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Clarcor, Inc. (NYSE:CLC)

Q1 2008 Earnings Call

March 20, 2008 11:00 am ET

Executives

Norman E. Johnson - Chairman, President & CEO

Bruce A. Klein - Vice President, Finance & Chief Financial Officer

Kim Moore – Corporate Comptroller

Analysts

Brian Drab - William Blair

Jeff Hammond - Keybanc Capital Markets

Richard Eastman - Robert W. Baird & Co.

David Lebowitz - Burmingham

Scott Graham - Bear Stearns

Brian Rosenhouse - Sidoti & Co.

Operator

Ladies and gentlemen please stand by, we are about to begin.

Good morning everyone. Thank you for standing by. Welcome to the Clarcor, Inc. first quarter 2008 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 your questions.

It is my pleasure to turn the conference over to Mr. Tom Lawrence of [Dye, Benmole and Lawrence]. Mr. Lawrence please go ahead sir.

Tom Lawrence

Thank you. We appreciate your interest in joining us on Clarcor’s conference call to discuss results of the first quarter of 2008. 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 at Clarcor’s website at www.Clarcor.com 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 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, March 20, 2008. 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.

Norm Johnson

Thanks Tom. Good morning and thank you for joining us today. Also with me are Bruce Klein, our Chief Financial Officer and [Kim] Moore, our Corporate Comptroller.

Based on our stock price I guess we are more pleased with our first quarter earning results with sales increasing 19% and operating profit of 19% than some people. I believe this quarter’s results demonstrate clearly the benefits of our diversification program into new markets and geographies. It was not long ago that our growth was driven by domestic sales to the heavy-duty transportation market. While heavy-duty engine filtration still is a major business, this quarter’s results were driven by our Oil and Gas, Aerospace and International businesses.

Our diversification has resulted in a portfolio of companies that serve diverse, recurring revenue markets around the world with excellent growth opportunities and projectable, consistent earnings.

I realize our net income line on our PNL raises some questions. I have asked Bruce to explain the Peco one-time purchase accounting adjustments as well as the impact of our interest rate swap.

Excluding these charges net earnings would have been 16%. Peco, which serves the fast growing oil and gas markets around the world, is exceeding our expectations and we are expecting strong earnings from them. When we purchased Peco we entered into an interest rate agreement with a rate of 3.9% on $120 million of debt for the next two years, which we thought was a good deal. Accounting rules required us to take a $2.4 million charge this quarter which we will fully recover over the next seven quarters. The reason behind this accounting is well beyond me. Bruce will explain it.

Nevertheless, our businesses performed very well and the 18% operating profit increase would have been even better if we had not had the Peco purchase accounting adjustments.

Now Bruce will give you the details.

Bruce Klein

Thank you Norm. We are very pleased with our first quarter results and Norm will discuss our operating performance in more detail in just a moment.

I want to first discuss several financial accounting matters. First, as Norm said, I want to discuss the interest rate swap agreement that required us to take a $2.4 million charge this quarter. This was a two-year agreement that allowed us to fix the interest rate we would pay on $100 million of outstanding borrowings for a two-year period and move away from paying a floating interest rate for that period. The swap became effective in early January and the rate was fixed at that time of 3.9%.

The charge we took was an accounting entry and will not have any cash flow effect. The $2.4 million charge will reverse over the next seven quarters so that the two-year impact on earnings will be zero.

We also entered into a new debt agreement early in the first quarter increasing our line of credit from $155 million to $250 million. The new debt agreement which goes for five years also lowered our borrowing costs on any amounts outstanding compared to our previous agreement. This is in addition to the interest rate swap.

Cash flow was strong this quarter. Cash from operating activities increased by almost 10%. Dividend payments increased by over 10% compared to last year’s first quarter.

During the quarter we also repurchased 1 million shares of our common stock at a price of $37.26 per share.

Sales growth is very good, particularly in our non-U.S. subsidiaries. In local currency terms, for example, sales in China increased by over 50%, in Mexico over 25%, in Germany by over 25% and the U.K. by over 20%.

In dollar terms, international sales in the first quarter this year comprised over 31% of Clarcor’s total sales compared to approximately 25% of last year’s first quarter.

