OMB APPROVAL
--------------------------
OMB Number: 3235-0059
Expires: February 28, 2006
Estimated average burden
hours per response...12.75
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CLARCOR Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
3) Filing Party:
--------------------------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------------------------
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
(CLARCOR INC. LOGO)
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of CLARCOR Inc. (the "Company") will be
held at the executive offices of the Company, 840 Crescent Centre Drive, Suite
600, Franklin, Tennessee 37067, on Monday, March 21, 2005 at 9:00 A.M., Central
Standard Time, for the following purposes:
1. To elect two Directors for a term of three years each;
2. To consider and vote upon an amendment to the Company's Second
Restated Certificate of Incorporation which will increase its authorized
Common Stock from 60,000,000 shares to 120,000,000 shares; and
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of CLARCOR Common Stock of record at the close of business on
Friday, January 28, 2005 are entitled to receive notice of and to vote at the
meeting or any adjournment thereof.
Whether or not you plan to attend the meeting, you are requested to sign
and date the enclosed proxy and return it promptly in the envelope enclosed for
that purpose.
DAVID J. BOYD
Secretary
PLEASE SIGN AND DATE THE ACCOMPANYING PROXY
AND MAIL IT PROMPTLY.
Franklin, Tennessee
February 17, 2005
CLARCOR INC.
840 CRESCENT CENTRE DRIVE, SUITE 600
FRANKLIN, TENNESSEE 37067
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CLARCOR Inc. (the "Company") for use at the
Annual Meeting of Shareholders to be held at the executive offices of the
Company, 840 Crescent Centre Drive, Suite 600, Franklin, Tennessee 37067, on
Monday, March 21, 2005 at 9:00 A.M., Central Standard Time, for the purposes set
forth in the Notice of Annual Meeting. This Proxy Statement and the accompanying
proxy are being mailed to shareholders on February 17, 2005.
A shareholder who gives a proxy may revoke it at any time before it is
voted by giving written notice of the termination thereof to the Secretary of
the Company, by filing with him another proxy or by attending the Annual Meeting
and voting his or her shares in person. All valid proxies delivered pursuant to
this solicitation, if received in time and not revoked, will be voted. If no
specifications are given by the shareholder executing the proxy card, valid
proxies will be voted (a) to elect the two persons nominated for election to the
Board of Directors listed on the proxy card enclosed herewith, (b) to approve
the proposed amendment to the Company's Second Restated Certificate of
Incorporation, and (c) in the discretion of the appointed proxies, upon such
other matters as may properly come before the meeting.
As of January 28, 2005, the Company had outstanding 25,733,057 shares of
Common Stock, constituting the only class of voting securities of the Company
outstanding, and each outstanding share is entitled to one vote on all matters
to be voted upon. Only holders of CLARCOR Common Stock of record at the close of
business on January 28, 2005 are entitled to notice of and to vote at the
meeting. A majority of the shares of Common Stock issued and outstanding and
entitled to vote at the meeting, present in person or represented by proxy, will
constitute a quorum for purposes of the Annual Meeting.
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
At the Annual Meeting two directors are to be elected. Proxies will be
voted for the election of Messrs. Robert H. Jenkins and Philip R. Lochner, Jr.,
unless the shareholder signing such proxy withholds authority to vote for one or
more of these nominees in the manner described on the proxy. If a quorum is
present at the meeting, the two candidates for director receiving the greatest
number of votes will be elected. Accordingly, withheld votes and broker
non-votes will not affect the outcome of the election of directors.
Messrs. Jenkins and Lochner are directors of the Company previously elected
by its shareholders whose terms in office expire this year. If elected, Messrs.
Jenkins and Lochner will hold office for a three-year period ending in 2008 or
until their respective successors are duly elected and qualified.
In the event that any of the nominees should for some reason, presently
unknown, fail to stand for election, the persons named in the enclosed form of
proxy intend to vote for substitute nominees.
1
INFORMATION CONCERNING NOMINEES AND DIRECTORS
YEAR TERM AS
DIRECTOR DIRECTOR
NAME AGE SINCE EXPIRES
---- --- -------- ------------
* Robert H. Jenkins 61 March 23, 1999 2008
Mr. Jenkins is retired Chairman, Hamilton Sundstrand
Corporation (formerly Sundstrand Corporation), Rockford,
Illinois. He served as Chairman, President and Chief
Executive Officer from 1997 to 1999 and as President and
Chief Executive Officer, Sundstrand Corporation from 1995 to
1997. Hamilton Sundstrand Corporation is an aerospace and
industrial company. Mr. Jenkins is a director of AK Steel
Holding Corporation, Solutia, Inc., Sentry Insurance and
Jason Incorporated.
* Philip R. Lochner, Jr. 61 June 17, 1999 2008
Mr. Lochner serves on corporate boards of public companies.
Currently, Mr. Lochner is a director of Apria Healthcare
Group Inc., Adelphia Communications Corp., GTech Holdings
Inc., and Solutia Inc.
J. Marc Adam 66 March 23, 1991 2006
Mr. Adam is retired Vice President Marketing, 3M, St. Paul,
Minnesota. He served as Vice President Marketing from 1995 to
1999 and from 1986 to 1995 as Group Vice President, 3M. 3M is
a diversified manufacturer. Mr. Adam is a director of
Schneider National Inc.
James L. Packard 62 June 22, 1998 2006
Mr. Packard is Chairman and Chief Executive Officer,
REGAL-BELOIT Corporation (NYSE), Beloit, Wisconsin since
2002. From 1986 to 2002 he served as Chairman, President and
Chief Executive Officer. REGAL-BELOIT Corporation is a
manufacturer of mechanical and electrical products. Mr.
Packard is a director of The First National Bank & Trust
Company of Beloit and Manitowoc Company, Manitowoc,
Wisconsin.
Robert J. Burgstahler 60 December 18, 2000 2007
Mr. Burgstahler retired as Senior Vice President, Business
Development and Corporate Services of 3M, St. Paul,
Minnesota, effective in August 2003. He served as Vice
President, Finance and Administrative Services of 3M from
2000 to 2002, President and General Manager of 3M Canada from
1998 to 2000 and Staff Vice President Taxes of 3M from 1995
to 1998. 3M is a diversified manufacturer.
Paul Donovan 57 March 24, 2003 2007
Mr. Donovan was the Executive Vice President and Chief
Financial Officer of Sundstrand Corporation from December
1988 to June 1999. Mr. Donovan was Senior/Executive Vice
President and Chief Financial Officer of Wisconsin Energy
Corporation, Milwaukee, Wisconsin, from August 1999 until
June 2003. Mr Donovan retired as a special advisor to the
Chairman of Wisconsin Energy Corporation in February 2004.
Wisconsin Energy Corporation is a holding company with
subsidiaries in utility and non-utility businesses. Mr.
Donovan is a director of AMCORE Financial, Inc. and Woodward
Governor Company.
Norman E. Johnson 56 June 26, 1996 2007
Mr. Johnson was elected Chairman, President and Chief
Executive Officer of CLARCOR Inc., Franklin, Tennessee, in
March 2000. He was elected President and Chief Operating
Officer, CLARCOR Inc. in June 1995. Mr. Johnson was elected
President-Baldwin Filters, Inc. in 1990, Vice
President-CLARCOR Inc. in 1992, and Group Vice
President-Filtration Products in 1993.
------------------------------
* Nominees for election to terms expiring in 2008
THE BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides for a Board of
Directors consisting of nine directors divided into three classes, each class
consisting of three directors. One class of directors is elected at each Annual
Meeting of Shareholders.
Effective on December 31, 2004, two directors of the Company, Mr. Keith E.
