CLARCOR INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

COMMISSION FILE NUMBER 1-11024

CLARCOR Inc.
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(Exact name of registrant as specified in its charter)

DELAWARE 36-0922490
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

840 Crescent Centre Drive, Suite 600, 37067
Franklin, TN ------------
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area 615-771-3100
code: ---------------

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None
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(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No __

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) Yes X No __

The aggregate market value of the Common Stock held by non-affiliates computed
by reference to the price at which the Common Stock was last sold as of the last
day of registrant's most recently completed second fiscal quarter is
$1,061,439,092.

The number of outstanding shares of Common Stock as of February 1, 2005 is
25,733,057 shares.

Certain portions of the registrant's Proxy Statement dated February 17, 2005 for
the Annual Meeting of Shareholders to be held on March 21, 2005 are incorporated
by reference in Part III. Such Proxy Statement will be filed with the Securities
and Exchange Commission not later than 120 days after the conclusion of the
registrant's fiscal year ended November 27, 2004.

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

(a) General Development of Business

CLARCOR Inc. ("CLARCOR") was organized in 1904 as an Illinois corporation
and in 1969 was reincorporated in the State of Delaware. As used herein, the
"Company" refers to CLARCOR and its subsidiaries unless the context otherwise
requires.

The Company's fiscal year ends on the Saturday closest to November 30. For
fiscal year 2004 the year ended on November 27, 2004 and included 52 weeks. For
fiscal year 2003 the year ended November 29, 2003 and included 52 weeks. For
fiscal year 2002 the year ended on November 30, 2002 and included 52 weeks. In
this Form 10-K, all references to fiscal years are shown to begin on December 1
and end on November 30 for clarity of presentation.

(i) Certain Significant Developments.

On January 8, 2004, the Company announced that it planned to relocate its
corporate headquarters from Rockford, Illinois, to the Nashville, Tennessee
area. This move was completed during the Company's fourth fiscal quarter. The
costs of the move were approximately $2,209,000 pretax ($0.05 per diluted share)
and will be a one-time charge incurred primarily in fiscal 2004.

On March 1, 2004, the Company acquired certain assets of Filtrel Group, a
Luton, England manufacturer and distributor of heavy-duty engine air filters for
approximately $4,900,000 in cash. As a result of the acquisition, the assets
were combined into existing subsidiaries of the Company in the Engine/Mobile
Filtration segment.

On September 15, 2004, the Company acquired certain assets of United EFP,
L.P., a privately owned manufacturer of woven wire and metallic screening and
filtration products for the plastic and polymer fiber industries, operating
through manufacturing facilities in Houston, Texas and Shelby, North Carolina
for approximately $37,000,000 including acquisition expenses. The purchase price
was paid in cash with available funds and proceeds from a revolving credit
facility. United EFP was renamed Purolator EFP ("Purolator EFP") and became a
wholly-owned subsidiary reported as part of the Company's
Industrial/Environmental Filtration segment. Purolator EFP's sales in the most
recent twelve-month period prior to the acquisition were approximately
$25,000,000.

During fiscal 2004 these acquired businesses contributed approximately
$10,000,000 to the Company's revenues for the year.

(ii) Summary of Business Operations.

During 2004, the Company conducted business in three principal industry
segments: (1) Engine/Mobile Filtration, (2) Industrial/Environmental Filtration
and (3) Packaging.

Engine/Mobile Filtration. Engine/Mobile Filtration includes filters for
oil, air, fuel, coolants and hydraulic fluids for trucks, automobiles,
construction, mining and industrial equipment, locomotives, marine and
agricultural equipment.

Industrial/Environmental Filtration. Industrial/Environmental Filtration
products are used primarily for commercial, residential and industrial
applications. The segment's industrial and environmental products include air
and antimicrobial treated filters and high efficiency electronic air cleaners
for commercial buildings, factories, residential buildings, paint spray booths,
gas turbine systems, medical facilities, motor vehicle cabins, clean rooms,
compressors and dust collector systems. The segment's process filtration
products include specialty filters, industrial process liquid filters, filters
for pharmaceutical processes and beverages, filtration systems for aircraft
refueling, anti-pollution, sewage treatment and water recycling, bilge
separators, sand control filters for oil and gas drilling and woven wire and
metallic products for filtration of plastics and polymer fibers.

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Packaging. Packaging products include a wide variety of custom-styled
containers and packaging items used primarily by the food, confectionery, spice,
film, consumer healthcare, promotions and battery industries. The segment's
products include lithographed metal containers, flat sheet decorated metal,
combination metal and plastic containers, plastic closures and various
specialties, such as spools for wire and cable, outer shells for dry cell
batteries and film canisters.

(b) Financial Information About Industry Segments

Business segment information for the fiscal years 2002 through 2004 is
included in Note Q to Notes to Consolidated Financial Statements. See pages F-25
through F-27 in this 2004 Annual Report on Form 10-K ("2004 Form 10-K").

(c) Narrative Description of the Business

ENGINE/MOBILE FILTRATION

The Company's engine/mobile filtration products business is conducted by
the following wholly-owned subsidiaries: Baldwin Filters, Inc.; Clark Filter,
Inc.; Baldwin Filters (Aust.) Pty. Ltd.; Baldwin Filters N.V.; Baldwin Filters
Limited and CLARCOR UK Limited. In addition, the Company owns (i) 90% of Filtros
Baldwin de Mexico ("FIBAMEX"), (ii) 80% of Baldwin-Weifang Filters Ltd., and
(iii) 80% of Baldwin-Unifil S.A.

The companies market a full line of oil, air, fuel, coolant and hydraulic
fluid filters. The filters are used in a wide variety of applications and in
processes where filter efficiency, reliability and durability are essential.
Impure air or fluid flow through semi-porous paper, corrugated paper, cotton,
synthetic, chemical or membrane filter media with varying efficiency filtration
characteristics. The impurities on the media are disposed of when the filter is
changed. The segment's filters are sold throughout the world, primarily in the
replacement market for trucks, automobiles, locomotives, marine, construction,
industrial, mining and agricultural equipment. In addition, some first-fit
filters are sold to the original equipment market.

INDUSTRIAL/ENVIRONMENTAL FILTRATION

The Company's industrial/environmental filtration products business is
conducted by the following wholly-owned subsidiaries: CLARCOR Air Filtration
Products, Inc. ("CLC Air"); Airklean Engineering Pte. Ltd.; Airguard Asia Sdn.
Bhd.; Facet USA, Inc. and related Facet companies in Italy, Spain, the United
Kingdom and other European locations ("Facet"); Purolator Advanced Filtration
Group, Inc. ("AFG"); Purolator Facet, Inc. ("PFI"); Purolator EFP; Total
Filtration Services, Inc. ("TFS"); and United Air Specialists, Inc. ("UAS"). The
segment's products are sold throughout the world.

CLC Air resulted from the merger, on December 1, 2003, of two of the
Company's former subsidiaries, Airguard Industries, Inc. ("Airguard") and
Purolator Products Air Filtration Company ("Purolator"). CLC Air manufactures
and sells Airguard and Purolator branded commercial and industrial air filters.
Purolator Advanced Filtration Group, Inc. was formerly named Filter Products,
Inc. and is in the business of manufacturing and selling liquid filters
primarily for pharmaceutical, beverage and other products.

The companies market commercial and industrial air filters and systems,
electrostatic contamination control equipment and electrostatic high precision
spraying equipment. The air filters and systems remove contaminants from
recirculated indoor air and from process air which is exhausted outdoors. The
products represent a complete line of air filters and cleaners with a wide range
of uses for maintaining high quality standards in interior air and exterior
pollution control.

