Filtration Solutions for a Global Marketplace

Transcription

1 Filtration Solutions for a Global Marketplace

2 Safe Harbor Statement This presentation contains forward-looking statements regarding CLARCOR Inc. ( we, CLARCOR or the Company ) within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements made in this presentation other than statements of historical fact, are forwardlooking statements, including any statements, expressed or implied, regarding the expected financial performance of CLARCOR or regarding CLARCOR s strategic and operational plans. Although the Company believes that its expectations and statements are based on reasonable assumptions, all forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the Company s actual results, performance or achievements to differ materially from the Company s expectations by these forward-looking statements. Additionally, the Company s historical performance offers no assurance with respect to its future performance. More information about potential risk factors that could affect CLARCOR s business and financial results is included in the Company s 2014 Annual Report on Form 10-K, which is available at or 1

3 CLARCOR overview Most diversified filtration company in the world 100% of consolidated revenue is filtration based Serve more filtration markets than any other filtration company Over 80% of our revenue is recurring aftermarket revenue Summary statistics $1.5 billion annual sales Over 5,500 employees 100 operating facilities in 20 countries Other Industrial (5%) Aerospace (2%) Distribution (7%) Natural gas (18%) Sales by major market Heavy-duty Engine (42%) Gas Turbine (6%) Industrial Air (20%) 2

4 CLARCOR overview Balanced filtration portfolio Air filtration: Heavy-duty engine Gas turbine air inlet Natural gas transportation HVAC Air pollution control Industrial air Liquid filtration: Heavy-duty engine (fuel, lube, hydraulic) Natural gas liquids Fuel & water separation Aviation fuel Processed water Oil drilling Polymer and plastics filtration Air filtration CIA acquisition 1 50% Air 50% Liquid CEMS acquisition 2 Liquid filtration 1 On December 16, 2013, CLARCOR acquired the Air Filtration Business of General Electric Company, now operated as CLARCOR Industrial Air 2 On May 1, 2014, CLARCOR acquired Stanadyne Corporation s diesel fuel filtration business, now operated as CLARCOR Engine Mobile Solutions 3

5 Packaging divestiture J.L. Clark, Inc. Manufacturer and marketer of rigid packaging products Approximately $75 million annual sales Operating margin of 7-10% CLARCOR s first operating company Was our only non-filtration portfolio company No significant synergies with other CLARCOR companies Sold to CC Industries, Inc. Sold on June 29, 2015 for approximately $48 million For further information, refer to our press release dated June 29, 2015, available at 4

6 Engine/Mobile Filtration Highlights: Approximately $600 million annual sales 90% aftermarket, 10% first-fit Heavy-duty fuel, oil, hydraulic and air filters On-highway truck, off-road equipment, railroad 5

7 On highway heavy-duty engine Fuel kit Cabin air Fuel spin-on Fuel water separator Air intake Diesel exhaust Lube Coolant Transmission lube Transmission 6

8 Off road heavy-duty engine Diesel fuel prefilter Diesel fuel final filter Replacement elements Replacement elements 7

9 Stanadyne Filtration acquisition Purchased in May 2014 for $325 million Approximately $100 million annual sales Premier diesel fuel filtration franchise Assemblies and replacement elements: Leading, proprietary technology Agriculture and construction market leadership Significant OE relationships Aftermarket represents > 70% of sales OE Relationships: Doing business as CEMS acquisition 2 8

10 Process Liquid Filtration Highlights: Approximately $350 million annual sales 55% aftermarket, 45% first-fit Natural gas filtration vessels and elements Aviation, aerospace, wastewater, industrial liquids 9

11 Natural gas filtration Gas housings and cartridges Liquid housings and cartridges Proprietary filtration media Gemini PuraSep gas coalescer XtreamPure high flow PEACH media 10

12 Aerospace filtration Example: Purolator filter applications for Boeing 737 High lift system and servo-valves Rudder and flap controls Elevator power control Actuator PCU Cabin air and electronics Cabin air E/E cooling Water filtration Potable pressurization (air) Waste tank rinse filter Potable drinking filter Primary flight controls Hydraulic filters Case drain filters Engine Filtration Fuel filters Lube oil filters Bleed air filters Speed drive filters 11

13 Industrial Air Filtration Highlights: Approximately $500 million annual sales 90% aftermarket, 10% first-fit Gas turbine air inlet systems and filters Pleated filters, HVAC, air pollution control 12