Wandell and Ms. Roseann Stevens, resigned from the Board. Mr. Wandell and Ms.
Stevens stated that their other professional and personal responsibilities
prevented them from continuing as members of the Board. Both Mr. Wandell and Ms.
Stevens confirmed that they had no disagreements with the Company or its
directors or management on any matter relating to the Company's operations,
policies or practices.
The Corporate Governance Committee of the Board has initiated a search for
candidates to replace Mr. Wandell and Ms. Stevens but the Company is not able to
predict when these vacancies on the Board will be filled. It is expected that
the new directors will be independent as such term is defined in the listing
standards adopted by the New York Stock Exchange ("NYSE").
The Board has determined that six of the seven directors currently on the
Board are independent as such term is defined in the listing standards adopted
by the NYSE on which the Company's Common Stock is listed and that such
directors have no material relationship with the Company. Mr. Norman E.
2
Johnson, the Chairman of the Board, President and Chief Executive Officer of the
Company, is the only director who is not independent as defined in such
standards.
The Board of Directors held six meetings during fiscal 2004. All of the
Company's directors attended at least 75% of the aggregate number of meetings of
the Board of Directors and Committees of the Board of which they are members.
In fiscal 2004, directors who were not employees of the Company received an
annual retainer of $32,500 and fees of $1,000 for each meeting of the Board of
Directors and each separate Committee meeting attended and reimbursement for
travel expenses related to attendance at Board and Committee meetings.
Non-employee directors who are Chairmen of Committees received an additional
annual fee of $3,250 in fiscal 2004.
In December 2004, the Board revised the compensation program for directors
as follows: (a) the amount of the annual retainer (to be paid initially in
March, 2005) was increased from $32,500 to $35,000 per year and each director
will have the option of taking such retainer in shares of the Company's Common
Stock or in cash; (b) beginning in December, 2004 the fee payable to each
director for each Board meeting attended was increased from $1,000 to $1,500;
(c) beginning in December, 2004, the fee payable to each director for each
meeting of a Committee of the Board attended was increased from $1,000 to
$1,500, except that fees for participation in a telephonic meeting of a
Committee remained at $1,000; and (d) the following changes were made in the
annual fees (to be paid initially in March, 2005) payable to Chairmen of
Committees of the Board: (i) Audit Committee Chairman increased to $7,500 from
$3,250; (ii) Corporate Governance Committee Chairman increased to $5,000 from
$3,250; and (iii) Compensation Committee Chairman increased to $5,000 from
$3,250. Board members will continue to receive reimbursement for travel expenses
and the stock options referred to below.
These increases were made in recognition of the significantly increased
demands on the time and efforts of the directors of the Company resulting from
recent changes in the law and regulatory requirements.
Pursuant to the Company's Deferred Compensation Plan for Directors, a
non-employee director may elect to defer receipt of the director's fees to which
he is entitled and to be paid the amounts so deferred, plus interest thereon at
the prime rate announced quarterly by JP Morgan Chase Bank, or its successor,
either when the participant ceases being a director of the Company or upon his
retirement from his principal occupation or at the time the participant reaches
a specified age. None of the directors deferred any portion of the fees payable
during fiscal 2004.
The Board has adopted a Directors' Stock Compensation Plan. Under this
Plan, as amended, on the date a person first becomes a non-employee director,
and annually thereafter on the date of each annual meeting of shareholders, such
person has the option to receive a grant of shares of the Company's Common Stock
with an aggregate fair market value equal to and in lieu of the amount of the
annual retainer for non-employee directors.
Under the Company's 2004 Incentive Plan, each non-employee director is
automatically granted, on the date of each annual meeting of shareholders,
options to purchase 3,750 shares of Common Stock at an option exercise price
equal to the fair market value of a share of Common Stock on the date of grant.
For persons who become a non-employee director on a date other than the date of
an annual meeting of shareholders, such grants are prorated based on the number
of days between the date on which he or she becomes a director and the date of
the next Annual Meeting of Shareholders. Such options are fully exercisable on
the date of grant and expire ten years after the date of grant. Shares acquired
upon exercise of an option may not be sold or transferred during the six month
period following the date of grant of such option. As of January 1, 2005, Mr.
Adam has fully exercisable options for 37,500 shares, Mr. Donovan has 7,500, Mr.
Packard has 25,325, Mr. Jenkins has 22,500, Mr. Lochner has 21,600 and Mr.
Burgstahler has 16,017.
3
COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 2004, the standing committees of the Board of Directors were
the Corporate Governance Committee, the Audit Committee and the Compensation
Committee.
Corporate Governance Committee. The Corporate Governance Committee
consists of three directors. As of February 17, 2005, the members of the
Committee were Messrs. J. Marc Adam, Chairman, Philip R. Lochner, Jr. and James
L. Packard. Each of these directors is independent as such term is defined in
the listing standards of the NYSE.
The Board has adopted a Charter for the Committee. A current copy of that
Charter is available on the Company's website: www.clarcor.com. The Charter
provides, among other things, that the Committee will make recommendations to
the full Board regarding changes to the size and composition of the Board or any
committee thereof; identify individuals that the Committee believes are
qualified to become Board members and recommend that the Board select such
nominee or nominees to stand for election; and identify individuals for
appointment to the Board to fill vacancies on the Board.
The Charter of the Committee requires the Committee to review and evaluate
any stockholder nominees for director. The Company's By-laws (available on the
Company's website) provide that notice of any proposed nomination by a
shareholder for election of a person to the Board shall be delivered to or
mailed and received at the principal executive offices of the Company no less
than 60 days nor more than 90 days prior to the date of the Annual Meeting of
Shareholders at which the election is to be held. Section 2.12 of the By-Laws
specifies the information to be included by a shareholder in such a notice.
The Committee has no specific policy with regard to the minimum
qualifications of director candidates. In the recent past, candidates
recommended for election to the Board have generally had significant experience
and expertise in the manufacture and distribution of disposable and replaceable
industrial or automotive products, in international sales and distribution
and/or in the preparation and analysis of financial statements and in accounting
and financial matters generally. The Company believes that persons with these
qualifications are the most qualified to assist the Company in the development
of its business and in compliance with its financial reporting responsibilities.
Messrs. Jenkins and Lochner are the current nominees recommended by the
Committee for election to the Board. Both of these nominees are standing for
reelection by the shareholders.
In the past the Committee has reviewed potential candidates for election to
the Board recommended primarily by Board members or third party search firms.
The process has included a review of the candidate's previous business
experience and, in some cases, interviews with the candidate. No different
process would be applied with respect to nominees recommended by holders of the
Company's common stock.
The Corporate Governance Committee met four times during fiscal 2004.
Audit Committee. The Audit Committee was established by the Board in
accordance with applicable provisions of the Securities Exchange Act of 1934, as
amended. The Audit Committee consists of three directors. As of February 17,
2005, the members of the Committee were Messrs. Robert J. Burgstahler, Paul
Donovan and Robert H. Jenkins. Each of these directors is independent and
financially literate as such terms are defined in the listing standards of the
NYSE. Further, Mr. Burgstahler and Mr. Donovan have previously served as the
chief financial officers of large, publicly-held corporations. Consequently, the
Board has determined that Mr. Burgstahler and Mr. Donovan are each an "audit
committee financial expert" as such term is defined in applicable rules of the
Securities and Exchange Commission.
4
The Board has adopted a Charter for the Audit Committee. A current copy of
that Charter is available on the Company's website: www.clarcor.com.
