<PAGE>   1
                                                                EXHIBIT 13(a)vi

NOTES TO FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

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

     On February 28, 1997, CLARCOR Inc. completed its acquisition of United Air
Specialists, Inc. (UAS), a manufacturer of air quality equipment based in
Cincinnati, Ohio.  (See Note B.)  The transaction has been structured as a
statutory merger accounted for as a pooling of interests.  As a result of the
acquisition, UAS became a subsidiary of CLARCOR Inc.  Under the requirements of
pooling of interests accounting treatment, the consolidated financial
statements and accompanying notes for the periods presented have been restated
(except for cash dividends declared per share, which represent the historical
dividends declared by CLARCOR Inc.) to include the results of operations, cash
flows, and financial positions of UAS.  CLARCOR Inc. and its subsidiaries are
hereinafter collectively referred to as the "Company" or CLARCOR.

A.   ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated financial statements include all domestic and foreign
subsidiaries which are more than 50% owned and controlled.

     Minority interests represent an outside shareholder's 10% ownership of the
common stock of Filtros Baldwin de Mexico (FIBAMEX), outside shareholders' 30%
ownership of Baldwin-Unifil S.A., and an outside shareholder's 50% ownership of
Baldwin Filters (Aust.) Pty. Limited.

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 and credited or charged directly to
a separate component 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.  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

     The excess of cost over fair value of assets acquired is being amortized
over a forty-year period, using the straight-line method subject to impairment
write-offs determined by underlying cash flows.  Accumulated amortization was
$7,192 and $6,802 at November 30, 1997 and 1996, respectively.

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.
The Company has certain noncash transactions related to stock option and award
plans that are described in Note M.

Concentrations of Credit

     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 with high credit quality financial institutions and in high-grade
municipal securities.  At November 30, 1997 and 1996, the Company held
short-term municipal securities with a total cost of $27,620 and $15,780,
respectively, with an original maturity of three months or less.  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.

Stock-Based Compensation

     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."  SFAS 123 encourages, but does not require,
companies to adopt a fair value based method for determining expense related to
stock-based compensation.  The disclosures are presented in Note M.  The
Company continues to account 

                                                                             25
<PAGE>   2

NOTES TO FINANCIAL STATEMENTS
(CONTINUED)

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

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.

Revenue Recognition

     Revenue is recognized upon shipment of goods to customers.

Net Earnings Per Common Share

     Net earnings per common share is based on the weighted-average number of
common shares outstanding during the respective years.

     In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per
Share" (EPS), which requires dual presentation of basic EPS and diluted EPS,
simplifies existing computational guidelines, and increases the comparability
of earnings per share on an international basis.  SFAS 128 is effective for
periods ending after December 15, 1997 and requires restatement of all prior
period EPS data presented.  The Company will adopt SFAS 128 in its first
quarter of fiscal year 1998.  Adoption of SFAS 128 will not have a material
impact on the Company's EPS other than the additional disclosure of diluted
EPS.

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.
Each of the fiscal years ended November 29, 1997, November 30, 1996, and
December 2, 1995, 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.

Reclassification

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

Recent Accounting Pronouncements

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

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

B.   BUSINESS COMBINATIONS, INVESTMENTS IN AFFILIATES, AND DIVESTITURE

     On February 28, 1997, the Company completed its acquisition of UAS, a
manufacturer of air quality equipment based in Cincinnati, Ohio.  The Company
issued 1,081,741 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 M for a discussion of the additional shares
to be issued.)  The transaction has been 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.

     Under the requirements of the pooling of interests accounting treatment,
the consolidated financial statements for the periods presented have been
restated (except for cash dividends declared per share, which represent the
historical dividends declared by the Company) to include the results of
operations, cash flows, and financial positions of UAS.  UAS' fiscal year-end
for all periods presented has been changed to the Saturday closest to November
30.  Therefore, the Company's restated consolidated financial statements for
fiscal 1997, 1996, and 1995 include UAS for the period beginning December 1 and
ending on November 30 of the following year.  Certain prior period amounts for
UAS have been reclassified to conform with the presentation of such data by the
Company.  UAS' net sales and net earnings for the fiscal years ended November
30, 1996 and 1995 were $38,994 and $39,916, and $967 and $1,546, respectively.