While not as strong as international growth, domestic growth was also good. For example, despite a decline in freight tonnage miles during the first quarter of this year for the United States, a heavy-duty engine filter sales were up over 3%. Domestic sales of air quality pollution control systems and dust collector systems and cartridges grew by over 20%. Not including Peco, sales of domestic oil and gas filter sales and aerospace filter sales grew by over 10%.

I want to make a couple of comments on Peco’s results. The first quarter was impacted by certain purchase accounting adjustments and most notably a one-time increase in cost of sales this quarter of $1.5 million in what is known as manufacturing profit and inventory at the acquisition phase. This cost will not recur and we took 100% of that $1.5 million increase in the first quarter. The impact, of course, was a lower gross margin for the quarter.

Excluding all purchase accounting adjustments and Clarcor’s corporate charges for 2008 to put Peco sales before the acquisition and after the acquisition on the same basis, we expect Peco sales and operating profits to exceed what it had reported for the year prior to the acquisition.

Sales for Peco for its fiscal 2007 were $101 million and its operating profit was $12 million.

Current demand for natural gas filtration systems and replacement cartridges remains very strong. Peco’s backlog has risen by 16% by the end of 2008 from early December when the Peco acquisition was finalized.

If you eliminate the $2.4 million charge and the $1.5 million one-time purchase accounting adjustment, earnings per share this quarter would have been approximately 37 cents per share, or an increase from last year of 16%.

Finally, we have not changed our forecast for earnings per share for 2008. We realize the percentage increase over last year’s results is a fairly wide range with a forecast in increase of 4% to 15%. We have started off well this year with a strong first quarter. I expect we will narrow this range at the end of our second quarter but given the uncertainties in the U.S. economy and particularly the U.S. capital markets, we have decided to wait one more quarter before defining our EPS estimate for the year.

Norm?

Norman Johnson

Thanks Bruce. As I said before we are pleased with our start in 2008. We all know the U.S. economy is at best near a recession and probably in one. There is no doubt some of our businesses will be impacted.

We expect our North American engine business to grow at a rate of 3-5% this year, which is less than we have enjoyed in the past but still maintaining historical margins.

Fortunately our international engine business is growing at a doubled-digit rate resulting in overall growth of 8-10% for the year for this business at our historical operating margin.

As a side note, we are very pleased to see significant opportunities for our engine filters to be used by Peco’s customers in the oil and gas market. There are a tremendous number of stationary engines we have filters for that can use Peco’s route to market.

While Engine/Mobile will have a good year and we expect profits to increase by 8-12%, our major growth drivers will be the savings from the restructuring efforts in our environmental air business, our dust collector and pollution control products using our nano fiber media and the Peco acquisition.

As I said, the oil and gas market is growing rapidly and Peco, a leader in this market, is growing with it.

Additionally we expect more than industry growth as we increase our after market replacement filter sales which we already manufacture the products for at our Baldwin and Facet operating companies and it is certainly one of the strengths we bring to Peco.

We will increase element sales the same tried and true way we have done it at Baldwin. We will offer the broadest product line in the industry and improve customer service by shipping within 24 hours of order, as well as leveraging the proprietary Peco developed Peach media, technically the most advanced in the industry.

Most of you are aware of our goals for our environmental air business. We see no reason we will not meet the objectives we originally communicated. We are just about done with the painful part and will start to see the benefits in the PNL. The machinery is being installed and meeting the targets we established. Obviously a $14 million improvement from our 2006 numbers by 2009 will have a significant impact on our earnings.

Two weeks ago I attended a meeting at the Gas Processing Association in Dallas. There is no doubt the outlook communicated at that meeting was very bullish. There is no recession in the oil and gas segment. Demand for Peco products is strong around the world and getting stronger. Our backlog is growing.

We are aggressively implementing programs to increase our after market element replacement business. We are integrating our Peco and Facet businesses around the world and as I said seeing synergies with our Baldwin Filter product line. I don’t want to jinx us but right now we are selling more than we can build. A high class problem we are aggressive working on to increase capacity.

In addition we are seeing strong growth in off-shore drilling for our premium sand-control filter. We are just starting to produce these products in our Chinese factory for the Asian market.