14 Gas turbine filtration vcell Cartridge Filter house Water Sand Salt Gas turbine 13

15 Industrial air filtration Preveil Membrane on fiberglass filter bags ThermoPleat pleated elements PulsePleat pleated elements 14

16 GE Air Filtration acquisition Purchased in December 2013 for $265 million Approximately $250 million annual sales Gas Turbine Inlet Systems: Gas turbine filtration Leading technology Multi-year supply agreement with GE Opportunity to diversify with non-ge customers CIA acquisition 1 Gas turbine filter elements: Industrial air filtration Doing business as Pleated filter elements: CEMS acquisition 2 15

17 CLARCOR culture Decentralized operating company structure Flexibility to respond to unique customer and channel needs Common operating rhythm the CLARCOR Management System Opportunities to leverage scale Combination of local and centralized R&D capabilities Strategic investments in information technology infrastructure Incentive structures to drive performance Substantially all employees participate in a performance-based incentive plan Focus on economic value-added and return on invested capital Long-term incentive plan aligned with strategic growth initiatives 16

18 CLARCOR management system Standardized business improvement practices Lean tools and techniques Supports focus on cost reductions and operating margin expansion 17

19 Research & development Driving growth by bringing innovative technologies to market New global R&D facility near Franklin, TN headquarters New oil & gas research center near Dallas, TX Proprietary filtration media Technology and talent gained from acquisitions Increasing R&D spend every year CLARCOR Innovation Center PEACH Nano-Fiber Media ProTura and ProTura NanoMatrix Media Oil & Gas Filtration Research Center 18

20 Filtration fundamentals Strategic focus on industries with the following characteristics: High share of aftermarket sales Extended product lifecycle Filtration offers critical customer value Barriers to entry Filtration supported by compliance and regulatory requirements Gas Turbine Air Inlet Industrial Air lkj;lkj; Oil and Natural Gas On- Highway Trucking Aero space lk lk Railroad Engine k;jkj Off- Highway Engine 19

21 Growth: geographic Legend Manufacturing Sales / distribution HEADQUARTERS Franklin, TN, USA CIA acquisition 1 (64 U.S. facilities, 22 manufacturing) CEMS acquisition facilities in 20 countries, including 37 manufacturing sites 20

22 Growth: emissions standards Case study CLARCOR Engine Mobile Solutions diesel fuel filters: Tier 2 (2005) Tier 3/4 NA and EU (2008) Tier 3/4 - Emerging Mkts (2013) Pre-filter w/lift pump Final filter Pre-filter w/lift pump Pre Filter Final filter Two Pre Filters in parallel Pre-filter w/lift pump Final filter Sales content per engine increased over 200% to meet new standards 21

23 Growth: new products & markets New products and higher margin markets: New Engine/Mobile filtration distribution channels Solutions for emerging process liquid filtration needs Focus on high value-add applications and criticality of filtration needs Legacy air filter product line Air Induction Systems clearcurrent PRO cartridges Next-gen Liquid Filters New heavy-duty engine distribution channel 22

24 Growth: energy Attractive long-term energy growth profile, including natural gas Source: BP World Energy Outlook 2035 CLARCOR solutions for power generation and consumption Gas turbine air inlet filtration Natural gas transportation and processing Natural gas liquids filtration Coalescing and separation CLARCOR exposure primarily natural gas focused, mid-stream in nature 23

25 Financial performance $ millions, except per share data $1,650 Sales $3.20 EPS $1,450 $2.70 $1,250 $2.20 $1,050 $1.70 $850 $650 $1.20 $ $ Compounded Annual Growth Rate 7% Compounded Annual Growth Rate 9% *Years with 53 weeks have been adjusted to reflect 52-week equivalent. 24

26 Cash flow $ millions $180 Cash flow from operations 140 Free cash flow $ $140 $ $ $80 60 $60 40 $40 $20 20 $ Compounded Annual Growth Rate 8% Free cash flow as % of net income* = 86% *Average annual free cash flow (defined as cash flow from operations minus capital expenditures) as a percentage of net income from 2004 to

27 Stock performance November 2015 $100,000 Value of $10,000 Invested in Dec 1999 (CAGR) $90,000 $80,000 $70,000 $70,780 (13.1%) $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $23,769 (5.6%) $14,288 (2.3%) $ CLARCOR S&P 500 Russell