The purposes of the Committee include assisting Board oversight of the
integrity of the Company's financial statements, its compliance with legal and
regulatory and filing requirements, the selection of an independent auditor,
determination of the independent auditor's qualifications and independence and
the performance of the Company's internal audit function and independent
auditors. The Committee also discusses the Company's annual audited financial
statements, quarterly financial statements and the earnings press release with
management and the independent auditors.
The Audit Committee met eight times during fiscal 2004.
Compensation Committee. The Compensation Committee consists of three
directors. As of February 17, 2005, the members of the Committee were Messrs.
James L. Packard, Chairman, J. Marc Adam and Robert H. Jenkins. Each of these
directors is independent as such term is defined in the listing standards of the
NYSE.
The Board has adopted a written Charter for the Committee. A current copy
of that Charter is available on the Company's website: www.clarcor.com.
The purposes of the Committee include discharging the Board's
responsibilities relating to compensation of the Company's executive officers
and review and recommendations to the Board with respect to compensation plans,
policies and programs. The Committee annually reviews and approves corporate
goals and objectives relevant to the compensation of the Company's Chief
Executive Officer and, together with the other independent directors, determines
and approves the compensation level of the Chief Executive Officer. The
Committee also makes recommendations to the full Board with respect to the
compensation of the Company's other executive officers and approves grants and
awards of restricted stock and stock options under the Company's Incentive
Plans. From time to time the Committee consults with outside compensation
experts in exercising its responsibilities.
The Committee met twice during fiscal 2004.
EXECUTIVE SESSIONS OF THE BOARD; COMMUNICATIONS WITH THE BOARD
The Company's Corporate Governance Guidelines (available on the Company's
website: www.clarcor.com) provide that at each meeting of the Board of Directors
the independent directors shall meet separately from the management of the
Company. Mr. Norman E. Johnson, a director and the Chairman, President and Chief
Executive Officer of the Company, does not attend these executive sessions.
Under the Guidelines, these sessions are chaired on a rotating basis by the
chairperson of one of the standing committees of the Board (currently the Audit
Committee, the Compensation Committee and the Corporate Governance Committee).
The Board has adopted a process for holders of the Company's common stock
and other interested parties to send written communications to the Board. Such
communications should be sent to the Corporate Secretary at CLARCOR Inc., 840
Crescent Centre Drive, Suite 600, Franklin, Tennessee 37067. The Corporate
Secretary will forward all such communications to the Chairman of the Corporate
Governance Committee of the Board. That Committee will determine whether any
such communication will be distributed to the full Board or, if requested by the
sender, only to the non-management directors.
The Board has adopted a policy which recommends that all directors
personally attend each annual and special meeting of the shareholders of the
Company. At the last Annual Meeting of Shareholders, held on March 22, 2004, all
of the directors were in attendance.
5
BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
CERTAIN BENEFICIAL OWNERS
The following table provides information concerning each person who is
known to the Company to be the beneficial owner of more than 5% of the Company's
Common Stock:
SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
------------------- ------------ -------
Gabelli Funds, LLC ......................................... 2,374,750(1) 9.23%
GAMCO Investors, Inc.
One Corporate Center
Rye, NY 10580-1434
Columbia Wanger Asset Management, L.P. ..................... 2,039,600(2) 7.93%
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Neuberger Berman, LLC ...................................... 1,899,050(3) 7.38%
605 Third Avenue
New York, NY 10158
------------------------------
(1) Based upon information contained in a Schedule 13F filed with the Securities
and Exchange Commission for the quarter ended September 30, 2004.
(2) Based upon information contained in a Schedule 13F filed with the Securities
and Exchange Commission for the quarter ended December 31, 2004.
(3) Based upon information contained in a Schedule 13F filed with the Securities
and Exchange Commission for the quarter ended September 30, 2004.
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table provides information concerning the shares of Common
Stock of the Company beneficially owned as of January 15, 2005 by all directors
and nominees, each of the executive officers named in the Summary Compensation
Table on page 8 and by all directors, nominees and executive officers of the
Company as a group:
SHARES PERCENT
NAME OF PERSON OR BENEFICIALLY OF
IDENTITY OF GROUP OWNED CLASS
----------------- ------------ -------
J. Marc Adam (2)............................................ 61,580 *
Robert J. Burgstahler (2)................................... 20,558 *
Paul Donovan (2)............................................ 9,187 *
Robert H. Jenkins (2)....................................... 29,758 *
Norman E. Johnson (1)(3).................................... 785,993 2.91%
Philip R. Lochner, Jr. (2).................................. 28,477 *
James L. Packard (2)........................................ 33,435 *
Sam Ferrise (1)(3).......................................... 78,203 *
Bruce A. Klein (1)(3)....................................... 245,640 *
William B. Walker (1)(3).................................... 143,127 *
David J. Boyd (1)(3)........................................ 43,273 *
All directors and executive officers as a group
(14 persons) (1)(2)(3)(4)................................. 1,823,716 6.76%
------------------------------
* Less than one percent.
6
(1) Includes Restricted Stock Units granted under the Company's Incentive Plans
(see footnote (3) to this table).
(2) Includes shares granted under the Directors' Stock Compensation Plan and
shares subject to stock options granted to Directors pursuant to the
Company's Incentive Plans. See "Election of Directors -- The Board of
Directors."
(3) Includes all shares subject to stock options granted pursuant to the
Company's Incentive Plans. Through the end of fiscal 2004 all options
outstanding were issued pursuant to the Company's 1994 Incentive Plan (the
"1994 Incentive Plan"). The 1994 Incentive Plan expired in December, 2003
and no further options can be granted under the 1994 Incentive Plan. In
March, 2003 the Shareholders of the Company approved the 2004 Incentive Plan
(the "2004 Incentive Plan"). On December 12, 2004, after the end of the
Company's 2004 fiscal year, the Company issued stock options as set forth in
footnote (4) below under the 2004 Incentive Plan. The 1994 Incentive Plan
and the 2004 Incentive Plan are sometimes collectively referred to herein as
the "Incentive Plans." For information as to the total number of shares
subject to options granted to Messrs. Johnson, Ferrise, Klein, Walker and
Boyd and the options which are exercisable by them within 60 days, see the
table on page 10.
(4) Includes 1,254,874 shares subject to stock options of which 153,500 were
granted on December 12, 2004. Options for 836,124 shares are exercisable
within 60 days. Also includes 42,614 deferred and 39,950 non-vested
Restricted Stock Units.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Each director and each officer of the Company who is subject to Section 16
of the Securities Exchange Act of 1934 (the "Act") is required by Section 16(a)
of the Act to report to the Securities and Exchange Commission, by a specified
date, his or her beneficial ownership of or transactions in the Company's Common
Stock. Reports received by the Company indicate that all such officers and
directors have filed all requisite reports with the Securities and Exchange
Commission on a timely basis during fiscal 2004. To the knowledge of the
Company, no person or entity owns beneficially 10% or more of its outstanding
Common Stock.
