<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.

In accordance with Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of," the Company determines any impairment losses based on
underlying cash flows related to specific groups of plant assets, identifiable
intangibles and excess cost over fair value of assets acquired and would first
apply such impairment losses 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,
2000 and 1999, the Company held short-term municipal securities with a total
cost of $2,900 and $12,720, respectively. 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.

The Company makes limited use of derivative financial instruments and does not
use them for trading or speculative purposes. Derivative financial instruments
are used principally to manage certain interest rate and foreign currency risks.
Interest rate swap agreements are utilized to convert certain floating rate debt
into fixed rate debt. Cash flows related to interest rate swap agreements are
included in interest expense over the terms of the agreements.

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

Foreign currency translation adjustments are included in other comprehensive
earnings in accordance with Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income."

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.

ACCOUNTING PERIOD

The Company's fiscal year ends on the Saturday closest to November 30. The
fiscal year ended December 2, 2000 included fifty-three weeks. The fiscal years
ended November 27, 1999 and November 28, 1998 were 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.




16 CLARCOR
<PAGE>   2
--------------------------------------------------------------------------------

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 AND INVESTMENTS IN AFFILIATES

During 2000, the Company purchased Filter Products, Inc., a Sacramento,
California liquid process filtration manufacturer, and two air filtration
distributors. All three of these acquisitions were accounted for under the
purchase method of accounting. Two of the acquisitions were paid for in cash.
The purchase price of the other was paid in cash and stock. For these
acquisitions, the Company paid $12,730 in cash, net of cash received, and issued
160,704 shares of its common stock (or $2,895). These acquisitions did not have
a significant impact on the results of the Company.

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
$140,985, 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
G.) 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 $25,910.

The transaction was accounted for under the purchase method of accounting with
the excess of the purchase price over the 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. During fiscal year 2000, the
Company finalized the purchase price according to the terms of the purchase
agreement and completed the estimates of liabilities assumed, including those
associated with exit and other costs of the acquisition. The finalized
allocation to major categories of assets and liabilities resulted in a reduction
to goodwill of $34. As part of the final allocation of purchase price, the
Company accrued an additional $800 for severance and exit costs during 2000,
resulting in a total accrual of $1,085 of which $329 was paid out as of November
30, 2000. The remaining cash payments for severance and exit costs are expected
to be paid out by the end of 2001. 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.

                                      Years Ended November
                                  ---------------------------
                                       1999          1998
                                  ---------------------------
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

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. 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.

C. INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the
last-in, first-out (LIFO) method for approximately 43% and 42% of the Company's
inventories at November 30, 2000 and 1999, 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:

                                        2000        1999
                                      -------------------
Raw materials .....................   $ 38,444   $ 33,274
Work-in-process ...................     14,253     15,203
Finished products .................     48,316     42,978
                                      -------------------
Total at FIFO .....................    101,013     91,455
Less excess of FIFO over LIFO .....        452      1,605
                                      -------------------
                                      $100,561   $ 89,850
                                      ===================

During 2000, certain LIFO inventory quantities were reduced resulting in a
partial liquidation of the LIFO bases. The effect on net earnings was not
material.

                                                                              17
<PAGE>   3

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

D. PLANT ASSETS

Plant assets at November 30, 2000 and 1999 were as follows:

                                        2000        1999
                                      -------------------
Land ..............................   $  3,911   $  3,853
Buildings and building fixtures ...     67,986     65,845
Machinery and equipment ...........    182,689    163,481
Construction-in-process ...........     17,666     11,108
                                      -------------------
                                       272,252    244,287
Less accumulated depreciation .....    132,131    118,261
                                      -------------------
                                      $140,121   $126,026
                                      ===================

E. ACQUIRED INTANGIBLES

Acquired intangibles, net of accumulated amortization at November 30, 2000 and
1999 consisted of the following:

                                                             2000       1999
                                                          -------------------
Excess of cost over fair value of assets acquired .....   $ 62,333   $ 49,784
Trademarks ............................................     29,090     30,140
Other acquired intangibles ............................     10,454     11,227
                                                          -------------------
                                                          $101,877   $ 91,151
                                                          ===================

Accumulated amortization was $13,812 and $9,890 at November 30, 2000 and 1999,
respectively.