Additional products include specialty filters, filtration systems for
aircraft refueling, anti-pollution and water recycling, and bilge separators.
These products are used in a wide range of applications including commercial,
military and general aviation, marine, oil and gas drilling and refining,
chemical and pharmaceutical processes and beverages, utilities, paper mills,
plastics, polymers and general industry. The filters are used for the process
filtration of liquids using a variety of string wound, meltblown, and porous and
sintered and non-sintered metal media filters, woven wire, strainers,
separators, coalescers and absorbent media. Many of

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these filter products and systems require special technical approvals and
product certification in order to meet commercial and military requirements.

TFS does not manufacture filtration products or equipment. It is engaged in
the business of supplying a full range of filtration products and equipment
acquired from the Company's subsidiaries and non-affiliated manufacturers to
customers as well as providing filter maintenance and cleaning supplies and
services for the customer's filtration equipment. In addition, in fiscal 2004,
TFS took control of the ownership and operation of certain branch outlets for
commercial and industrial air filtration products previously owned and operated
by CLC Air. On December 1, 2004, certain branch outlets owned and operated by
UAS were transferred to TFS. As part of the Company's Total Filtration Program,
it is expected that TFS will expand the products offered by these stores to
include most of the filtration products manufactured by Company subsidiaries.

PACKAGING

The Company's consumer and industrial packaging products business is
conducted by a wholly-owned subsidiary, J. L. Clark, Inc. ("J. L. Clark").

J.L. Clark manufactures a wide variety of different types and sizes of
containers and packaging specialties. Metal, plastic and combination
metal/plastic containers and closures manufactured by the Company are used in
packaging a wide variety of dry and paste form products, such as food
specialties (tea, coffee, spices, cookies, candy, mints and other confections);
cosmetics and toiletries; playing cards; beverages and juices; cosmetics and
pharmaceuticals. Other packaging products include shells for dry batteries, film
canisters, candles, spools for insulated and fine wire, and custom decorated
flat steel sheets.

Containers and packaging specialties are manufactured only upon orders
received from customers, and individualized containers and packaging specialties
are designed and manufactured, usually with distinctive decoration, to meet each
customer's marketing and packaging requirements and specifications.

DISTRIBUTION

Engine/Mobile Filtration and Industrial/Environmental Filtration products
are sold primarily through a combination of independent distributors, dealers
for original equipment manufacturers and directly to end-use customers such as
truck and equipment fleet users.

The engine/mobile segment also distributes filtration products worldwide
through each of its subsidiaries. CLARCOR UK Limited ("CLARCOR UK"), Baldwin
Filters N.V. and Baldwin Filters Limited primarily serve the European markets.
Baldwin Filters (Aust.) Pty. Ltd., markets heavy duty liquid and air filters in
Australia and New Zealand. FIBAMEX manufactures filters in Mexico with
distribution in Mexico and Central and South America. Through the Company's
investment in Baldwin-Weifang Filters Ltd., heavy duty filters and electrostatic
air pollution control systems are manufactured in China for distribution in
China and Southeast Asia. Baldwin-Weifang Filters Ltd. has expanded its product
line to include air and liquid filters for heavy duty engines manufactured by
Japanese companies. Additionally, through Baldwin-Unifil S.A., air filtration
products are manufactured in South Africa with distribution throughout Africa,
Great Britain, Europe and the Middle East.

The industrial/environmental segment also distributes and services
filtration products and equipment through subsidiaries located throughout the
United States and in Europe, Singapore, Malaysia and China.

During fiscal 2004, the Company continued its development and expansion of
its Total Filtration Program. Under the Program, the Company, primarily through
TFS, offers customers the ability to purchase all of the filters needed by that
customer for its facilities and manufacturing, transportation and construction
equipment. Customers that purchase a broad range of filtration products and
services from multiple suppliers are able, by taking advantage of the Program,
to purchase most of their filter requirements from a single source, and thereby
reduce administrative burdens and uncertainty concerning filter pricing,
availability, delivery, performance and quality. The Company is confident that
it can serve its customers' total filtration requirements because it believes
that it now manufactures and supplies the broadest range of filtration products
in the industry. The Company expects that the impact of this Program will grow
over the next several
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years as customers' facilities are converted to the Program. The Total
Filtration Program will serve as an added distribution channel for all of the
Company's filtration products.

Packaging salespersons call directly on customers and prospective customers
for containers and packaging specialties. Each salesperson is trained in all
aspects of J.L. Clark's manufacturing processes with respect to the products
sold and is qualified to consult with customers and prospective customers
concerning the details of their particular requirements. In addition,
salespersons with expertise in specific areas, such as flat-sheet decorating,
are focused on specific customers and markets.

CLASS OF PRODUCTS

No class of products accounted for 10% or more of the total sales of the
Company in any of the Company's last three fiscal years.

RAW MATERIAL

Steel, filter media, cartons, aluminum sheet and coil, stainless steel,
chrome vanadium, chrome silicon, resins, gaskets, roll paper, corrugated paper,
bulk and roll plastic materials and cotton, wood and synthetic fibers and
adhesives are the most important raw materials used in the manufacture of the
Company's products. All of these are purchased or are available from a variety
of sources. The Company has no long-term purchase commitments. During fiscal
2004 the price of steel and certain hydrocarbon based products (such as resins)
purchased by the Company rose substantially and certain grades of steel became
more difficult to obtain. The Company was able to procure adequate supplies of
steel and resins and initiated price increases for its products which offset a
substantial portion of the increased costs.

PATENTS, TRADEMARKS AND TRADENAMES

Certain features of some of the Company's products are covered by domestic
and, in some cases, foreign patents or patent applications. While these patents
are valuable and important for certain products, the Company does not believe
that its competitive position is dependent upon patent protection. The Company
believes, however, that its trademarks and tradenames (such as "Purolator" and
"Facet") used in connection with certain products are significant to its
business.

CUSTOMERS

The largest 10 customers of the Engine/Mobile Filtration segment accounted
for 24% of the $320,042,000 of fiscal year 2004 sales of such segment.

The largest 10 customers of the Industrial/Environmental Filtration segment
accounted for 28% of the $396,629,000 of fiscal year 2004 sales of such segment.

The largest 10 customers of the Packaging segment accounted for 65% of the
$71,015,000 of fiscal year 2004 sales of such segment.

No single customer accounted for 10% or more of the Company's consolidated
2004 sales.

BACKLOG

At November 30, 2004, the Company had a backlog of firm orders for products
amounting to approximately $75,900,000. The backlog figure for November 30, 2003
was approximately $85,800,000. Substantially all of the orders on hand at
November 30, 2004 are expected to be filled during fiscal 2005.

COMPETITION

The Company encounters strong competition in the sale of all of its
products. The Company competes in a number of filtration markets against a
variety of competitors. The Company is unable to state its relative competitive
position in all of these markets due to a lack of reliable industry-wide data.
However, in the replacement market for heavy duty liquid and air filters used in
internal combustion engines, the Company
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believes that it is among the top five companies measured by annual sales. In
addition, the Company believes that it is a leading manufacturer of liquid and
air filters for diesel locomotives. The Company believes that for industrial and
environmental filtration products, it is among the top five companies measured
by annual sales.

In the Packaging segment, its principal competitors include several
manufacturers whose specialty packaging segments are smaller than the Company's
and who often compete on a regional basis only. Strong competition is also
presented by manufacturers of paper, plastic and glass containers. The Company's
competitors generally manufacture and sell a wide variety of products in
addition to packaging products of the type produced by the Company and do not
publish separate sales figures relative to these competitive products.
Consequently, the Company is unable to state its relative competitive position
in those markets.

The Company believes that it is able to maintain its competitive position
because of the quality and breadth of its products and services and the broad
geographic scope of its operations.