26


<PAGE>   3


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

     No intercompany transactions existed between the two companies during the
periods presented.  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 distribution facility in
Toledo, Ohio; and The Filtair Company in Arlington, Texas; each 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.

     During fiscal 1996, Baldwin-Unifil S. A., in which the Company owns a 70%
equity interest, was incorporated in South Africa.  Baldwin-Unifil S. A.
acquired certain assets from Unifil (Pty.) Ltd. for $1,298 in cash.  The
Company also entered into a joint venture in China, called Baldwin-Weifang
Filters Ltd., and accounts for its investment on a cost basis.

     The Company purchased certain assets comprising the filtration business of
Hastings Manufacturing Company on September 4, 1995 for $14,125 in cash,
including acquisition expenses.  The business is a manufacturer of automotive
and light-duty filter products.  The acquisition has been accounted for by the
purchase method of accounting and the operating results of the business are
included in the Company's consolidated statements of earnings from the date of
the acquisition.

     The following unaudited pro forma amount is presented as if the Hastings
acquisition had occurred at the beginning of the period presented immediately
preceding the acquisition and does not purport to be indicative of what would
have occurred had the acquisition been made as of that date or of results which
may occur in the future.  Unaudited pro forma net sales for the Company would
have been $360,110 for the year ended November 30, 1995.  Net earnings and
earnings per share for this period would not have been significantly affected.

C.   INVESTMENT IN MARKETABLE SECURITIES

     In November 1996, the Company sold 50% of its 5% interest in G.U.D.
Holdings Limited, an Australian company, recognizing a pretax gain on the sale
of $1,675 in fiscal 1996.  The Company sold its remaining 2.5% investment in
December 1996 recognizing a pretax gain on the sale of $1,706 in fiscal 1997.
The investment, with an average cost basis, had been classified as available
for sale under the provisions of Statement of Financial Accounting Standards
No. 115, (SFAS 115) "Accounting for Certain Investments in Debt and Equity
Securities."  The quoted market value of the investment was $3,292 as of
November 30, 1996, which included unrealized holding gains, net of deferred
income taxes, of $992 and $1,285 as of November 30, 1996 and 1995,
respectively.  The 1996 and 1995 unrealized holding gains, net of deferred
income taxes, have been included as a component of shareholders' equity at
November 30.

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 61% and 58% of the
Company's inventories at November 30, 1997 and 1996, 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>
                                                             1997        1996
                                                          --------------------
<S>                                                       <C>         <C>
Raw materials ........................................... $ 20,890    $ 20,713
Work-in-process .........................................    9,341      12,473
Finished products .......................................   30,585      26,648
                                                          --------------------
  Total at FIFO .........................................   60,816      59,834
 Less excess of FIFO
  over LIFO .............................................    2,534       2,947
                                                          --------------------
                                                          $ 58,282    $ 56,887
                                                          ====================
</TABLE>


E.   PLANT ASSETS

     Plant assets at November 30, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                                            1997         1996
                                                          --------------------
<S>                                                       <C>         <C>
Land .................................................... $  2,566    $  2,563
Buildings and building fixtures .........................   53,442      49,824
Machinery and equipment .................................  119,644     114,726
Construction-in-process .................................    4,967       8,837
                                                          --------------------
                                                           180,619     175,950
Less accumulated depreciation ...........................   97,714      91,425
                                                          --------------------
                                                          $ 82,905    $ 84,525
                                                          ====================
</TABLE>


                                                                             27



<PAGE>   4



NOTES TO FINANCIAL STATEMENTS
(CONTINUED)

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

F.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts payable and accrued liabilities at November 30, 1997 and 1996 
were as follows:

