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F1Q09 (Qtr End 02/28/09) Earnings Call Transcript

March 19, 2009 11:00 am ET


Tom Lawrence – Dye, Van Mol, and Lawrence

Norman Johnson – Chairman, President and CEO

Bruce Klein – VP, Finance and CFO


Antonio Antezano – Macquarie Capital

Kevin Maczka – BB&T Capital Markets

Jeff Hammond – KeyBanc Capital Markets

Adam Brook – Sidoti

Gary Farber – C.L. King

Rick Eastman – Robert W. Baird

David Lebowitz – Verizon

David Mandel [ph] – William Blair

Jake Rebushek [ph] – Royal Capital



Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the CLARCOR Incorporated first quarter 2009 earnings conference call. Today’s conference is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. It is now my pleasure to turn the conference over to Tom Lawrence of Dye, Van Mol and Lawrence. Please go ahead, Mr. Lawrence.

Tom Lawrence

Thank you. We appreciate your interest in joining us on CLARCOR’s conference call to discuss results for the first quarter of 2009. By now everyone should have received a copy of the news release that was distributed yesterday. If anyone does need a copy, it is available on CLARCOR’s Web site at or you can call Bonnie Cash at 615-244-1818 and she will send you a copy immediately.

Before I turn the call over to Norm Johnson, CLARCOR’s Chairman and CEO, I remind you that all statements made in the news release, and during the conference call, other than statements of historical fact are forward-looking statements. These statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

The company believes that its expectations are based on reasonable assumptions. However, these forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the company’s actual results, performance or achievements or industry results to differ materially from the company’s expectations of future results, performance or achievements expressed or implied by these forward-looking statements. In addition, the company’s past results of operations do not necessarily indicate its future results.

Finally, we wanted to let people know that the information statements made during the call are made as of the date of the call, March 19th, 2009. Those listening to any replay should understand that the passage of time by itself will diminish the quality of the statements. Also, the contents of the call are the property of the company and the replay or transmission of the call may be done only with the consent of CLARCOR.

It is now my pleasure to turn the call over to Norm Johnson for his opening remarks.

Norman Johnson

Thank you, Tom. Good morning and thank you for joining us today. With me are Bruce Klein, our Chief Financial Officer and Kim Moore, our Corporate Controller. During our last call, I said earnings in the first quarter of 2009 would be lower than 2008. I would be the first to admit we did not expect the economy or our sales would fall as much as they did. Our sales decline was further exacerbated by our customers’ reducing inventory levels as they reacted to the uncertain times. We believe that inventory reduction effort is mostly over in orders for the balance of the year will be more in line with the general economy in new business we generate.

While we are disappointed in our results, the sky is not falling in. I’ve recently visited all of our obligating companies to make sure I had the pulse of the business. I came away from those visits seeing the glass is half full. Our people are doing a great job in reducing costs and at the same time, building for the future. Undoubtedly, we, along with many companies who have a tough couple of quarters, but we have not lost any major customers, actually have gained new ones. And I see us coming out as the strong turned stronger than ever. Our balance sheet is strong and we have the ability to weather a long downturn, which we hope won’t happen, to make acquisitions that are buy back stock. Not a bad position to be in.

While we did have some unusual charges during the quarter, the majority of our earnings’ decline is attributable to lower sales. We just could not reduce cost fast enough. December was the worst month we’ve had in my 19 years with the company. January (inaudible) a little better, but still not at 2008 level. If there’s any good news, we expect our performance to improve for the remainder of the year as our cost reduction actions are realized. At the same time, we are not expecting any worsening of the economy, nor any improvement. Our current outlook is that each quarter for the rest of the year will be sequentially better and the second quarter would be the most challenging.

I want to give you a quick update on some of the actions we’ve taken. We have implemented all of the cost reductions you expect such as freezing headcount and sales [ph] reducing travel, etcetera. The current cost would be lower for the balance of the year as our cost reduction plans are realized. Bruce can provide more detail, but being in a frightful [ph] economic system, we had to write off costs in the first quarter from material cost per eighteenth we capitalized last year. As a result, material cost did not reflect the lower prices we are now paying. They will be lower in the balance of the year.

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