7
COMPENSATION OF EXECUTIVE OFFICERS AND OTHER INFORMATION
The following Summary Compensation Table sets forth the cash compensation
and certain other components of the compensation of Norman E. Johnson, the
Chairman, President and Chief Executive Officer of the Company and the other
four most highly compensated executive officers of the Company for the fiscal
year that ended on November 27, 2004.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- ----------------------- ----------
OTHER ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(3) SATION(4) AWARDS(5) OPTIONS(6) PAYOUTS(7) SATION(8)
----------------------------------- ---- --------- -------- --------- ---------- ---------- ---------- ---------
Norman E. Johnson (1).............. 2004 $570,308 $1,040,045 $ -- $230,594 203,671 $ -- $89,662
Chairman, President and Chief 2003 546,154 1,091,644 -- 222,063 172,508 -- 76,852
Executive Officer 2002 500,000 700,387 -- 220,000 55,000 -- 30,341
Sam Ferrise........................ 2004 293,077 288,568 -- 114,431 17,500 46,547 11,981
President - 2003 281,154 390,457 -- 99,646 17,500 -- 12,187
Baldwin Filters, Inc. 2002 270,346 301,464 -- 27,500 10,000 -- 5,998
Bruce A. Klein..................... 2004 274,231 357,216 -- 107,045 69,836 146,435 47,540
Vice President, Finance and 2003 264,000 376,913 -- 93,670 48,312 -- 36,378
Chief Financial Officer 2002 252,000 252,221 -- 93,280 20,000 45,400 17,919
William B. Walker.................. 2004 221,982 151,155 -- 86,575 22,657 -- 10,121
Vice Chairman 2003 215,231 97,616 -- 76,390 22,632 -- 13,930
2002 206,000 240,281 -- 76,257 26,366 -- 11,600
David J. Boyd...................... 2004 171,092 156,007 -- 47,687 8,000 55,529 43,529
Vice President, General 2003 164,423 164,324 -- 41,667 8,000 28,941 6,724
Counsel and Corporate Secretary 2002 157,500 110,348 -- 41,250 5,000 14,432 6,249
------------------------------
(1) Mr. Johnson serves as a director of the Company but receives no separate
remuneration in that capacity.
(2) Includes compensation deferred by the Company's executive officers pursuant
to the Company's Retirement Savings Plan and the Company's Deferred
Compensation Plan.
(3) Cash bonuses paid under the Company's Annual Incentive Plan.
(4) The aggregate value of all perquisites and personal benefits did not exceed
the lesser of either $50,000 or 10% of the total annual salary and bonus
reported for the named executive officers in the Summary Compensation Table.
(5) Represents restricted stock units (the "Restricted Stock Units") granted
pursuant to the Incentive Plans. Restricted Stock Units provide for the
issuance of Common Stock to the grantee over a four year period. 25% of the
total number of Restricted Stock Units vest on each anniversary of the grant
so long as the grantee remains in the employment of the Company or one of
its subsidiaries. Until Restricted Stock Units vest and shares of Common
Stock are issued in conversion of the Restricted Stock Units, the grantee
does not have any rights as a shareholder of the Company, but prior to
vesting the grantee will receive a cash payment equal to the dividends paid
on the Common Stock. The Restricted Stock Units permit a grantee to defer
the issuance of Common Stock pursuant to the Restricted Stock Units for a
period of years or until the termination of the grantee's employment by the
Company. During 2004, Messrs. Johnson and Walker deferred vesting with
respect to 7,201 and 2,257 Restricted Stock Units, respectively. On November
27, 2004 (the end of the Company's most recent fiscal year) the named
executive officers held an aggregate of 63,993 Restricted Stock Units with a
total value of $1,868,447, based upon the closing market price of the
Company's Common Stock at the date of grant.
(6) Consists of options and replacement options granted under the Company's
Incentive Plans to acquire shares of the Company's Common Stock. See
"-- Stock Options" below.
(7) Consists of shares of Common Stock issued upon the vesting of Restricted
Stock Units. The amounts shown are calculated based on the closing price of
shares of Common Stock (on the date of issuance) issued upon the vesting of
Restricted Stock Units.
(8) The amounts shown in this column for All Other Compensation for the last
fiscal year are derived from the following figures: Messrs. Johnson, Klein
and Boyd respectively: $66,295, $37,910, and $31,579 for reimbursement of
moving expenses incurred in the 2004 relocation of the Company's
headquarters to Franklin, Tennessee; Messrs. Johnson, Ferrise, Klein, Walker
and Boyd respectively: $1,058; $542; $510; $415 and $317 -- Company match
for employee stock purchase plan; Messrs. Johnson, Ferrise, Klein, Walker
and Boyd respectively: $3,075; $8,200; $3,075; $2,799 and $8,200 -- Company
match for 401(k) plan;
8
Messrs. Johnson and Klein respectively: $2,018 and $563 -- Company paid
split dollar insurance; Messrs. Johnson, Ferrise, Klein, Walker and Boyd
respectively: $199; $438; $284; $1,417 and $1,783 -- Company paid group
insurance premium; and Messrs. Johnson, Ferrise, Klein, Walker and Boyd
respectively: $17,017; $2,801; $5,198; $5,490 and $1,650 -- Company paid
compensation for dividends on Restricted Stock Units.
Each officer of the Company is elected by the Board of Directors for a term
of one year which begins at the Board of Directors meeting at which he or she is
elected held in conjunction with the Annual Meeting of Shareholders and ends on
the date of the next Annual Meeting of Shareholders or upon the election of his
or her successor.
STOCK OPTIONS
The following table provides information with respect to stock options
granted during fiscal year 2004 under the Company's 1994 Incentive Plan, as
amended, to the five individuals named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
--------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO
GRANTED EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME (1) FISCAL YEAR PRICE (2) DATE PRESENT VALUE (3)
---- ---------- ------------ --------- ---------- -----------------
N. E. Johnson..................... 60,000 12.1% $45.59 12/13/13 $696,600
23,659(4) 4.8 45.14 12/16/07 188,326
21,689(4) 4.4 45.14 12/15/08 206,913
31,756(4) 6.4 45.14 12/19/09 345,823
33,158(4) 6.7 45.14 12/16/10 404,196
20,993(4) 4.2 45.14 12/15/11 283,196
12,416(4) 2.5 45.14 12/14/12 171,217
S. Ferrise........................ 17,500 3.5 45.59 12/13/13 203,175
B. A. Klein....................... 22,000 4.5 45.59 12/13/13 255,420
9,923(4) 2.0 44.40 12/16/07 76,705
7,277(4) 1.5 44.40 12/15/08 67,239
5,433(4) 1.1 44.40 12/19/09 57,209
12,915(4) 2.6 44.40 12/16/10 152,397
7,696(4) 1.6 44.40 12/15/11 100,279
4,592(4) 0.9 44.40 12/14/12 61,120
W. B. Walker...................... 17,500 3.5 45.59 12/13/13 203,175
5,157(4) 1.0 44.97 12/16/07 31,973
D. J. Boyd........................ 8,000 1.6 45.59 12/13/13 92,880
------------------------------
(1) Consists of nonqualified options issued for a ten year term (other than as
noted in footnote (4)) with a four year vesting schedule (see "Long-Term
Incentive Plan" in the Report of the Compensation Committee).
(2) Closing price of Common Stock as reported on the New York Stock Exchange
Composite Transactions at date of grant.
(3) Options are valued using Cox-Ross-Rubinstein Binomial Model, which is a
variation of the Black-Scholes Option Pricing Model using the following
assumptions:
(i) an expected option term of five years to exercise or until the
expiration date of replacement options (based on estimated prior
experience);
(ii) interest rates ranging from 2.79% to 4.79% depending on the date of
grant and based on the quoted yield of Treasury Strips;
9
(iii) dividends of $.4925 per share of Common Stock; and
(iv) stock price volatility of 22.8% based upon the monthly stock closing
prices for the preceding 7 years.
(4) These grants resulted from the exercise of an option and from the payment of
the related exercise price by the optionee using shares of previously owned
Company Common Stock. Under these circumstances, the Company's Incentive
Plans permit the grant of options ("replacement options") for the number of
shares used in payment of the exercise price. The exercise price for each
replacement option is equal to the market value of the Company's Common
Stock on the date of such exercise and replacement options expire on the
same date as the original option which was exercised. The replacement option
grants do not contain the replacement feature.