F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at November 30, 2000 and 1999 were as
follows:

                                                  2000      1999
                                                -----------------
Accounts payable ............................   $40,826   $42,477
Accrued salaries, wages and commissions .....    12,678    10,875
Compensated absences ........................     6,192     6,224
Accrued pension liabilities .................       262     6,711
Other accrued liabilities ...................    24,229    21,306
                                                -----------------
                                                $84,187   $87,593
                                                =================

G. LONG-TERM DEBT

Long-term debt at November 30, 2000 and 1999 consisted of the following:

                                                     2000       1999
                                                 -------------------
Multicurrency revolving credit agreement,
   interest payable at the end of each
   funding period at an adjusted LIBOR .......   $116,000   $115,000
Promissory note, interest payable
   semi-annually at 6.69% ....................     20,000     25,000
Industrial Revenue Bonds, at 2.20% to
   5.85% interest rates ......................     10,063     10,438
Other obligations, at 7.75% to 10%
   interest rates ............................        905        983
                                                 -------------------
                                                  146,968    151,421
Less current portion .........................      5,482      5,440
                                                 -------------------
                                                 $141,486   $145,981
                                                 ===================

A fair value estimate of $147,419 and $143,867 for long-term debt in 2000 and
1999, 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, which was extended for
one additional year in 2000, 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 a variable
spread of .55% to 1.25%. The variable spread is based on the ratio of the
Company's outstanding borrowings as compared with its shareholders' equity. The
spread was .80% at November 30, 2000. Facility fees and other fees on the entire
loan commitment are payable for the duration of this facility. At November 30,
2000 and 1999, $116,000 and $115,000 were outstanding under this agreement.

Borrowings under the credit facility are unsecured 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. The Company was in compliance with these covenants as of November 30,
2000 and 1999. This agreement also includes a letter of credit facility, against
which $10,841 and $11,405 in letters of credit had been issued as of November
30, 2000 and 1999, respectively.

During 2000, the Company entered into several interest rate agreements to manage
its interest exposure related to the multicurrency credit revolver. Two
agreements were in place at November 30, 2000 covering the outstanding amount on
the multicurrency credit revolver. One agreement provides for the Company to pay
a 7.12% fixed interest rate on a notional amount of $60,000 and matures in
December 2000. The other agreement provides for the Company to pay a 7.34% fixed
interest rate on a notional amount of $60,000 and is effective until September
11, 2002. Under both agreements the Company will receive interest at floating
rates based on LIBOR. At November 30, 2000 and 1999, LIBOR was 7.46% and 6.51%,
respectively. The fair market value of the agreements was a negative $1,183 at
November 30, 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 agreement, 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.



18 CLARCOR

<PAGE>   4
--------------------------------------------------------------------------------

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 $1,653 and
$2,028 as of November 30, 2000 and 1999, respectively. These mature in 2005 and
are backed by a letter of credit that requires an annual fee of 0.925% 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: $5,482 in 2001, $5,500 in 2002, $5,531 in 2003, $5,581 in 2004,
$305 in 2005 and $8,569 thereafter. The borrowings under the revolving credit
facility that matures in 2003 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 $10,714, $2,228 and $2,293 during 2000, 1999 and 1998,
respectively.

H. 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
noncancellable leases at November 30, 2000 for the next five years are: $8,176
in 2001, $7,481 in 2002, $6,016 in 2003, $4,463 in 2004 and $2,385 in 2005. Rent
expense totaled $8,367, $6,063 and $5,189 for the years ended November 30, 2000,
1999 and 1998, respectively.

I. 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 $2,580
and $8,550 at November 30, 2000 and 1999, 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, 2000 and 1999. The accrued
pension benefit liability includes an unfunded benefit obligation of $5,231 and
$11,445 as of November 30, 2000 and 1999, respectively. The obligations have
been determined with a weighted average discount rate of 7.75% and 7.50% in 2000
and 1999, 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 2000 and 1999.