PRODUCT DEVELOPMENT

The Company's Technical Centers and laboratories test product components
and completed products to insure high quality manufacturing results, evaluate
competitive products, aid suppliers in the development of product components,
and conduct controlled tests of newly designed filters, filtration systems and
packaging products for particular uses. Product development departments are
concerned with the improvement and creation of new filters and filtration media,
filtration systems, containers and packaging products in order to broaden the
uses of these items, counteract obsolescence and evaluate other products
available in the marketplace.

In fiscal 2004, the Company employed 103 professional employees on either a
full-time or part-time basis on research activities relating to the development
of new products or the improvement or redesign of its existing products. During
this period the Company spent approximately $7,950,000 on such activities as
compared with $7,403,000 for 2003 and $6,482.000 for 2002.

During fiscal 2004, the Company completed an expansion to its process
liquid technical center in Greensboro, North Carolina and in fiscal 2005 expects
to complete a new aviation fuel test facility in Greensboro, North Carolina.

ENVIRONMENTAL FACTORS

The Company is not aware of any facts which would cause it to believe that
it is in material violation of existing applicable standards with respect to
emissions to the atmosphere, discharges to waters, or treatment, storage and
disposal of solid or hazardous wastes.

The Company is party to various other proceedings relating to environmental
issues. The U.S. Environmental Protection Agency (EPA) and/or other responsible
state agencies have designated the Company as a potentially responsible party
(PRP), along with other companies, in remedial activities for the cleanup of
waste sites under the federal Superfund statute.

Although it is not certain what future environmental claims, if any, may be
asserted, the Company currently believes that its potential liability for known
environmental matters does not exceed its present accruals of $50,000. However,
environmental and related remediation costs are difficult to quantify for a
number of reasons including the number of parties involved, the difficulty in
determining the extent of the contamination, the length of time remediation may
require, the complexity of environmental regulation and the continuing
advancement of remediation technology. Applicable federal law may impose joint
and several liability on each PRP for the cleanup of a contaminated site.

The Company does anticipate, however, that it may be required to install
additional pollution control equipment to augment or replace existing equipment
in the future in order to meet applicable environmental standards. During fiscal
2003, the Company replaced certain oxidizers used to remove air borne
contaminants at its Rockford, Illinois, packaging manufacturing facility. The
cost of this project was about $1.4 million. In the future similar equipment may
be installed at the Company's packaging manufacturing facility located in

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Lancaster, Pennsylvania, at approximately the same cost. The Company is
presently unable to predict the timing or the cost of any other project of this
nature and cannot give any assurance that the cost of such projects may not have
an adverse effect on earnings. However, the Company is not aware, at this time,
of any other additional significant current or pending requirements to install
such equipment at any of its facilities.

EMPLOYEES

As of November 30, 2004, the Company had approximately 5,035 employees.

(d) Financial Information About Foreign and Domestic Operations and Export
Sales

Financial information relating to export sales and the Company's operations
in the United States and other countries is included in Note Q to Notes to
Consolidated Financial Statements. See page F-27 in this 2004 Form 10-K. The
Company is not aware of any unusual risks attendant to the conduct of its
operations in other countries.

INTERNET WEBSITE

The Company's Internet address is www.clarcor.com. The Company makes
available, free of charge, on this website, its annual report on Form 10-K, its
quarterly reports on Form 10-Q, its current reports on Form 8-K and amendments
to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Exchange Act as soon as reasonably practicable after such forms are
electronically filed with the SEC. In addition, the following corporate
governance documents can be found on this website: (a) charters for the Audit
Committee, the Corporate Governance Committee and the Compensation Committee of
the Board of Directors; (b) Code of Conduct; (c) Code of Ethics for Chief
Executive Officer and Senior Financial Officers; (d) Corporate Governance
Guidelines; (e) Disclosure Controls and Procedures; (f) Procedures Regarding
Reports of Misconduct or Alleged Misconduct and (g) the Company's By-laws.
Copies of all of these documents can also be obtained, free of charge, upon
written request to the Corporate Secretary, CLARCOR Inc., 840 Crescent Centre
Drive, Suite 600, Franklin, TN 37067.

ITEM 2. PROPERTIES.

Location

In 2004 the Company leased about 23,000 square feet of office space in
Franklin, Tennessee, and moved its corporate headquarters to that location.

Engine/Mobile Filtration. The following is a description of the principal
properties utilized by the Company in conducting its Engine/Mobile Filtration
business:

The Baldwin Filters' Kearney, Nebraska plant contains 516,000 square feet
of manufacturing and warehousing space, 25,000 square feet of research and
development space, and 40,000 square feet of office space. The Kearney facility
is located on a site of approximately 40 acres. A manufacturing facility located
in Yankton, South Dakota has approximately 170,000 square feet of floor space on
a 21 acre tract. Both facilities are owned by the Company. In addition, Baldwin
has a capital lease for a 100,000 square foot manufacturing facility on a site
of 20 acres in Gothenburg, Nebraska.

The Company manufactures filters for diesel locomotives and dust collector
cartridges in Lancaster, Pennsylvania at its Clark Filter plant. The building,
constructed about 1968 on an 11.4 acre tract of land, contains 168,000 square
feet of manufacturing and office space and is owned by the Company.

CLARCOR UK owns two facilities on four acres in Warrington, Cheshire,
England, which are used for offices, manufacturing and warehousing. These
facilities total approximately 6,600 square meters.

Baldwin-Weifang Filters Ltd. leases eight buildings in Weifang, China
aggregating approximately 180,000 square feet. These facilities are utilized for
manufacturing and administrative purposes.

The Company leases various facilities in Australia, Belgium, Mexico, South
Africa and the United Kingdom for the manufacture and distribution of
engine/mobile filtration products.

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Industrial/Environmental Filtration. The following is a description of the
principal properties utilized by the Company in conducting its
Industrial/Environmental Filtration business:

CLC Air has 14 manufacturing facilities and distribution centers. It leases
226,000 square feet in Henderson, North Carolina, 142,000 square feet in New
Albany, Indiana, 99,000 square feet in Louisville, Kentucky, 84,000 square feet
in Corona, California, 83,500 square feet in Dallas, Texas, 83,000 square feet
in Rockford, Illinois, 108,000 square feet in Sacramento, California and smaller
facilities in Davenport, Iowa, Kenly, North Carolina, and Clover, South
Carolina. CLC Air owns the following facilities: (a) the Airguard High
Efficiency Filter plant, located in Jeffersontown, Kentucky on a 7.5 acre tract
of land, which contains 100,000 square feet of manufacturing and office
facilities; (b) a 290,000 square foot manufacturing facility on 100 acres in
Campbellsville, Kentucky for the production of air filtration products; (c) a
manufacturing and office facility in Ottawa, Kansas, which contains 41,000
square feet; (d) a 235,000 square foot manufacturing and office facility in
Henderson, North Carolina on a site of approximately 25 acres; and (e) a 50,000
square foot manufacturing and office facility in Kenly, North Carolina.

CLC Air administrative and sales offices and distribution facilities are
located in leased facilities in Louisville, Kentucky. The Company also leases
facilities in Malaysia and Singapore.

Facet owns manufacturing and distribution facilities in Tulsa, Oklahoma and
La Coruna, Spain. The Tulsa facilities contain approximately 142,000 square feet
on a 16 acre site. The La Coruna facility is on an approximately 17,000 square
meter site and the building contains 5,700 square meters. Facet also leases
facilities in Stillwell, Oklahoma; Tulsa, Oklahoma; Italy; Germany; France;
United Kingdom and The Netherlands.