J.L. Clark, our packaging company also had a good quarter as they continue to build and strengthen their business.

Our international business grew at a strong double-digit rate for the quarter and increased to over 31% of our total sales. Including Peco our international sales grew at 49% for the quarter, benefiting from the weaker dollar. Excluding Peco our international sales grew by 22%. We expect our international business to continue growing at a faster rate than the company as a whole.

In spite of this enthusiasm, we fully recognize the reality of the economy. So far we have been very fortunate that some of the markets we serve are growing very rapidly and we along with them. There is no doubt we will not be as fortunate in others.

There is also no doubt we are seeing well material cost pressures. We have just implemented price increases of 3.4% in our engine business and 5% of our CLC Air business as well as selective price increases in other companies.

In summary, we expect our Engine/Mobile business to have a good year with lower growth in North America offset by stronger international sales. While we expect sales to grow in all of our businesses, our three primary growth drivers will be the restructuring effort for CLC Air, growth on our international business, the Peco acquisition against our being [flat] growing oil and gas markets.

On balance we expect 2008 to be another record year. We will now be pleased to answer any questions you may have. Operator if you would like to open up for questions we would appreciate it.

Question-And-Answer Session

Operator

Thank you, Sir. Ladies and gentlemen our question-and-answer session will be conducted electronically. If you would like to ask a question please press the * key followed by the digit 1 on your touchtone telephone. We will come to you in the order that you signal and if you find that your question has been asked and answered before you can ask it and you would like to remove yourself from the question roster please press the * key followed by the digit 2. Also, if you are using a speakerphone please make sure that your mute button is disengaged so that your signal can reach our equipment. Again that is *1 to ask a question. *2 to withdraw it.

We will pause for just a moment to assemble the question roster.

And for our first question we go to Brian Drab with William Blair.

Brian Drab - William Blair

Good morning. Just wanted to start by asking you about Peco. I know that Peco is operating as you said at about a 12% margin in their last fiscal year and I think you said on the call that in this first quarter with Clarcor they outperformed that margin. I was wondering if you could just help quantify that a little bit more clearly? Adding back just the $1.5 million COGS charge only gets me to about a 7% margin.

Norman Johnson

What we said is they are exceeding our expectations and what I meant by the expectations was sales came in higher than we expected and I mentioned also the demand for the product we are seeing. For example, our Baldwin business we get the orders and ship them within 24 hours. On the Peco business when you get into the vessels there is a long lead time and stronger backlogs. Backlogs are at record levels for the business and sales are coming in stronger than we projected. Peco traditionally performs a little bit better at the end of the year and Bruce’s comments where we are saying we are going to exceed the numbers as they experienced had in about twelve months, $101 million and $12 million the expectation is that we will obviously do better than that.

Bruce Klein

It also might be helpful, Brian, amortization expense for things like developed technology and non-compete agreements and customer relationship intangibles that get amortized, the quarterly charge for that which was not in Peco’s numbers when they were a private company between $650 and $700,000 for the quarter. That might help you a little bit also.

Brian Drab - William Blair

Yeah that helps. Just want to follow-up on Peco then. Were these purchase accounting adjustments in your forecast previously? Or would you think that the street would consider these charges one-time events that should be adjusted for?

Norman Johnson

The Peco intangible amortization and the interest expense and stuff like that was in our earnings per share forecast. As was the $1.5 million number. The $2.4 million was not.

Brian Drab - William Blair

Okay understood. Can you just give us a sense for what core growth was in each of the segments? Core revenue growth?

Bruce Klein

We said in the engine business domestically it was around 3%. Do you have the exact numbers?

Norman Johnson

In Engine/Mobile it grew at almost 9%. This is consolidated worldwide. Industrial environmental slightly over 30% and packaging about 12%.

Brian Drab - William Blair

Okay and industrial environmental without Peco?

Norman Johnson

Without Peco it would be almost 4%.

Brian Drab - William Blair

4%. Okay thanks very much.

Operator

We go next with Jeff Hammond with Keybanc Capital Markets.

Jeff Hammond - Keybanc Capital Markets

Good morning guys. On the CLC Air restructuring, what would you say Norm is the biggest risk to hitting that $10 million operating improvement at this point?