The following table sets forth certain information regarding option
exercises during the fiscal year and the unexercised options held by such
individuals at November 27, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END AT FY-END
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE (1) UNEXERCISABLE (2)
---- ----------- ---------- ------------------- --------------------
N. E. Johnson.................. 232,681 $5,371,777 334,541/113,750 $5,006,075/2,073,574
S. Ferrise..................... -- -- 24,375/25,625 494,214/355,311
B. A. Klein.................... 77,278 1,698,962 97,744/36,750 1,428,244/591,568
W. B. Walker................... 7,500 190,402 64,664/28,125 1,601,732/434,942
D. J. Boyd..................... -- -- 14,750/11,250 351,733/148,447
------------------------------
(1) On December 12, 2004, subsequent to the fiscal year-end, additional option
grants were awarded under the Company's 2004 Incentive Plan as follows: Mr.
Johnson 60,000; Mr. Ferrise 17,500; Mr. Klein 22,000; Mr. Walker 17,500 and
Mr. Boyd 8,000.
(2) Based on the $52.05 closing price of Common Stock as reported on the New
York Stock Exchange Composite Transactions on November 26, 2004, the last
trading date prior to the Company's fiscal year-end close on Saturday,
November 27, 2004.
RETIREMENT PLANS
Certain employees of the Company and its subsidiaries, including the
individuals named in the Summary Compensation Table, are eligible to receive
benefits under the CLARCOR Inc. Pension Plan (the "Pension Trust"). The amount
of the Company's contribution to the Pension Trust in respect to a specified
person cannot be individually calculated. During fiscal 2004 the Company made an
$6,500,000 contribution to the Pension Trust.
The Pension Trust provides benefits calculated under a Social Security
step-rate formula based on career compensation. Benefits are payable for life
with a guarantee of 120 monthly payments. The formula accrues an annual benefit
each plan year equal to the sum of (a) plan year compensation up to age 65
covered compensation ($45,000 in fiscal 2005) in effect each December multiplied
by .012 plus (b) any excess of such plan year compensation over age 65 covered
compensation (subject to Internal Revenue limitations applicable to all
qualified retirement plans) multiplied by .0175. The aggregate of all annual
accruals plus the benefit accrued at November 30, 1989 under prior plans is the
amount of annual pension.
Estimated annual retirement benefits payable under the Pension Trust at
normal retirement (age 65) for Messrs. Johnson, Ferrise, Klein, Walker and Boyd
are $68,829, $5,191, $21,538, $17,017
10
and $7,656, respectively. Such annual retirement benefits are not subject to any
reduction for Social Security amounts.
Effective January 1, 2004, the Board adopted a program pursuant to which
the pension benefits payable under the Pension Trust to most employees of the
Company were frozen. As to these employees, no further benefits will accrue
under the Pension Trust. As a substitute benefit the Company implemented a new
401(k) plan (the "New 401(k) Plan") which is available to substantially all
United States employees of the Company and its subsidiaries. Under the New
401(k) Plan the Company will match all contributions by a participant up to 3%
of his or her compensation and 50% of the next 2% of such compensation
contributed.
The Company offered employees who were both at least 40 years old and had
10 years of service the option of continuing to participate in the Pension Trust
or adopting the New 401(k) Plan. Those employees electing to continue
participation in the Pension Trust also are eligible to continue to participate
in the Company's previously established 401(k) Plan (the "Old 401(k) Plan").
Under the Old 401(k) Plan, the Company will match 50% of contributions by a
participant up to 3% of his or her compensation. Messrs. Johnson and Walker
elected to continue to participate in the Pension Trust and they will therefore
continue to accrue benefits under that program. Messrs. Ferrise, Klein and Boyd
were not eligible to continue to participate in the Pension Trust. However, Mr.
Klein continued to participate in the Old 401(k) Plan. The amounts currently
payable to Messrs. Ferrise, Klein and Boyd pursuant to the Pension Trust will
not increase or decrease in the future.
Effective December 1, 1994, the Company established two new retirement
plans for officers and senior executives of the Company: the 1994 Supplemental
Pension Plan and the 1994 Executive Retirement Plan. The 1994 Supplemental
Pension Plan is intended to preserve benefits lost by reason of the maximum
limitations on compensation and benefits imposed on tax qualified retirement
plans by the Internal Revenue Code of 1986. The 1994 Executive Retirement Plan
provides a monthly benefit to a participant equal to (a) 65% of his average
monthly compensation with respect to the three consecutive fiscal years for
which he received the highest compensation, reduced by (b) his monthly normal
retirement benefit provided by the Pension Trust. A minimum of 15 years of
service after attainment of the age of 40 is required to earn a full benefit of
65% of compensation at retirement. Messrs. Johnson and Klein are participants in
both of the 1994 plans. Messrs. Ferrise and Walker are participants in the 1994
Supplemental Pension Plan. Mr. Boyd is not a participant in either plan.
Estimated total annual retirement benefits pursuant to both the 1994
Supplemental Pension Plan and the 1994 Executive Retirement Plan payable at
normal retirement (age 65) for Messrs. Johnson, Ferrise, Klein and Walker are
$895,021, $10,128, $363,388 and $14,059, respectively. Such annual retirement
benefits are not subject to reduction for Social Security amounts.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Johnson,
Ferrise, Klein, Walker and Boyd and certain other executive officers of the
Company. Mr. Johnson's employment agreement provides for such compensation,
incentive plan compensation, benefits and perquisites, pensions, employment
termination, and "change of control" provisions as are described in this Proxy
Statement. Mr. Johnson's agreement, as amended, expires on the date of the 2007
Annual Meeting. His agreement is extended automatically each year unless
terminated by the Board. The agreements with Messrs. Ferrise, Klein, Walker and
Boyd and certain other executive officers include the provisions described in
the next two paragraphs.
The "Change of Control" provisions of Mr. Johnson's agreement and other
agreements, as amended, with Messrs. Ferrise, Klein, Walker and Boyd and certain
other executive officers become effective upon the occurrence of any of the
following: (i) the acquisition by any person, entity or group (other than from
the Company) of 15% or more of the outstanding securities of the Company which
are entitled to vote generally in the election of directors; (ii) individuals
who, at the date of the employment agreement, constitute the Board of Directors
of the Company (the "Incumbent Board")
11
cease for any reason to constitute at least a majority of the Board, provided
that any person becoming a director after the date of the employment agreements
whose election or nomination was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board will be considered as though
such person was a member of the Incumbent Board; (iii) consummation of a
reorganization, merger or consolidation, in each case in respect of which the
persons who were shareholders of the Company immediately prior to such
transaction do not immediately thereafter own more than 60% of the securities
entitled to vote generally in the election of directors of the entity resulting
from such transaction or (iv) approval by the shareholders of the Company of a
liquidation or dissolution of the Company or the sale of all or substantially
all of its assets.
The agreements provide that the Company agrees to employ these officers,
and the officers agree to remain in the employ of the Company, from the date of
a change of control to the earlier to occur of the third anniversary of such
change of control or the officer's normal retirement date at a rate of
compensation at least equal to the highest monthly base salary which the officer
was paid during the 36 calendar months immediately prior to the change of
control. In addition, during that period the Company agrees to provide employee
benefits which are the greater of the benefits provided by the Company to
executives with comparable duties or the benefits to which the officer was
entitled during the 90-day period immediately prior to the date of the change of
control. In the event that employment is terminated after a change of control,
the terminated officer is entitled to (i) a lump-sum cash payment equal to three
times the sum of the officer's base salary and annual bonus, (ii) continued
health and welfare benefits and perquisites for the three year period following
termination; and (iii) a lump sum payment equal to the pension benefits the
terminated officer would have earned during the three year period after the
termination. If any of such agreements subjects the officer to excise tax under
Section 4999 of the Internal Revenue Code, the Company will pay such officer an
additional amount calculated so that after payment of all taxes, interest and
penalties, the officer retains an amount of such additional payment equal to
such excise tax. The agreements define "termination" to mean termination of
employment by the Company for reasons other than death, disability, cause or
retirement. "Termination" also includes resignation by the officer after (a) a
material adverse reduction in the nature or scope of his authorities, duties or
responsibilities, following a change of control, as determined in good faith by
the officer; (b) a reduction in compensation or benefits after a change of
control or (c) a good faith determination by the officer that, as a result of
the change of control, he is unable to exercise the authority, power, function
and duties contemplated by the agreement.