<TABLE>
<CAPTION>
                                             Pension                 Postretirement
                                             Benefits                     Benefits
                                       ----------------------------------------------
                                           2000        1999         2000        1999
                                        ----------------------------------------------
<S>                                      <C>         <C>         <C>         <C>
Change in benefit obligation:
Benefit obligation at beginning
   of year ...........................   $ 73,356    $ 75,986    $  3,866    $  2,342
Service cost .........................      3,122       2,364          92          13
Interest cost ........................      5,021       5,251         280         149
Actuarial (gains) / losses ...........     (2,038)     (6,378)         (6)         18
Acquisitions .........................       --          --          --         1,606
Benefits paid ........................    (10,481)     (3,867)       (150)       (262)
                                         --------------------------------------------
Benefit obligation at end of year ....     68,980      73,356       4,082       3,866
                                         --------------------------------------------
Change in plan assets:
Fair value of plan assets at
   beginning of year .................     87,214      79,828        --          --
Actual return on plan assets .........      3,012      11,076        --          --
Benefits paid ........................     (3,540)     (3,690)       --          --
                                         --------------------------------------------
Fair value of plan assets at end
   of year ...........................     86,686      87,214        --          --
                                         --------------------------------------------

Funded status ........................     17,706      13,858      (4,082)     (3,866)
Unrecognized net transition asset ....       --        (1,056)       --          --
Unrecognized prior service cost ......        188         210        --          --
Unrecognized net actuarial
   (gain) / loss .....................     (3,011)     (5,421)        238         244
                                         --------------------------------------------
Net amount recognized ................   $ 14,883    $  7,591    $ (3,844)   $ (3,622)
                                         ============================================
Amounts recognized in the
   Consolidated Balance
   Sheets include:
       Prepaid benefit cost ...........  $ 19,519    $ 17,879    $   --      $   --
       Accrued benefit liability ......    (4,636)    (10,288)     (3,844)     (3,622)
                                         --------------------------------------------
Net amount recognized ................   $ 14,883    $  7,591    $ (3,844)   $ (3,622)
                                         ============================================

</TABLE>


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


                                                        Pension Benefits
                                                --------------------------------
                                                  2000       1999       1998
                                                --------------------------------
Components of net periodic benefit cost:
   Service cost .............................   $ 3,122    $ 2,364    $ 2,248
   Interest cost ............................     5,021      5,251      4,882
   Expected return on plan assets ...........    (7,695)    (7,041)    (6,883)
   Additional recognition amount ............      --          196        196
   Amortization of unrecognized:
      Net transition asset ..................    (1,056)    (1,056)    (1,056)
      Prior service cost ....................        21         62         63
      Net actuarial loss ....................         7         54         64
                                                -------    -------    -------
   Net periodic benefit
      (income) / cost .......................   $  (580)   $  (170)   $  (486)
                                                =======    =======    =======

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





                                                                              19
<PAGE>   5

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

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. The components of net periodic benefit cost for postretirement health
care benefits are shown below.

                                                Postretirement Benefits
                                                -----------------------
                                                 2000    1999     1998
                                                -----------------------
Components of net periodic benefit cost:
Service cost ................................    $ 92    $ 13     $ 13
Interest cost ...............................     280     149      166
                                                -----------------------
Net periodic benefit cost ...................    $372    $162     $179
                                                =======================

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 $1,408, $1,211 and $1,037 in 2000, 1999 and 1998,
respectively.

J. INCOME TAXES

The provision for income taxes consisted of:

                     2000       1999        1998
                  -------------------------------
Current:
   Federal ....   $ 17,693   $ 18,398    $ 16,976
   State ......      2,574      2,177       2,784
   Foreign ....      1,063        547         585
Deferred ......      1,871       (985)     (1,083)
                  -------------------------------
                  $ 23,201   $ 20,137    $ 19,262
                  ===============================

Income taxes paid, net of refunds, totaled $16,458, $22,234 and $16,199 during
2000, 1999 and 1998, respectively.