<TABLE>
<CAPTION>
                                                            1997         1996
                                                          --------------------
<S>                                                       <C>         <C>
Accounts payable ........................................ $ 22,168    $ 20,366
Accrued salaries, wages and commissions .................    8,773       6,375
Compensated absences ....................................    3,742       3,127
Accrued pension liabilities .............................      996         996
Other accrued liabilities ...............................   12,474       8,824
                                                          --------------------
                                                          $ 48,153    $ 39,688
                                                          ====================
</TABLE>


G. LONG-TERM DEBT

   Long-term debt at November 30, 1997 and 1996 consists of the following:
   
<TABLE>
<CAPTION>
                                                            1997         1996
                                                          --------------------
<S>                                                       <C>         <C>
Promissory note, interest payable quarterly at 9.71% ...... $      -    $  6,416
Promissory note, interest payable semi-annually at 6.69% ..   25,000      25,000
Industrial Revenue Bonds, at 2.65% to 4.80% interest rates.   10,958      11,127
Borrowings under domestic lines of credit, prime ..........        -       4,865
Note payable to bank, denominated in Deutsche
  marks, interest payable quarterly at FIBOR plus 2.75% ...      362         768
Other obligations, at 7% to 10% interest rates ............    2,476       2,898
                                                            --------------------
                                                              38,796      51,074
Less current portion ......................................    1,140       7,625
                                                            --------------------
                                                            $ 37,656    $ 43,449
                                                            ====================
</TABLE>


     The 9.71% promissory note was paid at maturity on March 31, 1997.  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.
A fair value estimate of $40,080 and $51,238 for the long-term debt in 1997 and
1996, respectively, is based on the current interest rates available to the
Company for debt with similar remaining maturities.  Under the note agreements,
the Company must meet certain restrictive covenants.  The primary covenants
include maintaining minimum consolidated net worth at $100,000, limiting new
borrowings, and restricting certain changes in ownership as stipulated in the
agreement.

     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.  In conjunction with the issuance of the Industrial
Revenue Bonds, the Company holds in trust certain investments restricted and 
committed for the acquisition of plant equipment.  At November 30, 1997 and 
1996, the restricted asset balance of $1,525 and $2,780 is included in other 
long-term assets.

     UAS has $2,547 and $2,717 of outstanding Industrial Revenue Bonds as of
November 30, 1997 and 1996, 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.

     Other obligations include a 15 year capital lease for a manufacturing
facility acquired in 1991 from the Community Development Authority of the City
of Gothenburg, Nebraska, and debt acquired through the merger with UAS and the
acquisition of Airguard Industries including an industrial revenue bond due in
2003.

     The Company has a $25,000 revolving credit facility with a financial
institution, against which $9,995 and $9,421 letters of credit have been issued
at November 30, 1997 and 1996, respectively.  The agreement related to this
obligation includes certain restrictive covenants that are similar to the 6.69%
promissory note.  The agreement expires in 2000.

     Principal maturities of long-term debt for the next five fiscal years
ending November 30 approximates:  $1,140 in 1998, $676 in 1999, $5,508 in 2000,
$5,555 in 2001, $5,600 in 2002, and $20,317 thereafter.

     Interest paid totaled $2,870, $3,987, and $2,930 during 1997, 1996, and
1995, respectively.

H.   RETIREMENT PLANS

     The Company has defined benefit pension plans covering certain employees.
Plan benefits are principally based upon years of service, compensation, and
social security benefits.  The Company's funding policy is to contribute
annually the maximum amount that can be deducted for federal income tax
purposes.