REPORT OF THE COMPENSATION COMMITTEE
One of the duties of the Compensation Committee ("Committee") is to assure
that the Chief Executive Officer and the other executive officers of the Company
("Executive Officers") are compensated equitably, competitively and in a manner
that is consistent with the long-term best interests of the Company and its
shareholders. The Committee, which is composed entirely of independent
non-employee directors, is responsible for determining the annual salary, cash
incentives, benefits and intermediate-term and long-term incentive plan awards
for the Company's Executive Officers.
COMPENSATION PHILOSOPHY
There are certain stated principles which the Committee follows in
structuring the compensation packages for the Chief Executive Officer and the
other Executive Officers of the Company. These are:
Pay for Performance
A high percentage of total compensation is linked directly to the
performance of the Company and the executive's individual performance in
attaining the Company's objectives and
12
supporting the Company's mission statement. The Committee believes that
this structure aligns the executives' interests with the interests of the
shareholders.
Competitiveness
Total compensation packages are designed to be comparable with those
of executives occupying comparable positions in comparable companies. The
packages are also designed to allow an opportunity to earn at a level above
median industry practices and market competitors when Company performance
exceeds the results of comparable companies. The opportunity to earn at
higher levels provides a significant challenge to the Executive Officers.
Executive Ownership
A major component of executive compensation is equity-based, and as a
result, the Executive Officer's interests are more directly linked with
shareholders' interests. The Committee believes that equity-based
compensation properly balances the rewards for long-term versus short-term
results.
The Committee has established ownership guidelines for Executive
Officers and non-employee directors to align their interests and objectives
with the Company's shareholders. These guidelines require that Executive
Officers, after a five-year period, own shares with a value ranging from a
minimum of two times annual salary for officers at the level of corporate
vice president to a minimum of four times annual salary for the Company's
Chairman and Chief Executive Officer. In addition, the guidelines require
that non-employee directors, after a five-year period, own shares with a
value equal to a minimum of five times the annual retainer.
Management Development
The compensation packages are also designed to attract and retain
quality executives with the leadership skills and other key competencies
required to meet the Company's objectives and to enhance shareholder value.
COMPONENTS OF EXECUTIVE PAY
The components of total pay for all executives are annual salary, cash
incentives, benefits and intermediate-term and long-term incentive awards. The
Committee reviews annually each component of compensation and total compensation
for the Executive Officers. The review includes a market comparison of
compensation and changes in compensation for equivalent positions in related
industrial groups and comparably-sized companies. Competitive information and
data relating to executive compensation packages is provided by independent
compensation consultants at the request of the Committee.
Annual Salary
Annual salary and annual adjustments are based on the executive's
performance, experience, and reference to competitive rates for comparable
positions in related industry groups and comparably-sized companies.
Cash Incentives
Annual cash incentives are determined based upon the attainment of
financial targets by the Company and the individual performance of the
executive. If certain minimum target results are not achieved, no annual
incentive will be paid. If target levels, which the Committee considers to
be reasonably difficult to attain, are achieved, annual incentive levels
generally range from 30% to 70% of base salary, and maximum awards may
exceed 100% of base salary if performance materially exceeds the target
objectives.
13
The financial target that must be attained is based on the economic
value added method, or as referred to by the Company, the CLARCOR Value
Added ("CVA") program. In basic terms, CVA is consolidated annual after-tax
operating earnings less the annual cost of capital. Thus the size of the
cash incentives varies directly with the amount by which such after-tax
earnings exceed the cost of capital. As a result, the CVA program is
designed to reward managers who increase shareholder value by most
effectively deploying the capital contributed by the shareholders and
lenders. If the Company fails to achieve the target levels of CVA, the cash
incentive awards are reduced. The Committee sets the target levels.
Benefits
Employee benefits offered to the general employee population of the
Company are provided to Executive Officers as part of the total
compensation program. In addition, certain Executive Officers are provided
supplemental retirement benefits, life insurance policies and certain other
benefits.
Intermediate-Term Incentive
The Company's intermediate term incentive program involves grants of
Restricted Stock Units ("Units"). Units provide for the issuance of Common
Stock to the grantee over a four year period. 25% of the total number of
Units vests on each anniversary of the grant so long as the grantee remains
in the employment of the Company or one of its subsidiaries. Until Units
vest and shares of Common Stock are issued in conversion of the Units, the
grantee does not have any rights as a shareholder of the Company, but prior
to vesting the grantee will receive a cash payment equal to the dividends
paid on the Common Stock. The Units permit a grantee to defer the issuance
of Common Stock pursuant to the Units for a period of years or until the
termination of the grantee's employment by the Company. The Committee
believes that intermediate-term incentive programs based on appreciation in
the price of the Company's Common Stock are in the best interests of the
Company and its shareholders.
Long-Term Incentive Plan
The Company's long-term incentive plan awards non-qualified stock
options to its executives and key employees. Options granted under the
Company's shareholder approved 1994 Incentive Plan or the 2004 Incentive
Plan have a 10-year life and all options granted during fiscal 2004 were at
the market value of the Common Stock on the date of grant. The option
grants provide the executives an opportunity to acquire an equity interest
in the Company and to share in the long-term appreciation of the stock.
Market surveys of long-term incentives are reviewed to establish
competitive practices. Management makes recommendations to the Committee on
the size of a grant, if any, for each executive based on the individual's
ability to affect financial performance, the executive's past performance,
and expectations of the executive's future contributions. The CEO's grant
is similarly determined by the Committee and all other stock option grants
are reviewed and approved by the Committee.
Stock options granted in fiscal 2004 are not exercisable for one year
after the grant. Thereafter they become exercisable at the rate of 25% per
year and they are fully exercisable after the 4th year and through the 10th
year of the option.
SECTION 162(M) COMPLIANCE
The Committee has considered the possible impact of Section 162(m) of the
Internal Revenue Code of 1986, which generally limits to $1 million (with
several exceptions) the tax deduction available for compensation paid to a
person who is an executive listed in the Summary Compensation Table and who is
employed by the Company at the end of its fiscal year. The Committee intends to
preserve to
14
the Company the maximum opportunity for obtaining deductibility for all amounts
paid to its officers by administering the Company's plans and programs in a way
that will meet the regulations in effect at the time compensation decisions are
made.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Johnson's annual salary was increased during fiscal 2004 to be
competitive with the median base salary paid to chief executive officers of
comparably-sized corporations identified by the Committee with the assistance of
outside compensation experts. For fiscal 2004, Mr. Johnson was awarded an annual
cash incentive equal to 182% of his base salary in accordance with the annual
cash incentive plan as a result of the CVA levels attained in fiscal 2004 which
significantly exceeded established target levels.
Mr. Johnson also received grants of 5,058 Restricted Stock Units and was
granted non-qualified stock options for 60,000 shares of the Company's Common
Stock at an exercise price of $45.59 per share, the closing price as reported on
the New York Stock Exchange on the date of grant. In addition, during fiscal
2004 he deferred the receipt of 7,201 shares of Common Stock issuable pursuant
to Restricted Stock Units.