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

                           2000      1999      1998
                         ---------------------------

Domestic income ....     $60,471   $53,467   $49,762
Foreign income .....       3,016     2,148     1,585
                         ---------------------------
   Total ...........     $63,487   $55,615   $51,347
                         ===========================

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:

                               Percent of Pretax Earnings
                               ---------------------------
                               2000       1999       1998
                               ---------------------------
Statutory U.S. tax rates ....  35.0%      35.0%      35.0%
State income taxes, net of
   federal benefit ..........   2.6        2.6        3.4
Foreign sales ...............  (0.8)      (0.8)      (0.7)
Other, net ..................  (0.3)      (0.6)      (0.2)
                               ---------------------------
Consolidated effective
   income tax rate ..........  36.5%      36.2%      37.5%
                               ===========================

The components of the net deferred tax liability as of November 30, 2000 and
1999 were as follows:


                                                       2000       1999
                                                    --------------------
Deferred tax assets:
   Deferred compensation ........................   $  3,930    $  2,792
   Other postretirement benefits .................       783         719
   Foreign net operating loss carryforwards .....        475         203
   Accounts receivable ..........................      2,177       1,538
   Inventories ..................................      1,774       1,975
   Accrued liabilities and other ................      2,009         751
                                                    --------------------
Total gross deferred tax assets .................     11,148       7,978
                                                    --------------------
Deferred tax liabilities:
   Pensions .....................................     (5,209)     (2,656)
   Plant assets .................................    (11,189)     (7,911)
   Other ........................................        (82)       (390)
                                                    --------------------
Total gross deferred tax liabilities ............    (16,480)    (10,957)
                                                    --------------------
Net deferred tax liability ......................   $ (5,332)   $ (2,979)
                                                    ====================

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.

As of November 30, 2000, the Company has not provided taxes on unremitted
foreign earnings of approximately $3,000 that are intended to be indefinitely
reinvested to finance operations and expansion outside the United States. If
such earnings were distributed beyond the amount for which taxes have been
provided, foreign tax credits would substantially offset any incremental U.S.
tax liability.

K. 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 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


20 CLARCOR

<PAGE>   6
--------------------------------------------------------------------------------

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.

L. 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.

M. 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 1997 acquisition of United Air
Specialists, Inc. (UAS), assumed the stock option plans of UAS and has reserved
20,669 shares of the Company's common stock for issuance under the assumed UAS
stock option plans.

The amended 1994 Incentive Plan allows grants and awards of up to 1.5% of the
outstanding common stock as of January 1 of each calendar year. 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. Any portion that is not granted in a given year is available for
future grants. After the close of fiscal year 2000, 368,153 shares were granted,
including the restricted stock units discussed hereafter.

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

STOCK OPTIONS

In accordance with Statement of Financial Accounting Standards No. 123 (SFAS
123), "Accounting for Stock-Based Compensation," the Company accounts for
stock-based compensation using the intrinsic value method as prescribed under
Accounting Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations and provides the disclosure-only
provisions of SFAS 123.

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
2000, 1999 and 1998 were at the fair market value at the dates of the grants.
Options granted to key employees prior to the end of fiscal year 2000 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 key employees after the
close of fiscal year 2000 vest 25% per year beginning at the end of the first
year; therefore, they become fully exercisable at the end of four years. Options
granted to non-employee directors vest immediately. All options expire ten
years from the date of grant unless otherwise terminated.

The following table summarizes the activity under the nonqualified stock option
plans.


<TABLE>
<CAPTION>
                                     2000                     1999                  1998
                            -------------------------------------------------------------------------
                                           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 .....    2,239,162    $  14.83    2,116,182    $  14.18    1,895,086    $  12.15
Granted .................      412,404       17.80      287,982       18.00      518,239       19.86
Exercised/
  surrendered ...........     (365,540)      12.75     (165,002)      12.93     (297,143)      11.10
                            -------------------------------------------------------------------------
Outstanding at
  end of year ...........    2,286,026    $  14.53    2,239,162    $  14.83    2,116,182    $  14.18
                             =======================================================================
Options exercisable
  at end of year ........    1,508,859    $  14.68    1,159,462    $  12.62    1,110,433    $  12.12
                             =======================================================================
</TABLE>


                                                                              21
<PAGE>   7

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

The following table summarizes information about the options at November 30,
2000:


                       Options Outstanding            Options Exercisable
                  ----------------------------------------------------------
                              Weighted    Weighted                Weighted
    Range of                   Average     Average                 Average
    Exercise                  Exercise    Remaining                Exercise
     Prices         Number     Price     Life in Years   Number     Price
-----------------------------------------------------------------------------
$11.55 - $15.83   1,225,885    $13.06       3.94      1,100,261    $12.92
$17.00 - $21.67   1,060,141    $18.85       7.99        408,598    $19.35

In addition, stock options outstanding and exercisable at November 30, 2000 and
1999 assumed as part of the UAS acquisition were 20,669 and 29,005,
respectively, and no further grants were made. These substitute options have an
exercisable price range per share of $2.40 to $5.94 at November 30, 2000 and
expire between 2002 and 2005.

