CLARCOR Inc. (CLC)
F3Q09 Earnings Call
September 17, 2009; 11:00 am ET
Norman Johnson - Chief Executive Officer and President
Bruce Klein - Chief Financial Officer
Tom Lawrence - Dye Van Mol & Lawrence
Kevin Maczka - BB&T Capital Markets
Rick Eastman - Robert W. Baird
Jeff Hammond - KeyBanc Capital Market
Adam Brook - Sidoti & Co.
Brian Drab - William Blair
David Lebowitz - Horizon Asset Management
Previous Statements by CLC
» CLARCOR Inc. F1Q09 (Qtr End 02/28/09) Earnings Call Transcript
» CLARCOR Inc. F3Q08 (Qtr End 08/30/08) Earnings Call Transcript
» CLARCOR Inc. Q2 2008 Earnings Call Transcript
Thank you and good morning. We appreciate your interest in joining us on CLARCOR’s conference call to discuss results for the third quarter and first nine months of 2009. By now everyone should have received a copy of the press release that was distributed yesterday. If anyone does need a copy, it is available on CLARCOR’s website at www.clarcor.com, or you can call Shay Jones 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 press release and during this 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, September 17, 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 maybe done only with the consent of CLARCOR.
It’s now my pleasure to turn the call over to Norm Johnson for his opening remarks.
Thanks Tom. Good morning and thank you for joining us today. With me are Bruce Klein, our CEO; [Dave Fallon] Vice President of Finance and Kim Orr, Vice President and Treasurer. Bruce is going to begin with a review of the quarter, and then I will discuss our outlook for the future.
Thanks Norm. As we expected, our third quarter this year was better than either of our first two quarters. It was still below last year’s results. In fact with lower earnings compared to last year, we were pleased with the quarter.
Gross margins not only improved to 32.1% which is better than either of the first two quarters this year, it was actually higher than the third quarter in 2008. Similarly, even as quarter sales have increased in the first quarter of this year to the third quarter, SG&A in dollars in the third quarter was the lowest of any quarter in 2009.
Most of our markets record lowest sales than last year, but it does appear that the bottom has been reached in our major markets based upon daily sales and order rates for August in the first two to three weeks of the first quarter. We expect the fourth quarter to record highest sales in operating profits than we’ve reported in the third quarters, though not significantly better.
Many of our major markets reported sales declines compared to the third quarter last year. In our Engine/Mobile market, the sales declines were roughly same for over-the-road trucking, agriculture, mining and construction markets, with a somewhat lower drop in sales of locomotive structures. Even though in 2009 we had experienced a first sales decline in these markets in many years, we expect to maintain our operating margins for 2009 in this segment above 20%.
Our Engine/Mobile Filtration companies are very efficient manufacturers and can be found quickly the changes in product demand. Also has been the case for many years, the aftermarket tends to be more stable in both good and bad economic periods, so even a mid-teen sales decline is still usually better than sales to OEM customers in recession. Our Engine/Mobile’s customer base is very diverse with many thousands of customers, both large and small.
We still primarily saw aftermarket structures in our industrial environmental segment as well. That segment does sell more of one-use of permanent filter product Engine/Mobile segment. For example, in general sales as well as used in offshore drilling, are normally one-time sales with a smaller aftermarket component. A drop in oil prices has led to a decline in oil drilling and resulted in a large drop of sales attached to this market in the third quarter.
Though it will not occur in the near term, we expect the sales drop in oil drilling filters to reverse. We specialize in filters using offshore drilling for very harsh environment. It generally means deep wells, and unusually high pressures. In the recent oil finds of Brazil, in the Gulf of Mexico and certain areas off the coast of Africa and in the North Sea, it requires our type of oil drilling filters.