The Committee believes that the key executive team of the Company will
receive appropriate rewards under this program of corporate incentives, but only
if they achieve the performance goals established for them and the Company and
if they succeed in building increased value for the Company's shareholders.
Compensation Committee
James L. Packard, Chairman
J. Marc Adam
Robert H. Jenkins
15
REPORT OF THE AUDIT COMMITTEE
The Company's Board of Directors' Audit Committee is comprised of three
directors who are independent as such term is defined in the listing standards
of the New York Stock Exchange. The Audit Committee reviews the Company's
financial reporting process and its system of internal financial controls on
behalf of the Board of Directors. Management of the Company has the primary
responsibility for the financial statements and the reporting processes of the
Company, including the system of internal controls, the presentation of the
financial statements and the integrity of the financial statements. Management
has represented to the Audit Committee that the Company's financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") and that its internal controls over
financial reporting were effective as of November 27, 2004. The Company's
auditors, PricewaterhouseCoopers LLP, are engaged to audit the Company's
financial statements and to express an opinion on the conformity of such audited
financial statements to GAAP, on the effectiveness of the Company's internal
controls over financial reporting and on management's assessment of the
effectiveness of the Company's internal controls over financial reporting.
Members of the Audit Committee rely on the information provided to them and on
the representations made by management and the information, representations,
opinions and communications of the Company's auditors.
In this context, the Audit Committee has reviewed and discussed the
Company's system of internal controls over financial reporting and its audited
financial statements with management and the Company's auditors. The Audit
Committee has discussed with the Company's auditors the matters required to be
discussed by Statement on Auditing Standards No. 90 (Audit Committee
Communications) and Public Company Accounting Oversight Board Auditing Standard
No. 2 (An Audit of Internal Controls Over Financial Reporting in Conjunction
with an Audit of Financial Statements). In addition, the Audit Committee has
received from the Company's auditors the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and discussed with the auditors their independence from the Company
and its management. While the activities of the Audit Committee are designed to
provide an additional level of review, such activities cannot provide absolute
assurance that the audit of the Company's financial statements and of the
effectiveness of the Company's internal controls over financial reporting has
been carried out in accordance with generally accepted auditing standards, that
the financial statements are presented in accordance with GAAP or that the
Company's auditors are in fact independent.
In reliance on the reviews and discussions referred to above and subject to
the limitations set forth above, the Audit Committee recommended to the Board of
Directors, and the Board has approved, that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
November 27, 2004, for filing with the Securities and Exchange Commission.
AMOUNTS PAID TO PRICEWATERHOUSECOOPERS LLP
The following table presents fees for professional services rendered by
PricewaterhouseCoopers LLP for the audit of the Company's consolidated financial
statements as of and for the years ended November 27, 2004 and November 29,
2003, and fees billed for other services rendered by PricewaterhouseCoopers LLP
during those periods.
YEARS ENDED
-------------------------------------
NOVEMBER 27, 2004 NOVEMBER 29, 2003
----------------- -----------------
Audit Fees......................................... $1,523,450 $579,500
Audit-Related Fees (1)............................. -- 10,200
Tax Fees (2)....................................... -- 17,000
All other Fees..................................... -- --
---------- --------
Total.............................................. $1,523,450 $606,700
16
------------------------------
(1) Audit-Related Fees are for assurance and related services. During 2003 the
primary component of fees in this category related to consultation on
general internal control matters and compliance with the Sarbanes-Oxley Act
of 2002.
(2) Tax fees in 2003 primarily related to advice and assistance with respect to
foreign tax compliance matters.
The charter of the Audit Committee provides that the Audit Committee is
responsible for the appointment, compensation and oversight of the work of the
independent auditors and must approve in advance any non-audit services to be
performed by the independent auditors. The Audit Committee has not established
any pre-approval procedures, but instead reviews each proposed engagement to
determine whether the provision of services is compatible with maintaining the
independence of the independent auditors. Pre-approval is detailed as to the
particular service or category of services and is generally subject to a
specific budget. All of the fees shown above were pre-approved by the Audit
Committee.
Audit Committee
Robert J. Burgstahler, Chairman
Paul Donovan
Robert H. Jenkins
17
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative total
return on its Common Stock for a five year period (November 27, 1999 to November
27, 2004) with the cumulative total return of the S&P SmallCap 600 Index and the
S&P Industrial Machinery Index.
TOTAL RETURN TO SHAREHOLDERS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, S&P SMALLCAP 600 INDEX AND
S&P INDUSTRIAL MACHINERY INDEX
[PERFORMANCE GRAPH]
* Assumes that the value of the investment in the Company's Common Stock and
each index was $100 on November 27, 1999 and that all dividends were
reinvested.
The reference points on the foregoing graph are as follows:
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
CLARCOR INC....................................... 109.22 163.85 203.97 275.08 330.71
S&P SMALLCAP 600 INDEX............................ 109.72 119.59 112.81 148.65 180.90
S&P INDUSTRIAL MACHINERY INDEX.................... 93.00 97.96 105.43 131.88 166.67
The 1999 beginning measuring point was the market close on November 26,
1999, the last New York Stock Exchange trading day before the beginning of the
Company's fifth preceding fiscal year. The closing measuring point for 2004 was
November 26, 2004 based on the last New York Stock Exchange trading date prior
to the Company's Saturday, November 27, 2004 fiscal year-end.
18
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of November 27, 2004 regarding
the shares of Common Stock of the Company issuable under awards and grants under
the Company's Incentive Plans.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING SHARES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN NUMBER OF
WARRANTS AND RIGHTS WARRANTS AND RIGHTS SHARES IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- -------------------- -------------------- -----------------------
Equity compensation plans approved
by security holders:
Options........................... 1,839,243 $30.83
Restricted Stock Units............ 83,997
---------
Total........................ 1,923,240 1,463,680
Equity compensation plans not
approved by security holders...... -- --
--------- ---------
Total........................ 1,923,240 1,463,680
========= =========
PROPOSED AMENDMENT TO THE SECOND
RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors unanimously recommends that the shareholders
consider and approve a proposal to amend the Second Restated Certificate of
Incorporation (the "Charter") of the Company to increase the number of shares of
Common Stock, par value $1.00 per share, which the Company is authorized to
issue from 60,000,000 to 120,000,000 shares. The Charter currently authorizes
5,000,000 shares of Preferred Stock, par value $1.00 per share, and the proposed
amendment will not increase or decrease that number. If the proposed amendment
is approved, the first paragraph of ARTICLE FOURTH of the Charter shall be
amended to read as follows:
"FOURTH: The total number of shares of all classes of capital stock which
the corporation shall have the authority to issue is 125,000,000 shares which
shall be divided into two classes as follows:
"5,000,000 shares of Preferred Stock (Preferred Stock) of the par
value of $1.00 per share, and
"120,000,000 shares of Common Stock (Common Stock) of the par value of
$1.00 per share."
The proposed amendment does not change the number of authorized shares of
Preferred Stock but only provides for an increase in the authorized Common Stock
from 60,000,000 shares to 120,000,000 shares.
On January 28, 2005, 25,733,057 shares of Common Stock were issued and
outstanding and none of the Preferred Stock was issued and outstanding. The
proposed amendment would increase the number of authorized but unissued shares
of Common Stock from 34,266,943 to 94,266,943 shares.