28


<PAGE>   5

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

     The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at November 30:

<TABLE>
<CAPTION>
                                           1997                  1996
                                -----------------------------------------------
                                   Assets   Accumulated    Assets   Accumulated
                                   Exceed     Benefits     Exceed     Benefits
                                Accumulated    Exceed   Accumulated    Exceed
                                  Benefits     Assets     Benefits     Assets
                                -----------------------------------------------
<S>                                 <C>         <C>        <C>         <C>
Accumulated benefit
 obligation, including
 vested benefits of
 $51,615 and $47,269
 in 1997 and 1996,
 respectively ...................   $52,755    $  8,552    $48,628     $ 7,603
                                    ==========================================
Plan assets at fair value .......   $78,046    $      -    $66,857     $     -

Less projected benefit
 obligation for service
 rendered to date ...............    58,818      10,218     54,266       8,785
                                    ------------------------------------------
Plan assets in excess of
 (less than) projected
 benefit obligation .............    19,228     (10,218)    12,591      (8,785)

Unrecognized net loss (gain) from
past experience different
  from that assumed .............    (2,163)      2,425      4,214       1,988

Unrecognized net asset
  being recognized over
  approximately 15 years ........    (3,168)          -     (4,352)          -

Recognition of additional
  minimum liability .............         -        (759)         -        (806)
                                    ------------------------------------------
Accrued pension asset (liability) for
  defined benefit plans .........   $13,897    $ (8,552)   $12,453     $(7,603)
                                    ==========================================
</TABLE>

     In addition to the plan assets related to qualified plans, the Company has
funded approximately $3,002 and $2,829 at November 30, 1997 and 1996,
respectively, in a restricted trust for its nonqualified plans.  This trust is
included in other long-term assets in the Company's consolidated balance
sheets.

     The defined benefit pension plan covering the Company's non-employee
directors was terminated as of December 1, 1996.  The payment of the net
present value of the Company's obligation for directors' retirement benefits
was deferred and will be paid to the directors at their normal retirement date.

     The net pension expense includes the following components for the three 
years ended November 30:


<TABLE>
<CAPTION>
                                                  1997       1996       1995
                                                -------------------------------
<S>                                             <C>        <C>         <C>
Service cost - benefits earned during
 the period ..................................  $  2,029   $   1,986   $  1,789
Interest cost on projected benefit obligation.     4,558       4,394      4,139
Actual return on assets ......................   (14,630)     (7,232)    (8,791)
Net amortization and deferral ................     8,506       1,062      3,208
                                                -------------------------------
Net pension expense ..........................  $    463   $     210   $    345
                                                ===============================
</TABLE>


     The projected benefit obligation has been determined with a
weighted-average discount rate of 7.25% and 7.5% in 1997 and 1996,
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 1997 and 1996.  Plan assets consist of group annuity insurance
contracts, corporate stocks, bonds and notes, certificates of deposit and U.S.
Government securities.

     The Company also sponsors various defined contribution plans that provide
substantially all 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 $941, $786, and $552 in 1997,
1996, and 1995, respectively.

I.   POSTRETIREMENT HEALTH CARE BENEFITS

     The Company provides certain health care benefits for certain of the
Company's retired employees.  These employees become eligible for benefits if
they meet minimum age and service requirements and are eligible for retirement
benefits.  The Company has the right to modify or terminate these benefits.



                                                                              29


<PAGE>   6


NOTES TO FINANCIAL STATEMENTS
(CONTINUED)

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

     The following table sets forth the plan's obligation and cost at November
30, 1997 and 1996:

<TABLE>
<CAPTION>

                                                              1997        1996
                                                            -------------------
<S>                                                         <C>         <C>
Accumulated postretirement benefit obligation:
 Retirees ...............................................   $ 2,136     $ 2,158
 Fully eligible active plan participants.................        19          13
 Other active plan participants .........................       276         147
                                                            -------------------
Accumulated postretirement benefit obligation ...........     2,431       2,318
Unrecognized (loss) .....................................      (210)          -
                                                            -------------------
Accrued postretirement benefit liability  ...............     2,221       2,318
Less current portion, included in accrued liabilities ...       280         309
                                                            -------------------
                                                            $ 1,941     $ 2,009
                                                            ===================

</TABLE>
     The net periodic postretirement benefit cost includes the following 
components for the three years ended November 30:

<TABLE>
<CAPTION>

                                                                                        1997    1996   1995  
                                                                                        -------------------  
<S>                                                                                     <C>     <C>    <C>   
Service cost - benefits attributed to service during the period .....................   $  7    $ 11   $ 25
Interest cost on accumulated postretirement benefit obligations .....................    162     236    218
                                                                                        ------------------- 
Net periodic postretirement benefit cost ............................................   $169    $247   $243 
                                                                                        =================== 
</TABLE>