Purolator Facet, Inc. ("PFI") owns two manufacturing and distribution
facilities in Greensboro, North Carolina. One facility contains approximately
88,000 square feet on a 21 acre site. The second, comprising of 97,000 square
feet, was acquired in 2004 to support the expansion of PFI's manufacturing
facilities for products sold to the oil and gas industry as well as hydraulic
filtration products and string wound and melt blown cartridges and bag filters
formerly manufactured by another subsidiary of the Company.

Purolator EFP leases a 80,000 square foot office and manufacturing facility
in Houston, Texas, owns a 48,000 square foot manufacturing facility in Shelby,
North Carolina and leases warehouse facilities in Dalton, Georgia.

TFS leases 80,000 square feet of headquarters space in Rochester Hills,
Michigan, and a 9,000 square foot facility in Birmingham, Alabama. In addition,
it leases office, warehouse space or distribution facilities in Anaheim, Fresno,
Hayward, Corona and Sacramento, California; Cincinnati and Columbus, Ohio;
Jasper and Indianapolis, Indiana; Kansas City, Missouri; Wichita, Kansas;
Sparks, Nevada; Fairfax, Virginia; Phoenix, Arizona; Auburn, Washington;
Atlanta, Georgia; Jackson, Mississippi; Louisville, Kentucky; Portland, Oregon;
Houston and Dallas, Texas; Troy, Michigan; and Commerce City, Colorado. It also
owns an office and warehouse facility consisting of a total of 33,000 square
feet in Goodlettsville, Tennessee.

United Air Specialists ("UAS") has its offices and primary manufacturing
facility in Blue Ash, Ohio (a suburb of Cincinnati), on approximately 17 acres
of land. This facility was built in 1978 and was expanded in 1991 and 1993 to a
total of approximately 157,000 square feet. In addition, UAS leases sales and
service facilities in Bad Camberg, Germany.

AFG owns a 40,000 square foot manufacturing and office facility in
Sacramento, California.

Packaging. The following is a description of the principal properties
utilized by the Company in conducting its Packaging business:

The Company's J. L. Clark, Rockford, Illinois plant, located on 34 acres,
consists of one-story manufacturing buildings, the first of which was
constructed in 1910. Since then a number of major additions have been
constructed and an injection molding plant was constructed in 1972.
Approximately 450,000 square feet of floor area are devoted to manufacturing,
warehouse and office use. Of the 34 acres, approximately 12 are vacant.

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A J. L. Clark plant is located in Lancaster, Pennsylvania on approximately
11 acres. It consists of a two-story office building containing approximately
7,500 square feet of floor space and a manufacturing plant and warehouse
containing 236,000 square feet of floor space, most of which is on one level.
These buildings were constructed between 1924 and 1964.

J. L. Clark also leases a manufacturing facility in Lathrop, California.

The various properties owned by the Company are considered by it to be in
good repair and well maintained. Plant asset additions in 2005 are estimated at
$25,000,000 to $30,000,000 for land, buildings, equipment and machinery and cost
reduction projects.

Function

Engine/Mobile Filtration. Oil, air, fuel, hydraulic fluid and coolant
filters are produced at the Baldwin facilities in Kearney and Gothenburg,
Nebraska and Yankton, South Dakota. The various processes of pleating paper,
winding cotton and synthetic fibers, placing the filter element in a metal or
fiber container and painting the containers are highly mechanized, but require
some manual assistance. The plants also maintain an inventory of special dies
and molds for filter manufacture.

Oil, air and fuel filters, primarily for use in the railroad industry, are
produced at Clark Filter in Lancaster, Pennsylvania.

At its facilities in Warrington, England, CLARCOR UK produces large scale
air filtration systems primarily for diesel and gas turbine power installations,
air filters and units for agricultural and off-road vehicles and specialty
filters mainly for vacuum cleaners, pharmaceuticals and incineration
applications.

Baldwin-Weifang Filters Ltd. manufactures heavy duty engine filters and
electrostatic air pollution control systems for Asian markets at its Weifang,
China facility.

Industrial/Environmental Filtration. Air filters for the commercial,
residential and industrial markets are produced in the CLC Air facilities. Dust
collection systems, high efficiency electronic air cleaning systems and
electrostatic precision spraying systems are designed and manufactured at the
UAS facility in Cincinnati, Ohio.

Specialty filter products for aviation, oil and gas drilling, military,
marine and paper and chemical processes and industrial hydraulic filters are
manufactured and assembled at the PFI facilities in Greensboro, North Carolina.
The manufacturing processes include bonding and sintering metal, tungsten inert
gas and electron beam welding and diffusion-bonding of wire. Facet designs,
manufactures and assembles filters and filtration systems for aircraft
refueling, power generation, water treatment and general industrial applications
at its United States and European facilities. The company also uses outside
contractors for assembly and manufacturing of some of its products. Many of
these products require special commercial or military technical approvals or
product certification. String wound and melt blown cartridges and bag filters
are also manufactured at PFI's Greensboro, North Carolina facility.

Extruder and pack screens, fabricated wire cloth parts, fabricated wire
cloth filters and other products primarily for applications in the polymer fiber
and plastics production are manufactured by Purolator EFP at its plants in Texas
and North Carolina.

Depth media filters for the pharmaceutical, biotech and food and beverage
industries and other critical process filtration applications are manufactured
at the AFG facility in Sacramento, California.

Packaging. The Company's metal and combination metal and plastic packaging
products are produced at J. L. Clark plants located in Rockford, Illinois,
Lancaster, Pennsylvania, and Lathrop, California. The Rockford and Lancaster
plants are completely integrated facilities which include creative and
mechanical art departments and computer capabilities for color separation,
digital preparation of multiple-design artwork data and fabricating
lithographing plates. Metal sheets are decorated on coating machines and
lithographing presses connected with conveyor ovens. Decorated sheets are then
cut to working sizes on shearing equipment,

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following which fabrication is completed by punch presses, can-forming and
can-closing equipment and other specialized machinery for supplementary
operations.

Plastic packaging capabilities include molding and labeling of irregular
shaped plastic containers and customized plastic closures which have product
dispensing as well as convenience features.

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in legal actions arising in the normal course of
business. Management is of the opinion that the outcome of these actions will
not have a material adverse effect on the Company's consolidated results of
operations or financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT

Each executive 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 at the time of the Annual Meeting of Shareholders,
and ends on the date of the next Annual Meeting of Shareholders or upon the due
election and qualification of his or her successor.

11

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.

The Company's Common Stock is listed on the New York Stock Exchange; it is
traded under the symbol CLC. The following table sets forth the high and low
market prices as quoted during the relevant periods on the New York Stock
Exchange and dividends per share paid for each quarter of the last two fiscal
years.

The approximate number of holders of record of the Company's Common Stock
at January 14, 2005 is 1,541. In addition, the Company believes that there are
approximately 6,100 beneficial owners whose shares are held in street names.

ITEM 6. SELECTED FINANCIAL DATA.

The information required hereunder is included as Exhibit 13(a)(i) to this
2004 Form 10-K.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.

The information required hereunder is included as Exhibit 13(a)(ii) to this
2004 Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information required hereunder is included as part of Exhibit 13(a)(ii)
to this 2004 Form 10-K.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Consolidated Financial Statements, the Notes thereto and the report
thereon of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, required hereunder with respect to the Company and its
consolidated subsidiaries are included in this 2004 Form 10-K on pages F-1
through F-27.

12

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

CONCLUSION REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
the Company conducted an evaluation of its disclosure controls and procedures,
as such term is defined under Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation,
Chief Executive Officer and the Chief Financial Officer, concluded that the
Company's disclosure controls and procedures were effective as of November 27,
2004, the end of the period covered by this annual report.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of CLARCOR is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Under the supervision and with the participation of
management, including the Company's Chief Executive Officer and Chief Financial
Officer, an evaluation of the effectiveness of the Company's internal control
over financial reporting was conducted based on the framework in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission ("COSO"). Based on that evaluation
under the framework in Internal Control -- Integrated Framework issued by the
COSO, the Company's management concluded that the Company's internal control
over financial reporting was effective as of November 27, 2004.