The additional shares of stock authorized by the proposed amendment would
be issuable at any time in the sole discretion of the Board of Directors,
without the necessity of further approval by the shareholders except as required
by law or applicable stock exchange requirements. The terms of any shares of
Preferred Stock issued including dividend rates, conversion prices (if any),
voting rights, redemption prices and similar matters will be determined by the
Board of Directors. The holders of the Company's Common Stock and Preferred
Stock do not currently, and would not as a result of the proposed increase in
authorized shares, have preemptive rights to subscribe for any additional
capital stock of the Company.
19
The increase in authorized but unissued shares of Common Stock is designed
to enable the Company to issue stock dividends (including stock splits issued in
the form of stock dividends), make grants and awards under the Company's 2004
Incentive Plan, to raise capital and engage in acquisitions and to use for
general corporate purposes. The Company has no present commitments, agreements
or undertakings to issue shares of Common or Preferred Stock except pursuant to
outstanding grants under the Company's 1994 Incentive Plan and 2004 Incentive
Plan and the outstanding Preferred Stock Purchase Rights associated with its
outstanding Common Stock. The Company does not have any present intention to use
the additional shares for any purpose other than these routine corporate
purposes.
The increase in the authorized but unissued shares of Common Stock,
however, could make a change in control of the Company more difficult to
achieve. The flexibility to issue additional Common Stock can enhance the
Board's arm's-length bargaining capability on behalf of the Company's
shareholders in a takeover situation. Under some circumstances, the authorized
but unissued shares of Common Stock and the ability to designate the rights of,
and issue, Preferred Stock could be used by an incumbent board to make a change
of control of the Company more difficult. The Board has no present intention to
use the Common or Preferred Stock for such a purpose, except that any issuances
of the Common Stock proposed to be authorized will be accompanied by the
Preferred Stock Purchase Rights identical to those now outstanding. The Company
is not aware of any present effort to effect a change of control or takeover of
the Company.
VOTING ON THE AMENDMENT
If a quorum is present at the Annual Meeting, approval of the proposed
amendment requires the affirmative vote of the holders of at least a majority of
the 25,733,057 shares of Common Stock outstanding on the record date for the
Annual Meeting. Abstentions and broker non-votes will have the same effect as a
vote against the proposed amendment. Proxies solicited by the Board of Directors
will be voted for this proposal unless a contrary vote is specified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S SECOND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK.
MISCELLANEOUS
AUDITORS
It is expected that the Audit Committee of the Board of Directors will
select PricewaterhouseCoopers LLP to audit the financial statements of the
Company for the fiscal year ending December 3, 2005. PricewaterhouseCoopers LLP
(or its predecessors) has served as the Company's auditors for more than 50
years. A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
and respond to appropriate questions.
OTHER BUSINESS
The Board of Directors has no knowledge of any matters, other than as set
forth in this Proxy Statement, upon which action is to be taken at the meeting.
In the event any such matters are brought before the meeting, the attorneys
named in the enclosed form of proxy will vote proxies received by them as they
deem best with respect to all such matters.
PROPOSALS OF SECURITY HOLDERS FOR 2006 ANNUAL MEETING OF SHAREHOLDERS
Under the rules and regulations of the Securities and Exchange Commission,
any proposal which a shareholder of the Company intends to present at the Annual
Meeting of Shareholders to be held in 2006 and which such shareholder desires to
have included in the Company's proxy materials for such meeting, must be
received by the Company on or before October 13, 2005.
20
The Company's bylaws provide that nomination by a shareholder of a person
for election as a director and other proposals made by such shareholders for
action by the shareholders at any meeting of shareholders may be disregarded
unless proper notice of such nomination or proposal shall have been given to the
Secretary of the Company not less than 60 days nor more than 90 days prior to
the date of the meeting and certain other requirements are met. It is currently
expected that the 2006 Annual Meeting of Shareholders of the Company will be
held on March 27, 2006. Consequently, written notice of any such nomination or
proposal which a shareholder desires to make at the 2006 Annual Meeting must be
received by the Company no earlier than December 27, 2005 and no later than
January 26, 2006. A copy of the Company's bylaws may be obtained without charge
from the Secretary of the Company.
EXPENSE OF SOLICITATION OF PROXIES
The expense of solicitation of proxies, including printing and postage,
will be paid by the Company. In addition to the use of the mail, proxies may be
solicited personally, or by telephone, by officers and regular employees of the
Company. The Company has employed D. F. King & Co., Inc. to solicit proxies for
the Annual Meeting from brokers, bank nominees and other institutional holders.
The Company has agreed to pay $8,500, plus the out-of-pocket expenses of D. F.
King & Co., Inc., for these services. The Company will reimburse brokers and
other persons holding stock in their names, or in the name of nominees, for
their expenses for sending proxy material to principals and obtaining their
proxies.
By Order of the Board of Directors
DAVID J. BOYD
Secretary
Franklin, Tennessee
February 17, 2005
21
FOLD AND DETACH HERE
-------------------------------------------------------------------------------
PROXY/VOTING
INSTRUCTION CARD CLARCOR INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING ON MARCH 21, 2005
The undersigned hereby appoints ROBERT J. BURGSTAHLER and PAUL DONOVAN or any
one or more of them, acting alone if only one shall be present, or jointly if
more than one shall be present, the true and lawful attorneys of the
undersigned, with power of substitution, to vote as proxies for the undersigned
at the Annual Meeting of Shareholders of CLARCOR Inc. to be held at the offices
of the Company, 840 Crescent Centre Drive, Suite 600, Franklin, TN 37067, on
Monday, March 21, 2005 at 9:00 a.m., Central Standard Time, and all adjournments
thereof, all shares of Common Stock which the undersigned would be entitled to
vote and all as fully and with the same effect as the undersigned could do if
then personally present.
Receipt is acknowledged of the Company's Annual Report to Shareholders for the
fiscal year ended November 27, 2004, and the Notice and Proxy Statement for the
above Annual Meeting.
The Company is aware of two matters to be voted upon at this Annual Meeting: 1.
the election of directors -- the nominees are Messrs. Robert H. Jenkins and
Philip R. Lochner, Jr.; and 2. the proposed amendment to the Company's Restated
Certificate of Incorporation described in the Proxy Statement for this Annual
Meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES (SEE
REVERSE SIDE) BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. IF A VOTE IS NOT SPECIFIED, THE
PROXIES NAMED ABOVE WILL VOTE FOR THE NOMINEES FOR ELECTION AS DIRECTORS AND FOR
THE APPROVAL AND ADOPTION OF THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN
THIS CARD.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
CLARCOR INC.
C/O NATIONAL CITY BANK
CORPORATE TRUST OPERATIONS
LOCATOR 5352
P.O. BOX 92301
CLEVELAND, OH 44101-4301
FOLD AND DETACH HERE
-------------------------------------------------------------------------------
(Continued from the other side)
[X] PLEASE MARK VOTES AS
IN THIS EXAMPLE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE NOMINEES FOR ELECTION AS DIRECTORS NAMED IN THIS PROXY AND FOR THE
APPROVAL AND ADOPTION OF THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SUCH NOMINEES
AND FOR APPROVAL AND ADOPTION OF THE AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION.
1. Election of Directors. (See Reverse)
[ [
] FOR ] WITHHELD
[
] F
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S):
--------------------------------------------------------------------------------
2. Proposal to approve and adopt the amendment to the Company's Restated
Certificate of Incorporation. [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Dated: --------------- , 2005
--------------------------------
Signature(s)
NOTE: Please date and sign as
name appears hereon. If shares
are held jointly by two or more
persons, each shareholder named
must sign. Executors,
administrators, trustees, etc.
should so indicate when signing.
If the signer is a corporation,
please sign full corporate name
by duly authorized officer. If a
partnership, please sign in
partnership name by authorized
person.