     During 1996, the Company entered into an irrevocable agreement with the
Healthcare Financing Administration (HCFA), the Federal agency that oversees
Medicare, whereby certain employees and retirees of the Company's locations in
Pennsylvania relinquished their rights to receive Medicare and accepted
healthcare insurance from an insurance carrier.  The HCFA entered into a
contract with the insurance carrier to administer the healthcare claims and
Medicare for these employees and retirees.  This agreement terminated the
Company's primary responsibility to provide for the postretirement benefit
obligation and eliminated significant risks related to the obligation and plan
assets related to those employees and retirees.  The Company recognized a
pretax gain of $672 on the curtailment of its postretirement healthcare plan
for certain employees and retirees as defined above.

     Substantially all future health care benefit cost increases will be
assumed by the participants, and therefore, future increases in health care
costs will not increase the postretirement benefit obligation or cost to the
Company.  The weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% and 7.5% in 1997 and
1996, respectively.

J.   INCOME TAXES

     The provision for income taxes consists of:

<TABLE>
<CAPTION>


                                               1997          1996         1995
                                             ----------------------------------
<S>                                          <C>           <C>          <C>
Current:
  Federal ..........................         $15,095       $11,596      $11,592
  State ............................           2,356         1,432        1,407
  Foreign ..........................             446           423          214
Deferred ...........................            (733)        1,864         (153)
                                             ----------------------------------
                                             $17,164       $15,315      $13,060
                                             ==================================
</TABLE>


     Income taxes paid, net of refunds, totaled $15,112,  $11,230, and $11,939
during 1997, 1996, and 1995, respectively.

     The components of the net deferred tax liability as of November 30, 1997 
and 1996 were as follows:

<TABLE>
<CAPTION>

                                                        1997            1996
                                                     -------------------------
<S>                                                  <C>              <C>
Deferred tax assets:
 Deferred compensation ..........................    $  1,984         $  1,566
 Other postretirement benefits ..................         777              855
 Foreign net operating loss carryforwards .......         626              939
 Loss allowance on receivables ..................       1,229            1,007
 Other items ....................................       2,280            1,958
                                                     -------------------------
Total gross deferred tax assets .................       6,896            6,325
                                                     -------------------------
Deferred tax liabilities:                                          
 Pensions .......................................      (2,151)          (2,107)
 Plant assets ...................................      (7,766)          (6,503)
 Other items ....................................        (432)          (1,901)
                                                     -------------------------
Total gross deferred tax liabilities ............     (10,349)         (10,511)
                                                     -------------------------
Net deferred tax liability ......................    $ (3,453)        $ (4,186)
                                                     =========================
</TABLE>


     Deferred tax assets, including foreign net operating loss carryforwards,
are expected to be realized through reversal of taxable temporary differences
and future earnings.

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

<TABLE>
<CAPTION>

                                            1997           1996           1995
                                          -------------------------------------
<S>                                       <C>            <C>            <C>
Domestic income ......................... $42,874        $40,224        $35,314
Foreign income ..........................   1,318          1,181          1,317
                                          -------------------------------------
Total ................................... $44,192        $41,405        $36,631
                                          =====================================
</TABLE>




30


<PAGE>   7

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

     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
                                                      -----------------------
                                                      1997     1996     1995
                                                      -----------------------
<S>                                                   <C>      <C>      <C>
Statutory U.S. tax rates ...........................   35.0%   35.0%    35.0%
State income taxes, net of federal benefit .........    3.2     2.6      3.0
Merger-related costs ...............................    0.8       -        -
Foreign tax credit (utilization) ...................      -       -     (0.1)
Foreign net operating loss (utilization) ...........      -    (0.3)    (3.6)
Other, net .........................................   (0.2)   (0.3)     1.4
                                                      -----------------------
Consolidated effective income tax rate .............   38.8%   37.0%    35.7%
                                                      =======================
</TABLE>


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 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 liabilities, if any,
resulting from these matters 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.

