                                                           ===================================
Operating profit:
Engine/Mobile Filtration ...............................   $  43,591    $  38,983       34,536
Industrial/Environmental Filtration ....................       5,120        6,966        4,188
Packaging ..............................................       7,366        5,714        8,672
                                                           -----------------------------------
                                                              56,077       51,663       47,396
Merger-related costs ...................................        --           --         (2,972)
Other income (expense) .................................        (462)        (316)        (232)
                                                           -----------------------------------
Earnings before income taxes and minority interests ....   $  55,615    $  51,347    $  44,192
                                                           ===================================
Identifiable assets:
Engine/Mobile Filtration ...............................   $ 137,351    $ 128,618    $ 121,804
Industrial/Environmental Filtration ....................     241,471       72,289       60,706
Packaging ..............................................      36,173       30,500       36,824
Corporate ..............................................      57,996       74,359       63,185
                                                           -----------------------------------
                                                           $ 472,991    $ 305,766    $ 282,519
                                                           ===================================
Additions to plant assets:
Engine/Mobile Filtration ...............................   $  13,115    $  10,479    $   7,382
Industrial/Environmental Filtration ....................       4,824        3,743        2,570
Packaging ..............................................       3,217        1,258        1,127
Corporate ..............................................         666          345          270
                                                           -----------------------------------
                                                           $  21,822    $  15,825       11,349
                                                           ===================================
Depreciation and amortization:
Engine/Mobile Filtration ...............................   $   6,944    $   6,320    $   5,724
Industrial/Environmental Filtration ....................       5,132        2,803        2,386
Packaging ..............................................       2,742        2,749        2,994
Corporate ..............................................         554          508          496
                                                           -----------------------------------
                                                           $  15,372    $  12,380       11,600
                                                           ===================================
</TABLE>


      Financial data relating to the geographic areas in which the Company
operates are shown for the years ended November 30, 1999, 1998 and 1997. Net
sales by geographic area are based on sales to final customers within that
segment.


<TABLE>
<CAPTION>
                                                              1999       1998       1997
                                                            ------------------------------
<S>                                                         <C>        <C>        <C>
Net Sales:
United States ...........................................   $399,717   $355,522   $325,361
Europe ..................................................     35,984     29,505     28,201
Other international .....................................     42,168     41,746     40,702
                                                            ------------------------------
                                                            $477,869   $426,773   $394,264
                                                            ==============================
Plant assets, at cost less accumulated depreciation:
United States ...........................................   $119,196   $ 83,621   $ 80,223
Europe ..................................................      5,650      1,704      1,709
Other international .....................................      1,180      1,064        973
                                                            ------------------------------
                                                            $126,026   $ 86,389   $ 82,905
                                                            ==============================

</TABLE>


                                       27