Management has excluded Purolator EFP from its assessment of internal
control over financial reporting as of November 27, 2004 because it was acquired
by the Company in a purchase business combination during 2004. Purolator EFP is
a wholly-owned subsidiary whose total assets and total revenues represented 7%
and 1%, respectively, of the related consolidated financial statement amounts as
of and for the year ended November 27, 2004.

Management's assessment of the effectiveness of the Company's internal
control over financial reporting as of November 27, 2004 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report which is included herein.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Certain information required hereunder is set forth in the Company's Proxy
Statement dated February 17, 2005 (the "Proxy Statement") for the Annual Meeting
of Shareholders to be held on March 21, 2005 under the caption "Election of
Directors -- Nominees for Election to the Board of Directors," "-- Information
Concerning Nominees and Directors" and "-- The Board of Directors -- Audit
Committee" and is incorporated herein by reference. Additional information
required hereunder is set forth in the Proxy Statement under the caption
"Beneficial Ownership of the Company's Common Stock -- Section 16(a) Beneficial
Ownership Reporting Compliance" and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

The information required hereunder is set forth in the Proxy Statement
under the captions "Compensation of Executive Officers and Other Information"
and "Report of the Compensation Committee" and under the caption "Performance
Graph" and is incorporated herein by reference.

13

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The information required hereunder is set forth in the Proxy Statement
under the caption "Equity Compensation Plan Information" and under the caption
"Beneficial Ownership of the Company's Common Stock" and is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required herein is set forth in the Proxy Statement under
the caption "Report of the Audit Committee -- Amounts Paid to
PricewaterhouseCoopers LLP."

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.

(a)(1) Financial Statements

(a)(2) Financial Statement Schedule

II. Valuation and Qualifying Accounts....................... S-1

Financial statements and schedules other than those listed above are
omitted for the reason that they are not applicable, are not required, or the
information is included in the financial statements or the footnotes therein.

(b) The Company filed Current Reports on Form 8-K on (a) September 16, 2004
to report the issuance by the Company of a press release disclosing the
Company's financial results for the third quarter and nine month period which
ended on August 28, 2004, (b) December 15, 2004 to report a revision of the
Compensation Plan for Directors, (c) January 4, 2005 to report the resignation
of two directors and (d) January 13, 2005 to report the issuance by the Company
of a press release disclosing the Company's financial results for the fourth
quarter and fiscal year which ended on November 27, 2004.

(c) Exhibits

3.1 The registrant's Second Restated Certificate of
Incorporation. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the fiscal year
ended November 30, 1998.

14

3.1(a) Amendment to ARTICLE FOURTH of the Second Restated
Certificate of Incorporation. Incorporated by reference to
the Company's Proxy Statement dated February 18, 1999 for
the Annual Meeting of Shareholders held on March 23, 1999.

3.1(b) Proposed amendment to ARTICLE FOURTH of the Second Restated
Certificate of Incorporation. Incorporated by reference to
the Company's Proxy Statement dated February 17, 2005 for
the Annual Meeting of Shareholders to be held on March 21,
2005.

3.2 The registrant's By-laws, as amended. Incorporated by
reference to Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1995.

3.3 Certificate of Designation of Series B Junior Participating
Preferred Stock of CLARCOR as filed with the Secretary of
State of the State of Delaware on April 2, 1996.
Incorporated by reference to Exhibit 4.5 to the Registration
Statement on Form 8-A filed April 3, 1996.

4.1 Stockholder Rights Agreement dated as of March 28, 1996
between the registrant and the First Chicago Trust of New
York. Incorporated by reference to Exhibit 4 to the
Company's Current Report on Form 8-K filed April 3, 1996.

4.1(a) First Amendment to Stockholders Rights Agreement dated as of
March 23, 1999. Incorporated by reference to Exhibit 4 to
the Company's Form 8-A/A filed March 29, 1999.

4.2 Certain instruments defining the rights of holders of
long-term debt securities of CLARCOR and its subsidiaries
are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K. CLARCOR hereby agrees to furnish copies of these
instruments to the SEC upon request.

4.2(c) Credit Agreement dated as of April 8, 2003 among CLARCOR
Inc., the Lenders and Bank One, NA, as Agent. Incorporated
by reference to Exhibit 4 to the Company's Quarterly Report
on Form 10-Q filed June 27, 2003.

10.1 The registrant's Deferred Compensation Plan for Directors.
Incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended
November 30, 1984 (the "1984 10-K").

10.2 The registrant's Supplemental Retirement Plan. Incorporated
by reference to Exhibit 10.2 to the 1984 10-K.

10.2(a) The registrant's 1994 Executive Retirement Plan.
Incorporated by reference to Exhibit 10.2(a) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 3, 1994 ("1994 10-K").

10.2(b) The registrant's 1994 Supplemental Pension Plan.
Incorporated by reference to Exhibit 10.2(b) to the 1994
10-K.

10.2(c) The registrant's Supplemental Retirement Plan (as amended
and restated effective December 1, 1994). Incorporated by
reference to Exhibit 10.2(c) to the 1994 10-K.

10.3 The registrant's 1984 Stock Option Plan. Incorporated by
reference to Exhibit A to the Company's Proxy Statement
dated March 2, 1984 for the Annual Meeting of Shareholders
held on March 31, 1984.

10.4 Employment Agreements with certain officers. Incorporated by
reference to Exhibit 5 to the Company's Current Report on
Form 8-K filed July 25, 1989.

10.4(a)(1) Form of Amended and Restated Employment Agreement with each
of Marcia S. Blaylock, David J. Boyd, Sam Ferrise, Bruce A.
Klein, David J. Lindsay, Peter F. Nangle, and William B.
Walker. Incorporated by Reference to Exhibit 10.4(a)(1) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 2, 2000 (the "2000 10-K").

10.4(c) Employment Agreement with Norman E. Johnson dated July 1,
1997. Incorporated by reference to Exhibit 10.4(c) to the
1997 10-K.

15

10.4(c)(1) Amended and Restated Employment Agreement with Norman E.
Johnson dated as of December 17, 2000. Incorporated by
Reference to Exhibit 10.4(c)(1) to the 2000 10-K.

10.4(d) Trust Agreement dated December 1, 1997. Incorporated by
reference to Exhibit 10.4(d) to the 1997 10-K.

10.4(e) Executive Benefit Trust Agreement dated December 22, 1997.
Incorporated by reference to Exhibit 10.4(e) to the 1997
10-K.

10.5 The registrant's 1994 Incentive Plan (the "1994 Plan") as
amended through June 30, 2000. Incorporated by Reference to
Exhibit 10.5 to the 2000 10-K.

10.5(a) Amendment to the 1994 Plan adopted December 18, 2000.
Incorporated by Reference to Exhibit 10.5(a) to the 2000
10-K.

10.5(b) The registrant's 2004 Incentive Plan (the "2004 Plan").
Incorporated by reference to Exhibit A to the Company's
Proxy Statement dated February 20, 2003 for the Annual
Meeting of Shareholders held on March 24, 2003.

10.5(c) Amendment to the 1994 Plan and to the 2004 Plan.
Incorporated by reference to Exhibit 10.5(c) to the
Company's Annual Report for the fiscal year ended November
29, 2003 (the "2003 10-K").

*12.1 Computation of Certain Ratios.

*13 (a) The following items are included as Exhibits to this Annual
Report on Form 10-K:

(i) The "11-Year Financial Review"; and

(ii) Management's Discussion and Analysis of Financial
Condition and Results of Operation.