     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, including the 1984 Stock Option Plan, the 1987 Long Range
Performance Share Plan, and the 1990 Directors' Restricted Stock Compensation
Plan.  In addition, the Company has, in connection with the acquisition of UAS,
assumed the stock option plans of UAS.  The Company has reserved 127,590 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 1,000,000 shares
authorized for future grants.  At November 30, 1997 and 1996, respectively,
there were 306,089 and 494,349 shares reserved for future grants, of which
306,043 and 183,260 shares were granted in December 1997 and 1996,
respectively.  The remaining ungranted shares expire in December 2003.

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


                                                                             31


<PAGE>   8


NOTES TO FINANCIAL STATEMENTS
(CONTINUED)

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

STOCK OPTIONS

     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 an
exercise price less than the fair market value at the date of grant.  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 nonemployee 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>

                                                                1997                     1996                     1995
                                                        ------------------------------------------------------------------------
                                                                     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 .....................  1,334,800     $17.16     1,252,906     $16.16     1,112,269     $15.56
Granted ..............................................    193,750      21.94       208,500      20.88       195,250      18.79
Exercised/surrendered ................................   (265,159)     15.59      (126,606)     13.47       (54,613)     13.30
                                                        ------------------------------------------------------------------------
Outstanding at end of year ...........................  1,263,391     $18.22     1,334,800     $17.16     1,252,906     $16.16
                                                        ========================================================================
Options exercisable at end of year ...................    737,954     $16.69       744,175     $15.35       726,000     $13.83
                                                        ========================================================================
</TABLE>

     The following table summarizes information about the options at November 
30, 1997:

<TABLE>
<CAPTION>

                             Options Outstanding              Options Exercisable
                     -------------------------------------------------------------
                                 Weighted      Weighted                   Weighted
   Range of                       Average      Average                     Average
   Exercise                      Exercise     Remaining                   Exercise
    Prices           Number       Price     Life in Years     Number       Price
----------------------------------------------------------------------------------
<S>                  <C>         <C>            <C>          <C>          <C>
$12.55 - $18.50      671,891     $16.145        4.30         611,516      $15.93

$18.875 - $25.50     591,500     $20.573        7.97         126,438      $20.38

</TABLE>


     In addition, stock options outstanding at November 30, 1997 and 1996
assumed as part of the UAS acquisition were 42,714 and 127,590, respectively.
Substitute stock options exercisable under the UAS plans were 42,714 and
119,579.  These substitute options have an exercisable price range per share of
$3.60 to $11.34 at November 30, 1997 and expire between 2002 and 2005.  No
grants were made under these plans in 1996 or 1997 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 12,010 and 11,758
performance shares on December 1, 1996 and 1995, respectively.  As of November
30, 1997, none of these shares 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 for the performance
opportunity ratably during the performance cycle.  Compensation expense for the
plan totaled $547, $522, and $446 in 1997, 1996, and 1995, respectively.
Distribution of Company common stock and cash for the performance periods ended
November 30, 1997, 1996, and 1995 were $341, $291, and $312, respectively.

DIRECTORS' RESTRICTED STOCK COMPENSATION

     The 1994 Incentive Plan grants all nonemployee directors, in lieu of cash,
shares of common stock equal to five years directors' annual retainer.  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 nonemployee
director for any reason.

     Compensation expense for the plan totaled $121, $165, and $104 in 1997,
1996, and 1995, respectively.  During 1996, 4,575 shares of Company common
stock (or $5) were issued under the plan.  No shares were granted in 1997.

FAIR VALUE ACCOUNTING (SFAS 123)

     In 1997, the Company adopted the disclosure-only provisions of Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation."  SFAS 123 encourages, but does not require,
companies to recognize compensation cost for stock-based compensation plans
over the vesting period based upon the fair value of awards on the date of
grant.  However, the statement allows the alternative of the continued use of
the intrinsic value method as prescribed under Accounting Principles Board
Opinion (APB) No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations.  Therefore, as 


32


<PAGE>   9


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

permitted, the Company will continue to apply APB No. 25 and related
Interpretations in accounting for its stock-based compensation plans.