Norman Johnson

Well there is always the risk when you put in that type of machinery that it doesn’t meet expectations. Certainly that risk is a lot less this quarter than it was three quarters ago because we have machines installed in the plants that are working and meeting the expectations. There could be a significant down turn in the economy that could drop the sales base. We do not see that happening. The machinery is under our control and I guess the economy is not but I don’t expect that business to be impacted by the economy any more than it has right now.

Jeff Hammond - Keybanc Capital Markets

So you are comfortable with the machinery you’ve gotten so far in terms of performance?

Norman Johnson

I’m so comfortable that I’ve talked with the people who run that business and said I’m going to say I’m very comfortable and if you guys don’t think that’s a good idea it would be a good idea to tell me. Like I said before they have got it worked out factory by factory, machine by machine, person by person and it all makes very logical sense anyway. Not that something couldn’t go wrong, but maybe something will go right. It could be $16 million or $12 million but the base is still there.

Jeff Hammond - Keybanc Capital Markets

On the guidance the band of guidance currently it sounds like you’ll address that next quarter in terms of maybe updating that, but what kind of scenario really needs to play out to see that bottom end of the range?

Norman Johnson

The economy would need to get worse than it is right now. Something would have to happen on the international scene as we have experienced good growth in that business. Something more of a macro economic sense than anything internal.

Jeff Hammond - Keybanc Capital Markets

Okay. Finally on the price increases, any feedback? Is there push back on that given I guess a tougher economy here domestically? Is it too early or any feedback you are getting on those price increases?

Norman Johnson

Well I can assure you we haven’t gotten any feedback from our customers to raise them more. One of the benefits we have in the after market business is we control our price sheets. It’s not like we have to go to a large OEM or something like that to get an increase. Certainly nobody likes price increases but on the other hand everyone is reading in the paper about the tremendous commodity cost increases and all that. So we’re not the only company out there giving price increases and I just talked to the people at those companies this morning to see how it’s going and they tell me they are very confident of their [strick] rates.

Jeff Hammond - Keybanc Capital Markets

Okay great. Thank you.

Operator

We go next to Richard Eastman with Robert Baird.

Richard Eastman - Robert W. Baird & Co.

Just a couple of things, Norm. Regarding Peco if I do the math the walkup on the op profit in the first quarter, the inventory step up issue I’m not sure that we expected it to be a full $1.5 million so that would be an issue, but if I add the $1.5 million in the $200,000 to profit and quite honestly even the amortization, the identifiable amortization, the margin there is still lower than one would think. Did you guys take any restructurings in there or flow any other costs through there?

Norman Johnson

I think Rick when you look at margins and we talk about Peco if you take the $12 million divided by 100 it is on an annual basis and the numbers we are projecting are based on that. So obviously if what I’m saying is correct the margins should be better the remaining three quarters than the ones you just calculated. That is how they are built.

Richard Eastman - Robert W. Baird & Co.

Should we think about…and we’ve had this conversation before, one of the numbers you weren’t able to disclose before until the accounting was done was the amortization number. So should we think of Peco with the inventory step up out as a 10-11% operating profit business with the amortization in? Is that how we should think of that?

Norman Johnson

With the amortization, yes.

Richard Eastman - Robert W. Baird & Co.

About $2.8 million a year.

Norman Johnson

Annualize the 700 that would come off of what Peco did as a private company. That’s correct.

Richard Eastman - Robert W. Baird & Co.

Okay. Also Bruce the debt is locked down here for two years at this 3.9%? So we should keep that debt level where it is at and then the free cash flow goes back into either buybacks or into cash for now?

Bruce Klein

Yes.

Richard Eastman - Robert W. Baird & Co.

Okay. One last thought. Norm on CLC Air, we took a bit of a loss here in the first quarter. Is that a function of raw material costs being up? Transportation costs being up? Because that seems to be moving up on you a little bit as you restructure the business to literally improve the profits over time.

Norman Johnson

It’s more of a function that we still have a couple of plants that we don’t have the new machinery in and as a result we are still stuck with building product that plant primarily serves for their geographic region and moving around the country at a higher costs. Since the beginning of March the machines just got in those places. So it is more of a manufacturing absorption issue and excess freight and excess costs and a couple of factors that they are not fully up to speed yet.