14 Code of Ethics for Chief Executive Officer and Senior
Financial Officers. Incorporated by reference to Exhibit 14
to the 2003 10-K.

*21 Subsidiaries of the Registrant.

*23 Consent of Independent Registered Public Accounting Firm.

*31.1 Certification of Norman E. Johnson, Chairman, President and
Chief Executive Officer of the Company, pursuant to Rule
13a-14(a) of the Exchange Act.

*31.2 Certification of Bruce A. Klein, Vice President -- Finance
and Chief Financial Officer of the Company, pursuant to Rule
13a-14(a) of the Exchange Act.

*32.1 Certification of Norman E. Johnson, Chairman, President and
Chief Executive Officer of the Company, pursuant to Section
1350 of Chapter 63 of Title 18 of the United States Code.

*32.2 Certification of Bruce A. Klein, Vice President -- Finance
and Chief Financial Officer of the Company, pursuant to
Section 1350 of Chapter 63 of Title 18 of the United States
Code.

- ---------------

* Filed herewith.

16

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date: February 10, 2005 CLARCOR Inc.
(Registrant)

By: /s/ NORMAN E. JOHNSON
--------------------------------------
Norman E. Johnson
Chairman of the Board, President &
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Date: February 10, 2005 By: /s/ NORMAN E. JOHNSON
------------------------------------------------
Norman E. Johnson
Chairman of the Board, President &
Chief Executive Officer and Director

Date: February 10, 2005 By: /s/ BRUCE A. KLEIN
------------------------------------------------
Bruce A. Klein
Vice President -- Finance &
Chief Financial Officer

Date: February 10, 2005 By: /s/ MARCIA S. BLAYLOCK
------------------------------------------------
Marcia S. Blaylock
Vice President, Controller &
Chief Accounting Officer

Date: February 10, 2005 By: /s/ J. MARC ADAM
------------------------------------------------
J. Marc Adam
Director

Date: February 10, 2005 By: /s/ ROBERT J. BURGSTAHLER
------------------------------------------------
Robert J. Burgstahler
Director

Date: February 10, 2005 By: /s/ PAUL DONOVAN
------------------------------------------------
Paul Donovan
Director

Date: February 10, 2005 By: /s/ ROBERT H. JENKINS
------------------------------------------------
Robert H. Jenkins
Director

17

Date: February 10, 2005 By: /s/ PHILIP R. LOCHNER, JR.
------------------------------------------------
Philip R. Lochner, Jr.
Director

Date: February 10, 2005 By: /s/ JAMES L. PACKARD
------------------------------------------------
James L. Packard
Director

18

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
CLARCOR Inc.

We have completed an integrated audit of CLARCOR Inc.'s 2004 consolidated
financial statements and of its internal control over financial reporting as of
November 27, 2004 and audits of its 2003 and 2002 consolidated financial
statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Our opinions, based on our audits, are
presented below.

CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of CLARCOR Inc. and its subsidiaries at November 27, 2004 and
November 29, 2003, and the results of their operations and their cash flows for
each of the three years in the period ended November 27, 2004 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Also, in our opinion, management's assessment, included in Management's Report
on Internal Control Over Financial Reporting appearing under Item 9A, that the
Company maintained effective internal control over financial reporting as of
November 27, 2004 based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all
material respects, based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of November 27, 2004, based on criteria established in
Internal Control -- Integrated Framework issued by the COSO. The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express opinions on
management's assessment and on the effectiveness of the Company's internal
control over financial reporting based on our audit. We conducted our audit of
internal control over financial reporting in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. An audit of internal control over financial reporting
includes obtaining an understanding of internal control over financial
reporting, evaluating management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in
F-1

reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

As described in Management's Report on Internal Control Over Financial
Reporting, management has excluded Purolator EFP from its assessment of internal
control over financial reporting as of November 27, 2004 because it was acquired
by the Company in a purchase business combination during 2004. We have also
excluded Purolator EFP from our audit of internal control over financial
reporting. Purolator EFP is a wholly-owned subsidiary whose total assets and
total revenues represent 7% and 1%, respectively, of the related consolidated
financial statement amounts as of and for the year ended November 27, 2004.

/s/ PricewaterhouseCoopers LLP

Louisville, KY
February 7, 2005

F-2

CLARCOR INC.

CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 2004 AND 2003
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of the consolidated financial
statements.
F-3

CLARCOR INC.

CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED NOVEMBER 30, 2004, 2003 AND 2002
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

The accompanying notes are an integral part of the consolidated financial
statements.
F-4

CLARCOR INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 2004, 2003 AND 2002
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

The accompanying notes are on integral part of the consolidated financial
statements.
F-5

CLARCOR INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 2004, 2003 AND 2002
(DOLLARS IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.
F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

A. ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include all domestic and foreign
subsidiaries that are more than 50% owned and controlled. CLARCOR Inc. and its
subsidiaries are hereinafter collectively referred to as the "Company" or
CLARCOR. The Company has three reportable segments: Engine/Mobile Filtration,
Industrial/Environmental Filtration and Packaging.

Use of Management's Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Accounting Period

The Company's fiscal year ends on the Saturday closest to November 30. The
fiscal years ended November 27, 2004, November 29, 2003, and November 30, 2002
were comprised of fifty-two weeks. In the consolidated financial statements, all
fiscal years are shown to begin as of December 1 and end as of November 30 for
clarity of presentation.

Cash Equivalents

All highly liquid investments with a maturity of three months or less when
purchased or that are readily saleable are considered to be short-term cash
equivalents. The carrying amount of the investments approximates fair value.

Foreign Currency Translation

Financial statements of foreign subsidiaries are translated into U.S.
dollars at current rates, except that revenues, costs, expenses and cash flows
are translated at average rates during each reporting period. Net exchange gains
or losses resulting from the translation of foreign financial statements are
accumulated with other comprehensive earnings as a separate component of
shareholders' equity and are presented in the Consolidated Statements of
Shareholders' Equity.

Derivatives

The Company makes limited use of derivative financial instruments to manage
certain interest rate and foreign currency risks. Interest rate swap agreements
are utilized to convert certain floating rate debt into fixed rate debt. Cash
flows related to interest rate swap agreements are included in interest expense
over the terms of the agreements.

The Company documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. In addition, the Company assesses (both
at the hedge's inception and on an ongoing basis) the effectiveness of the
derivatives that are used in hedging transactions. If it is determined that a
derivative is not (or has ceased to be) effective as a hedge, the Company would
discontinue hedge accounting prospectively. Ineffective portions of changes in
the fair value of cash flow hedges are recognized in earnings.

F-7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Comprehensive Earnings

Foreign currency translation adjustments, unrealized gains and losses on
derivative instruments and minimum pension liability adjustments are included in
other comprehensive earnings, net of tax.

The components of the ending balances of accumulated other comprehensive
earnings are as follows:

The minimum pension liability is net of tax of $1,089, $359 and $666 for
the years ended November 30, 2004, 2003 and 2002, respectively.

Stock-based Compensation

In accordance with Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting for
Stock-Based Compensation -- Transition and Disclosure," the Company accounts for
stock-based compensation using the intrinsic value method as prescribed under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations and provides the disclosure-only
provisions of SFAS No. 123.

If the Company had determined compensation expense for its stock-based
compensation plans based on the fair value at the grant dates consistent with
the method of SFAS No. 123 and SFAS No. 148, the Company's pro forma net
earnings and basic and diluted earnings per share (EPS) would have been as
follows.