     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 earnings per share
would have been $26,702 and $1.66, and $25,782 and $1.62 for 1997 and 1996,
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 1997 and 1996.  Adjustments for forfeitures
are made as they occur.

<TABLE>
<CAPTION>
                                                                  1997    1996
                                                                 --------------
<S>                                                              <C>     <C>
Risk free interest rate .......................................   5.98%   5.61%
Expected dividend yield .......................................   3.05%   3.04%
Expected volatility factor ....................................  26.10%  27.90%
Expected option term (in years) ...............................   7.00    7.00

</TABLE>

     The weighted-average fair value per option at the date of grant for
options granted in 1997 and 1996 was $6.03 and $5.88, 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.   UNAUDITED QUARTERLY FINANCIAL DATA

     The unaudited quarterly data for 1997 and 1996 are as follows:

<TABLE>
<CAPTION>

                                            First        Second       Third        Fourth                
                                           Quarter      Quarter      Quarter      Quarter      Total     
------------------------------------------------------------------------------------------------------   
<S>                                        <C>          <C>         <C>          <C>          <C>        
1997:                                                                                                    
Net sales ..............................   $86,958      $96,684     $104,636     $105,986     $394,264   
Gross profit ...........................    24,508       29,866       32,111       34,077      120,562   
Net earnings ...........................     3,017        7,048        8,085        8,768       26,918   
Net earnings per common share ..........   $  0.19      $  0.44      $  0.50     $   0.54     $   1.67

1996:
Net sales ..............................   $81,014      $91,540      $99,134     $100,694     $372,382 
Gross profit ...........................    23,101       27,387       28,544       29,753      108,785 
Net earnings ...........................     3,752        6,277        6,943        8,973       25,945 
Net earnings per common share ..........   $  0.24      $  0.39      $  0.44     $   0.56     $   1.63

</TABLE>


     In the first quarter of 1997, the Company incurred merger-related costs of
$2,972 ($2,390 after-tax or $0.15 per share) as discussed in Note B and
realized a gain from the sale of securities of $1,706 ($1,092 after-tax or
$0.07 per share).  In the fourth quarter of 1996, the Company realized a gain
from the sale of securities of $1,675 ($1,072 after-tax or $0.07 per share).
The realized gains are discussed in Note C.

O.   SEGMENT INFORMATION

     The Company operates in three principal product segments:  Engine/Mobile
Filtration, Industrial/Environmental Filtration and Consumer Packaging.
Engine/Mobile Filtration manufactures and markets a complete line of filters
used in the filtration of internal combustion engines, and lubrication oils,
air, fuel, coolant, hydraulic and transmission fluids in both the domestic and
international markets, including Europe, Australia, Canada, Mexico, South
Africa, Latin America and Asia.  Industrial/Environmental Filtration
manufactures and markets a complete line of filters and systems used in the
filtration of commercial and industrial buildings, residences, and clean rooms
in both the domestic and international markets, including Europe, Australia,
Mexico, Canada, South Africa, Latin America and Asia.  Consumer Packaging
manufactures and markets plastic closures and custom designed lithographed
metal and metal/plastic containers in both domestic and international markets,
including Canada and Germany.

     Net sales represent sales to unaffiliated customers, as reported in the
consolidated statements of earnings.  Intersegment sales were not material.
Assets are those assets used in each business segment.  Corporate assets
consist of cash and short-term cash investments, deferred income taxes, world
headquarters facility, pension assets and various other assets that are not
specific to an industry segment.