28 2015 financial highlights For the third quarter ended August 29, 2015 Diluted EPS of $0.72 per share (12% decrease from prior year) Net sales declined -11% from last year s third quarter Includes $0.15 benefit from J.L. Clark gain on sale and operational results Includes $0.09 reduction from impairment of BioProcess investments Adjusted* diluted EPS of $0.66 per share (19% decrease from prior year) Adjusted* net sales declined -7% from prior year, or -4% in local currencies Challenging macroeconomic conditions in most end-markets Continued penetration of new heavy-duty engine distribution channel Adjusted* operating margin declined 180 basis points Evaluating cost structure for significant cost reduction opportunities *See note on slide 27 for description of adjustments and related information 27

29 2015 financial highlights For the nine-months ended August 29, 2015 Diluted EPS of $2.00 per share (1% increase from prior year) Net sales increased +1% from the comparable prior year period Operating margin increased 20 basis points from the prior year Adjusted* diluted EPS of $1.91 per share (8% decrease from prior year) Adjusted* net sales increased +2% from prior year, or +5% in local currencies Growth driven by acquisitions of the Stanadyne Business and Filter Resources Growth from penetration of new heavy-duty engine distribution channel Sales of natural gas filtration vessels and elements up 10% from prior year Adjusted* operating margin decreased 120 basis points *See note on slide 28 for description of adjustments and related information 28

30 2015 3Q financial highlights* $ millions, except per share data Third Quarter -- GAAP Results Change Third Quarter -- Non-GAAP Adjusted Results* Change 8/29/2015 8/30/2014 $ % 8/29/2015 8/30/2014 $ % Net sales $ $ $ (42.6) -11% $ $ $ (27.4) -7% Gross profit (15.6) -12% (13.0) -10% Selling and administrative expenses (3.8) -5% (2.3) -3% Operating profit (11.8) -19% (10.7) -17% Net earnings (5.3) -13% (8.0) -19% Diluted EPS $ 0.72 $ 0.82 $ (0.10) -12% $ 0.66 $ 0.81 $ (0.15) -19% Percentages: Gross margin % 33.8% 33.8% 34.8% Selling and administrative % of sales % 18.3% 19.5% 18.6% Operating margin % 15.6% 14.3% 16.1% Effective tax rate % 31.2% 33.0% 31.1% *In the table above, non-gaap adjusted results for the third quarter of 2015 exclude the financial results from our J.L. Clark packaging business disposed of on June 27, 2015, a net gain on the sale of such packaging business, and an impairment loss related to our BioProcess H2O and Algae investments. The non-gaap adjusted results for the third quarter of 2014 exclude integration, purchase accounting and transaction-related costs associated with the GE Air Filtration, Bekaert Advanced Filtration and Stanadyne Filtration acquisitions, and the results of our J.L. Clark packaging business disposed of during the third quarter of Please refer to our press release dated September 16, 2015 (available at for a reconciliation of these non-gaap measures to our GAAP results. 29

31 2015 YTD financial highlights* $ millions, except per share data Year-to-Date -- GAAP Results Change Year-to-Date -- Non-GAAP Adjusted Results* Change 8/29/2015 8/30/2014 $ % 8/29/2015 8/30/2014 $ % Net sales $ 1,108.5 $ 1,099.5 $ 9.0 1% $ 1,067.6 $ 1,045.0 $ % Gross profit % % Selling and administrative expenses % % Operating profit % (9.0) -6% Net earnings % (8.4) -8% Diluted EPS $ 2.00 $ 1.98 $ % $ 1.91 $ 2.08 $ (0.17) -8% Percentages: Gross margin % 32.5% 33.7% 33.9% Selling and administrative % of sales % 19.3% 19.9% 19.0% Operating margin % 13.2% 13.7% 14.9% Effective tax rate % 32.6% 31.8% 31.6% *In the table above, non-gaap adjusted results for the first nine months of 2015 exclude the financial results from our J.L. Clark packaging business disposed of on June 27, 2015, a net gain on the sale of such packaging business, and an impairment loss related to our BioProcess H2O and Algae investments. The non-gaap adjusted results for the first nine months of 2014 exclude integration, purchase accounting and transaction-related costs associated with the GE Air Filtration, Bekaert Advanced Filtration and Stanadyne Filtration acquisitions, a bargain purchase gain from the Bekaert Advanced Filtration acquisition, and the results of our J.L. Clark packaging business. Please refer to our press release dated September 16, 2015 (available at for a reconciliation of these non-gaap measures to our GAAP results. 30