Accounts Receivable and Allowance for Losses

Trade accounts receivable are recorded at the invoiced amount and do not
bear interest. The allowance for losses is the Company's best estimate of the
amount of probable credit losses in its existing accounts receivable. The
Company determines the allowance based on historical write-off experience by
industry, regional economic data and evaluating specific customer accounts for
risk of loss. The Company reviews its allowance for doubtful accounts monthly.
Past due balances over 90 days and over a specified amount are reviewed
individually for collectibility. Account balances are charged off against the
allowance when it is probable the receivable will not be recovered. The Company
does not have any off-balance-sheet credit exposure related to its customers.

F-8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Plant Assets

Depreciation is determined primarily by the straight-line method for
financial statement purposes and by the accelerated method for tax purposes. The
provision for depreciation is based on the estimated useful lives of the assets
(15 to 40 years for buildings and improvements and 3 to 15 years for machinery
and equipment). It is the policy of the Company to capitalize renewals and
betterments and to charge to expense the cost of current maintenance and
repairs. When property or equipment is retired or otherwise disposed of, the net
book value of the asset is removed from the Company's books and the resulting
gain or loss is reflected in earnings.

Goodwill and Other Intangible Assets

The Company recognizes the excess of the cost of an acquired entity over
the net amount assigned to assets acquired and liabilities assumed as goodwill.
Goodwill is tested for impairment on an annual basis and between annual tests in
certain circumstances. Impairment losses would be recognized whenever the
implied fair value of goodwill is less than its carrying value.

The Company recognizes an acquired intangible apart from goodwill whenever
the asset arises from contractual or other legal rights, or whenever it is
capable of being separated or divided from the acquired entity and sold,
transferred, licensed, rented, or exchanged, either individually or in
combination with a related contract, asset or liability. An intangible other
than goodwill is amortized over its estimated useful life unless that life is
determined to be indefinite. The Company's trade names and trademarks have
indefinite useful lives and are subject to impairment testing. All other
acquired intangible assets, including patents (average fourteen year life) and
other identifiable intangible assets with lives ranging from one to thirty
years, are being amortized using the straight-line method over the estimated
periods to be benefited. The Company reviews the lives of its definite-lived
intangibles annually and if necessary, impairment losses would be recognized if
the carrying amount of an intangible subject to amortization is not recoverable
from expected future cash flows and its carrying amount exceeds its fair value.

Impairment of Long-Lived Assets

The Company determines any impairment losses based on underlying cash flows
related to specific groups of acquired long-lived assets, including associated
identifiable intangibles and goodwill, when events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

Income Taxes

The Company provides for income taxes and recognizes deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the financial statement carrying amounts and the tax basis
of assets and liabilities.

Revenue Recognition

Revenue is recognized when product ownership and risk of loss has
transferred to the customer or performance of services is complete and the
Company has no remaining obligations regarding the transaction. Estimated
discounts and rebates are recorded as a reduction of sales in the same period
revenue is recognized. Shipping and handling costs are recorded as revenue when
billed to customers.

Product Warranties

The Company provides for estimated warranty costs when the related products
are recorded as sales or for specific items at the time their existence is known
and the amounts are reasonably determinable.

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Research and Development

The Company charges research and development costs relating to the
development of new products or the improvement or redesign of its existing
products to expense when incurred. These costs totaled approximately $7,950 in
2004, $7,403 in 2003 and $6,482 in 2002.

Guarantees

The Company has provided letters of credit totaling approximately $24,649
to various government agencies, primarily related to industrial revenue bonds,
and to insurance companies and other entities in support of its obligations. The
Company believes that no payments will be required resulting from these
accommodation obligations.

In the ordinary course of business, the Company also provides routine
indemnifications and other guarantees whose terms range in duration and often
are not explicitly defined. The Company does not believe these will have a
material impact on the results of operations or financial condition of the
Company.

The Company has a majority ownership interest in a consolidated affiliate
in which the Company has agreed, under certain conditions, to buy out the
minority owners' interest for an amount estimated not to exceed $1,400.

New Pronouncements

On December 23, 2003, the Financial Accounting Standards Board (FASB)
issued SFAS No. 132R, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." This Statement requires additional disclosures to be
made by employers regarding pensions and other postretirement benefit plans, but
does not change the measurement or recognition of those plans. The Company
adopted the interim period disclosure provisions of this Statement in fiscal
2004 and Note I to the Consolidated Financial Statements includes the required
disclosures.

On May 19, 2004, the FASB issued FASB Staff Position (FSP) No. 106-2,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003," (the Act). The Act introduces
a prescription drug benefit under Medicare as well as a federal subsidy to
sponsors of retiree health care benefit plans. The Act did not have a material
effect on the measurement of the Company's postretirement obligations. FSP No.
106-2 was effective for the Company's fourth quarter 2004.

Subsequent to the Company's 2004 fiscal year end, the FASB issued SFAS No.
123R, "Share-Based Payment," which requires companies to expense the value of
employee stock options and similar awards. SFAS No. 123R is effective for the
Company's fourth quarter 2005. Management has not determined the impact of
adopting SFAS No. 123R.

On December 21, 2004, subsequent to the Company's 2004 fiscal year end, the
FASB issued two FSPs regarding the accounting implications of the American Jobs
Creation Act of 2004. FSP No. 109-1, "Application of FASB Statement No. 109
'Accounting for Income Taxes' to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004" is not expected
to have an effect on the Company's effective tax rate until fiscal 2006. FSP No.
109-2, "Accounting and Disclosure Guidance for the Foreign Earnings Repatriation
Provision within the American Jobs Creation Act of 2004" is effective for fiscal
year 2004 and is discussed in Note J.

B. ACQUISITIONS

On September 15, 2004, the Company acquired certain assets of United EFP, a
privately-owned manufacturer of woven wire and metallic screening and filtration
products for the plastic and polymer fiber industries, operating through two
manufacturing facilities in Houston, Texas and Shelby, North Carolina for

F-10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

approximately $37,022 net of cash received, including acquisition expenses. The
preliminary purchase price was paid in cash with available funds and proceeds
from a revolving credit facility. United EFP was renamed Purolator EFP (EFP) and
became a wholly-owned subsidiary reported as part of the
Industrial/Environmental Filtration segment. EFP's sales in the most recent
twelve-month period prior to the acquisition were approximately $25,000. The
acquisition would not have significantly affected net earnings and earnings per
share of the Company for prior fiscal years. The Company expects the acquisition
to be accretive to earnings per share in fiscal year 2005.

The transaction was accounted for under the purchase method of accounting
with the excess of the initial purchase price over the estimated fair value of
the net tangible and identifiable intangible assets acquired recorded as
goodwill. The initial purchase price was based on the net assets of the business
acquired as shown on a September 14, 2004 balance sheet which is subject to a
final adjustment. The preliminary allocation of the purchase price over the
preliminary estimated fair value of the tangible and identifiable intangible
assets acquired for EFP resulted in $16,357 recorded as goodwill. In addition,
the Company recognized $5,204 for customer relationships that will be amortized
over twenty years, $18 as indefinite-lived trademarks and $560 as other acquired
intangibles which will be amortized over three years. The preliminary allocation
for EFP will be finalized when the Company completes its estimates of
liabilities assumed, finishes an appraisal of the assets acquired and finalizes
the purchase price with the sellers. The Company expects to do this in the first
six months of fiscal 2005. Following is a preliminary condensed balance sheet
based on fair values of the assets acquired and liabilities assumed.