                                                                             33


<PAGE>   10


NOTES TO FINANCIAL STATEMENTS
(CONTINUED)

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

     The segment data for the years ended November 30, 1997, 1996, and 1995 
are as follows:

<TABLE>
<CAPTION>

                                           1997           1996            1995
-------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>
Net sales:
  Engine/Mobile Filtration...........    $207,640       $195,223       $158,969
  Industrial/Environmental
   Filtration .......................     111,491        103,388        101,981
  Consumer Packaging.................      75,133         73,771         69,160
                                         --------------------------------------
                                         $394,264       $372,382       $330,110
                                         ======================================
-------------------------------------------------------------------------------
Operating profit:
  Engine/Mobile Filtration ..........    $ 34,536       $ 31,169       $ 28,940
  Industrial/Environmental
   Filtration .......................       4,188          4,046          3,121
  Consumer Packaging ................       8,672          7,381          6,667
                                         --------------------------------------
                                           47,396         42,596         38,728
Merger-Related Costs ................      (2,972)             -              -
                                         --------------------------------------
                                         $ 44,424       $ 42,596       $ 38,728
                                         ======================================
-------------------------------------------------------------------------------
Assets:
  Engine/Mobile Filtration ..........    $121,804       $120,584       $104,022
  Industrial/Environmental
   Filtration .......................      60,706         56,272         56,658
  Consumer Packaging ................      36,824         41,334         39,853
  Corporate .........................      63,185         48,829         45,164
                                         --------------------------------------
                                         $282,519       $267,019       $245,697
                                         ======================================
-------------------------------------------------------------------------------
Additions to plant assets:
  Engine/Mobile Filtration ..........    $  7,382       $ 11,386       $  6,140
  Industrial/Environmental
   Filtration .......................       2,570          1,829          2,563
  Consumer Packaging ................       1,127          4,275          5,591
  Corporate .........................         270          4,740            177
                                         --------------------------------------
                                         $ 11,349       $ 22,230       $ 14,471
                                         ======================================
-------------------------------------------------------------------------------
Depreciation:
  Engine/Mobile Filtration ..........    $  5,262       $  4,533       $  3,327
  Industrial/Environmental
   Filtration .......................       2,249          2,310          2,273
  Consumer Packaging ................       2,994          2,946          2,787
  Corporate .........................         496            361            207
                                         --------------------------------------
                                         $ 11,001       $ 10,150       $  8,594
                                         ======================================
</TABLE>


     The following details sales volume by class of product for the Consumer
Packaging segment for those classes of products that contributed 10% or more to
total Corporate revenue.

<TABLE>
<CAPTION>
                                              1997           1996          1995
-------------------------------------------------------------------------------
<S>                                            <C>            <C>           <C>
Containers ..........................          14%            15%           16%

</TABLE>


     No class of products within the Engine/Mobile Filtration or the
Industrial/Environmental Filtration segment accounted for as much as 10% of the
total sales of the Company.

     Financial data relating to the geographic areas in which the Company
operates are shown for the years ended November 30, 1997, 1996, and 1995.  Net
sales by geographic area are based on sales to final customers within that
segment.

<TABLE>
<CAPTION>

                                           1997           1996            1995
-------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>
Net sales:
 Sales within the
   United States ....................    $325,361       $310,611       $278,018
 Export Sales to
   Other Countries ..................      43,266         37,171         29,471
 Sales within
    Other Countries .................      25,637         24,600         22,621
                                         --------------------------------------
                                         $394,264       $372,382       $330,110
                                         ======================================
-------------------------------------------------------------------------------
Operating profit:
 On Sales within the
   United States ....................    $ 37,730       $ 35,530       $ 34,620
 On Export Sales to
   Other Countries ..................       8,043          5,649          2,817
 On Sales within
    Other Countries .................       1,623          1,417          1,291
                                         --------------------------------------
                                           47,396         42,596         38,728
Merger-Related Costs ................      (2,972)             -              -
                                         --------------------------------------
                                         $ 44,424       $ 42,596       $ 38,728
                                         ======================================
-------------------------------------------------------------------------------
Identifiable Assets:
 United States ......................    $262,739       $249,505       $229,207
 Other Countries ....................      19,780         17,514         16,490
                                         --------------------------------------
                                         $282,519       $267,019       $245,697
                                         ======================================
</TABLE>


34