Richard Eastman - Robert W. Baird & Co.

Same issue on a trailing basis, but again they should start to disappear quickly?

Norman Johnson

That is the plan, yes.

Richard Eastman - Robert W. Baird & Co.

Thank you.

Operator

And as a reminder ladies and gentlemen it is *1 if you would like to ask a question.

We go next to David Lebowitz with Burmingham.

David Lebowitz - Burmingham

Yes, a few questions. In terms of the guidance how important is project 14 on that? In other words, given the 20 plus cents per share earnings range, project 14 fits into how much of that?

Norman Johnson

It is certainly important that if we are going to make the height of that range it better all go right. Certainly a few things could go wrong to make the low range. We are expecting a significant improvement in that business for the remainder of the year.

David Lebowitz - Burmingham

Can you quantify how much of the 20 cents would be improvement courtesy of project 14?

Bruce Klein

No, we can’t. We haven’t broken out how much that is. We said that we expect a $10 million improvement which will be about $6.5 million after tax and if you divide up our roughly 50 million shares outstanding that gives you a sense of the importance of project 14.

David Lebowitz - Burmingham

Okay. Again, sticking to this wide range of earnings how much of that is top line driven to make the top number and how much of it is efficiency driven and not just project 14 but all other efficiencies, price increases, etc.?

Norman Johnson

Well when you get into all of those issues it is hard to address. Certainly any company that is highly dependent upon sales and if our sales would significantly decline it would have an impact. But as Bruce just mentioned there are other things, project 14 for example, that are not dependent upon sales. So to say that 50% is one way and 50% is another is a tough one, but I would say there are more things under our control to make it than not.

David Lebowitz - Burmingham

In terms of your raw material costs are you hedging commodities at this juncture?

Bruce Klein

No, although we do buy certain commodities such as steel and some energy supplies on longer term contracts up to a year. It is not a full hedging program as such. Sometimes we will buy steel, we will pick a price for the next year but it is rarely beyond a year.

David Lebowitz - Burmingham

Okay. And lastly do you have a goal for what you would like to see your international revenue achieve over the next 3-5 years?

Norman Johnson

Certainly we have a goal. As I said we want to increase international sales as a percentage of our sales. We want to do that with a faster growth rate than we do domestically. But so much of it is dependent upon the dollar and local currency. But certainly we want to continue to grow our international business at high double-digit rates and to say to have a goal if it is going to be 40% of our sales or 50% sure we’d like that. But it is a tough one to come up with because you never know there could be an acquisition that is all international, all domestic or whatever. So having really specific goals we don’t really state it like that.

David Lebowitz - Burmingham

Lastly on the acquisition front, given the uncertain times are you becoming more aggressive in your search or less aggressive?

Norman Johnson

I would say our aggressive level is staying at the same level. We are always looking for any acquisition opportunity. We look at them all the time and unfortunately most of them don’t work out.

David Lebowitz - Burmingham

Thank you.

Operator

We go next to Scott Graham with Bear Stearns.

Scott Graham - Bear Stearns

Good morning. Hey I just wanted to know you have now had a pretty good look in at the Peco operations from a manufacturing and a purchasing standpoint. I was wondering kind of what the strategic formulations are now based on that look? Where you see synergy? I know you have talked a lot about the sales synergy, which is great of course, but could you talk to the cost side a little bit more?

Norman Johnson

First of all we have combined the Peco operation with our Facet operation to make a combined company with administrative functions as well as the president. Starting with the manufacturing to talk about synergy, the top project right now from a synergy standpoint is the manufacturing of the elements that go in the vessels. As I said our goal is to have the broadest product line in the oil and gas industry. Peco had a project to increase the number of elements they build and Facet already had started that project so we will only obviously have to do it at one place. So the elements can be produced in the Facet factories and sold to and through the Peco distribution organization.

Some of the components that go into some of those elements are very similar to what Baldwin makes and we have a project what common parts, end caps and things like that, does Baldwin have that can be used to manufacture elements at the Peco and the Facet factories.