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 28,383 and 26,656 performance
shares on December 1, 1999 and 1998, respectively. As of November 30, 2000, the
Company has cancelled 2,496, 4,860 and 802 shares of the 2000, 1999 and 1998
grants, respectively. 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 $901, $534 and $435 in 2000, 1999 and 1998, respectively.
Distribution of Company common stock and cash for the performance periods ended
November 30, 2000, 1999 and 1998 were $488, $485 and $537, respectively.

Subsequent to the end of the fiscal year 2000, the Company granted 35,222
restricted units of Company common stock. In connection therewith, the Company
cancelled 12,113 performance shares and 8,074 performance units from the
December 1, 1999 grant and replaced them with 9,182 units of restricted stock
and with additional stock option awards. The restricted shares vest over four
years. No future awards of long range performance shares or units are expected
to be granted.

DIRECTORS' RESTRICTED STOCK COMPENSATION

The 1994 Incentive Plan provided for grants of shares of common stock equal to
five years of directors' annual retainers to all non-employee directors, in lieu
of cash. 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.

Effective March 25, 2000, this plan was amended to grant all non-employee
directors shares of common stock equal to a one-year annual retainer. The
directors' rights to the shares vest immediately on the date of grant. In 2000,
7,076 shares of Company common stock were issued under the amended plan.
Subsequent to the end of fiscal year 2000, 452 shares were granted.

Compensation expense for the plan totaled $184, $191 and $149 in 2000, 1999 and
1998, respectively. During 1999, 16,002 shares of Company common stock were
issued under the plan of which 15,488 were cancelled in 2000 due to the plan
amendment. During 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 $39,520, $34,848 and $31,520 and $1.61, $1.43 and $1.28 for
2000, 1999 and 1998, 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 2000, 1999 and 1998. Adjustments for forfeitures are made as
they occur.

                                          2000      1999      1998
                                        ----------------------------
Risk-free interest rate .............     6.34%     4.87%     5.90%
Expected dividend yield .............     2.47%     2.35%     2.60%
Expected volatility factor ..........    25.00%    24.50%    25.80%
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 2000, 1999 and 1998 was $5.28, $4.88 and $5.63, 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.

N. 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



22 CLARCOR

<PAGE>   8
--------------------------------------------------------------------------------

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.

The Company calculates and presents basic and diluted earnings per share in
accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share." 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.


<TABLE>
<CAPTION>
                                               2000          1999          1998
                                           ---------------------------------------
<S>                                        <C>           <C>           <C>
Net Earnings (numerator) ...............   $    40,237   $    35,412   $    32,079
Basic EPS:
   Weighted average number of
      common shares outstanding
      (denominator) ....................    24,269,675    23,970,011    24,268,250
      Basic per share amount ...........   $      1.66   $      1.48   $      1.32
                                           =======================================
Diluted EPS:
   Weighted average number
      of common shares
      outstanding ......................    24,269,675    23,970,011    24,268,250
   Dilutive effect of stock options ....       236,496       343,596       380,373
                                           ---------------------------------------
      Diluted weighted average
         number of common
         shares outstanding
         (denominator) .................    24,506,171    24,313,607    24,648,623
      Diluted per share amount .........   $      1.64   $      1.46   $      1.30
                                           =======================================
</TABLE>


For fiscal years ended November 30, 2000, 1999 and 1998, respectively, 682,866,
525,156 and 508,864 options with a weighted average exercise price of $19.34,
$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.