In Europe we have consolidated already some of the operations. For example Peco had an office in Italy. Facet had an office. It just so happens that the Peco managing director was going to retire and we have already combined that into the Facet organization. The same thing is going on in the U.K. and other countries. So there have been some administrative functions that have been combined.

On the manufacturing side Facet sells vessels but subcontracted most of them. We are now working with the two purchasing departments to look at common vendors around the world. One of the things we are doing because as I mentioned the increased demand for the vessels, Peco has a new factory in Mexico that we are expanding. It is a very cost effective factory. But at the same time we are not adding to our capacity to meet all of the demand internally. We are using subcontractors around the world and again combining the purchasing leverage around the world of Facet and Peco just to give you a couple of examples.

Scott Graham - Bear Stearns

Those are some really good examples. From my read of the third or fourth one you mentioned, the last one, you are saying that you are looking at expanding your subcontracting? Or you are looking at taking that into the lower cost Mexico?

Norman Johnson

I said both. We are making more in Mexico ourselves but that is not enough to meet the total demand. A lot of the demand for this product is in Asia, in Europe and obviously the Mid East. We are looking for alternatives for subcontractors in a lot of those areas but to make some of the lower…I don’t want to say lower quality…less technical vessels is a better way of saying it, and then supplying the elements that go into those vessels from our own factories.

Scott Graham - Bear Stearns

Okay that is helpful. My other question has to do with more of a macro thing because the truck tonnage numbers here in the U.S. the last several months have been surprisingly resilient and I dare say almost good. Are you seeing that in your operations? Are you starting to feel that this is maybe just a head fake? What is your feeling on that?

Norman Johnson

I don’t know if it is a head fake but we are starting to see a little bit…historically the trucking industry has been a leading indicator. It will be one of the first to go into a recession and one of the first to come out. If you talk to the people in the trucking industry they are repeating the same things that you have said. I just don’t know how to tell if it is a head fake or not.

Scott Graham - Bear Stearns

That is fair enough. Thanks Norm. Thanks Bruce.

Operator

We go next to Brian Rosenhouse with Sidoti & Co.

Brian Rosenhouse - Sidoti & Co.

Hi. Good morning guys. Just a couple of quick balance sheet related questions. How do you see your debt to cap ratio changing through 2008?

Bruce Klein

If you exclude cash and exclude future stock repurchases then debt to total cash will gradually decline through the rest of the year due to increased earnings as the year progresses. I don’t anticipate any major change. We have to keep at least $100 million of debt outstanding because of the swap agreement for the life of the swap so cash may go up but we won’t be using that cash to pay off the debt until the swap expires.

Brian Rosenhouse - Sidoti & Co.

So do you think you’ll still see double-digit levels into 2009?

Bruce Klein

Yes, but it should be declining through the rest of this year excluding again cash and excluding future share repurchases.

Brian Rosenhouse - Sidoti & Co.

Okay. And in terms of your buyback authorization, how much remains?

Bruce Klein

About $180 million I believe.

Brian Rosenhouse - Sidoti & Co.

Okay. And do you see a steady state level of around 50 million shares outstanding going forward? Or do you just plan to purchase more shares when you feel that they are undervalued?

Norman Johnson

I think certainly if we think they are undervalued they are going to be repurchased. 50 million give or take a couple of million who knows? I look for us to buy back more stock if the market price is right.

Brian Rosenhouse - Sidoti & Co.

Excellent. Thank you very much.

Operator

And with that ladies and gentlemen we have no further questions on our roster. Therefore, Mr. Johnson, I will turn the conference back over to you for any closing remarks.

Norman Johnson

Thank you for joining us today. I have to say that quite frankly we were a little bit surprised…not a little bit but a lot surprised by the hit our stock price took. We thought we had a great first quarter to tell you the truth with our sales and operating profit. Unfortunately we had these unusual items that certainly must have been a big impact. I can just leave you that we are optimistic about the year. We see that our businesses are strong, diversified, growing around the world and we think we’re going to have a heck of a year. So thanks for joining us. We look forward to seeing you next quarter.

Operator

Ladies and gentlemen this does conclude the Clarcor, Inc. first quarter 2008 earnings conference call. We do appreciate your participation and you may disconnect at this time.

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