O. UNAUDITED QUARTERLY FINANCIAL DATA

The unaudited quarterly data for 2000 and 1999 were as follows:

                              First     Second     Third      Fourth
                             Quarter    Quarter   Quarter     Quarter      Total
                            ----------------------------------------------------
2000:
   NET SALES ............   $150,697   $162,205   $160,830   $178,416   $652,148
   GROSS PROFIT .........     44,283     49,985     47,778     56,299    198,345
   NET EARNINGS .........      7,063     10,090     10,078     13,006     40,237
   NET EARNINGS PER
   COMMON SHARE:
     BASIC ..............   $   0.29   $   0.42   $   0.41   $   0.53   $   1.66
     DILUTED ............   $   0.29   $   0.41   $   0.41   $   0.53   $   1.64

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

Fiscal year 2000 was a fifty-three week year, whereas fiscal year 1999 was a
fifty-two week year. Likewise, fourth quarter 2000 was a fourteen week quarter
while fourth quarter 1999 was a thirteen week quarter. In addition, fourth
quarter 1999 includes the acquisition of three industrial filtration businesses
as discussed in Note B.

P. 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 Engine/Mobile Filtration segment manufactures and markets a complete line of
filters used in the filtration of oils, 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




                                                                              23
<PAGE>   9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(Dollars in thousands except per share data)

locomotives, marine and mining equipment, industrial 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, pharmaceutical
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.
Subsequent to year-end 2000, the Company reached an agreement with a customer of
its Packaging segment that will result in the early termination of a supply and
license agreement. As a result of a settlement payment made by that customer in
the first quarter 2001, the Packaging segment is expected to record increased
revenue and operating profit in fiscal 2001. The segment's sales of plastic
closures will be reduced beginning in 2001 as a result of the agreement.

Net sales represent sales to unaffiliated customers. No single customer or class
of product accounted for 10% or more of the Company's consolidated 2000 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, 2000, 1999 and 1998 were as
follows:

                                              2000        1999        1998
                                            --------------------------------
Net sales:
Engine/Mobile Filtration ...............    $259,791    $238,680    $223,761
Industrial/Environmental Filtration ....     319,746     174,889     135,828
Packaging ..............................      72,611      64,300      67,184
                                            --------------------------------
                                            $652,148    $477,869    $426,773
                                            ================================
Operating profit:
Engine/Mobile Filtration ...............    $ 49,162    $ 43,591    $ 38,983
Industrial/Environmental Filtration ....      18,433       5,120       6,966
Packaging ..............................       8,392       7,366       5,714
                                            --------------------------------
                                              75,987      56,077      51,663
Other income (expense)..................     (12,500)       (462)       (316)
                                            --------------------------------
Earnings before income taxes and
   minority interests ..................    $ 63,487    $ 55,615    $ 51,347
                                            ================================
Identifiable assets:
Engine/Mobile Filtration ...............    $144,563    $137,351    $128,618
Industrial/Environmental Filtration ....     271,669     241,471      72,289
Packaging ..............................      41,891      36,173      30,500
Corporate ..............................      43,807      57,996      74,359
                                            --------------------------------
                                            $501,930    $472,991    $305,766
                                            ================================
Additions to plant assets:
Engine/Mobile Filtration ...............    $  7,588    $ 13,115    $ 10,479
Industrial/Environmental Filtration ....      10,842       4,824       3,743
Packaging ..............................       8,045       3,217       1,258
Corporate ..............................       2,530         666         345
                                            --------------------------------
                                            $ 29,005    $ 21,822    $ 15,825
                                            ================================
Depreciation and amortization:
Engine/Mobile Filtration ...............    $  7,475    $  6,944    $  6,320
Industrial/Environmental Filtration ....      10,145       5,132       2,803
Packaging ..............................       2,832       2,742       2,749
Corporate ..............................         627         554         508
                                            --------------------------------
                                            $ 21,079    $ 15,372    $ 12,380
                                            ================================

Financial data relating to the geographic areas in which the Company operates
are shown for the years ended November 30, 2000, 1999 and 1998. Net sales by
geographic area are based on sales to final customers within that region.

                                              2000        1999       1998
                                            --------------------------------
Net Sales:
United States ..........................    $532,210    $399,717    $355,522
Europe .................................      60,250      35,984      29,505
Other international ....................      59,688      42,168      41,746
                                            --------------------------------
                                            $652,148    $477,869    $426,773
                                            ================================
Plant assets, at cost less
 accumulated depreciation:
United States ..........................    $133,323    $119,196    $ 83,621
Europe .................................       5,695       5,650       1,704
Other international ....................       1,103       1,180       1,064
                                            --------------------------------
                                            $140,121    $126,026    $ 86,389
                                            ================================

24 CLARCOR