Cash........................................................ $ 2
Accounts receivable, less allowance for losses.............. 3,151
Inventory, net.............................................. 3,679
Prepaid assets.............................................. 62
Plant assets................................................ 9,555
Goodwill.................................................... 16,357
Other acquired intangibles.................................. 5,782
-------
Total assets acquired..................................... 38,588
Accounts payable and accrued liabilities.................... (1,564)
-------
Net assets acquired....................................... $37,024
=======

On March 1, 2004, the Company acquired certain assets of Filtrel Group, a
Luton, England manufacturer and distributor of heavy-duty engine air filters for
approximately $4,871 in cash. As a result of the acquisition, the assets were
combined into existing subsidiaries of the Company in the Engine/Mobile
Filtration segment. A preliminary allocation of the initial purchase price has
been made to major categories of assets and liabilities. The $3,598 excess of
the initial purchase price over the preliminary estimated fair value of the net
tangible and identifiable intangible assets acquired was recorded as goodwill.
Other acquired intangibles included a noncompete agreement valued by an
independent appraiser at $115, which will be amortized on a straight-line basis
over two years. The Company also recorded $50 as exit costs for terminated
employees. This amount was paid during the quarter ended May 29, 2004. The
acquisition is not material to the results of the Company. The Company expects
to make additional adjustments to reflect final purchase agreement adjustments
in the first six months of fiscal 2005.

On June 5, 2002, the Company acquired CLARCOR UK (formerly Locker
Filtration Limited), a Warrington, England manufacturer of heavy-duty air
filters, diesel and gas turbine air intake system filters and specialty filters.
The Company acquired Total Filter Technology (TFT), a process liquid filtration
manufacturer based in North Chelmsford, Massachusetts during third quarter 2002
and FilterSource, an air filtration

F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

distributor based in California during fourth quarter 2002. The three
acquisitions were purchased for approximately $10,371 in cash and their results
were included in the Company's consolidated results of operations from the dates
of acquisition. The combined sales for CLARCOR UK, TFT and FilterSource in the
most recent twelve-month period prior to acquisition were approximately $16,500.
The acquisitions are not material to the results of the Company. CLARCOR UK is
included in the Engine/Mobile Filtration segment. TFT and FilterSource are
included in the Industrial/Environmental Filtration segment. An allocation of
the purchase price has been made to major categories of assets and liabilities
for each acquisition. The allocation of the purchase price over the estimated
fair value of the tangible and identifiable intangible assets acquired for
CLARCOR UK, TFT and FilterSource resulted in $2,713, $2,477 and $461 recorded as
goodwill for each acquisition, respectively. The Company recognized $943 for a
CLARCOR UK customer relationship that will be amortized over ten years. In
connection with the TFT and FilterSource acquisitions, the Company recorded $221
as indefinite-lived trademarks and $1,049 as other acquired intangibles which
will be amortized over a weighted average life of eight years.

C. INVENTORIES

Inventories are stated at the lower of cost or market. During the fourth
quarter of 2003, the Company changed its method of inventory costing on certain
inventories from the last-in, first-out (LIFO) method to the first-in, first-out
(FIFO) method. The change increased net income in 2003 by $289 or $.01 per
diluted share. Prior years were not restated as the impact of the change was
immaterial to each year. The FIFO method approximates current cost. Inventories
are summarized as follows:

D. PLANT ASSETS

Plant assets at November 30, 2004 and 2003 were as follows:

F-12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

E. ACQUIRED INTANGIBLES

The following table summarizes the activity for acquired intangibles by
reporting unit for fiscal year 2004. Other acquired intangibles at November 30,
2004 include $7,845 for customer relationships and $7,276 for other acquired
intangibles, which include parts manufacturer regulatory approvals, patents and
noncompete agreements.

The Company has completed the annual impairment reviews at each year-end
since 2002, with no indication of impairment of goodwill. In performing the
impairment reviews, the Company estimated the fair values of the reporting units
using a present value method that discounted future cash flows. Such valuations
are sensitive to assumptions associated with cash flow growth, discount rates,
terminal value and the aggregation of reporting unit components. The Company
further assessed the reasonableness of these estimates by using valuation
methods based on market multiples and recent capital market transactions.

The Company performed the annual impairment tests on its indefinite-lived
intangibles as of November 30, 2004 and 2003 using the relief-from-royalty
method to determine the fair value of its trademarks and trade names. There was
no impairment as the fair value was greater than the carrying value for these
indefinite-lived intangibles as of these dates.

In addition, the Company reassessed the useful lives and classification of
identifiable finite-lived intangible assets at each year end and determined that
they continue to be appropriate. Amortization expense was $910, $907 and $761
for the years ended November 30, 2004, 2003 and 2002, respectively. The
estimated amounts of amortization expense for the next five years are $1,251 in
2005, $1,205 in 2006, $1,091 in 2007, $912 in 2008 and $912 in 2009.

F-13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

F. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at November 30, 2004 and 2003 were
as follows:

Warranties are recorded as a liability on the balance sheet and as charges
to current expense for estimated normal warranty costs and, if applicable, for
specific performance issues known to exist on products already sold. The
expenses estimated to be incurred are provided at the time of sale and adjusted
as needed, based primarily upon experience.

Changes in the Company's warranty accrual during the year ended November
30, 2004 are as follows:

Balance at November 30, 2003................................ $ 1,789
Accruals for warranties issued during the period.......... 1,119
Accruals related to pre-existing warranties............... (104)
Settlements made during the period........................ (1,633)
Other adjustments, primarily currency translation......... 29
-------
Balance at November 30, 2004................................ $ 1,200
=======

G. LONG-TERM DEBT

Long-term debt at November 30, 2004 and 2003 consisted of the following:

A fair value estimate of $23,963 and $17,359 for long-term debt in 2004 and
2003, respectively, is based on the current interest rates available to the
Company for debt with similar remaining maturities.

F-14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

In April 2003, the Company entered into a five-year multicurrency revolving
credit agreement with a group of participating financial institutions under
which it may borrow up to $165,000. At year-end 2004, the interest rate on the
outstanding borrowings under the credit agreement was 2.49%. The credit
agreement provides that loans may be made under a selection of currencies and
rate formulas. The interest rate is based upon either a defined Base Rate or the
London Interbank Offered Rate (LIBOR) plus or minus applicable margins. Facility
fees and other fees on the entire loan commitment are payable for the duration
of this facility.

Borrowings under the credit facility are unsecured but are guaranteed by
subsidiaries of the Company. The agreement related to this borrowing includes
certain restrictive covenants that include maintaining minimum consolidated net
worth, limiting new borrowings, maintaining a minimum interest coverage and
restricting certain changes in ownership. The Company was in compliance with
these covenants throughout fiscal years 2004 and 2003. This agreement also
includes a $40,000 letter of credit line subline, against which $8,491 and
$14,095 in letters of credit had been issued at November 30, 2004 and 2003,
respectively.

The industrial revenue bonds include $8,000 issued in cooperation with the
Campbellsville-Taylor County Industrial Development Authority (Kentucky), that
are due May 1, 2031, with a variable rate of interest that is reset weekly. In
connection with the issuance of these bonds, the Company holds in trust certain
restricted investments committed for the acquisition of plant equipment. At
November 30, 2004 and 2003, the restricted asset balance was $594 and $1,268,
respectively, and is included in other noncurrent assets. The Company has other
industrial revenue bonds, including $8,410 issued in cooperation with the South
Dakota Economic Development Finance Authority due February 1, 2016 with a
variable rate of interest that is reset weekly and additional bonds of $228 and
$558 outstanding as of November 30, 2004 and 2003, respectively, which mature in
2005.

Required principal maturities of long-term debt for the next five fiscal
years ending November 30 approximates: $420 in 2005, $220 in 2006, $0 in 2007,
$7,500 in 2008, $0 in 2009 and $16,410 thereafter. The Company expects to repay
the $7,500 outstanding on the revolver in fiscal 2005.

At November 30, 2001, the Company had an interest rate agreement that
provided for the Company to pay a 7.34% fixed interest rate on a notional amount
of $60,000 and receive interest at floating rates based on LIBOR. The agreement
expired September 11, 2002. This derivative instrument was designated as a cash
flow hedge and determined to be effective. Therefore, there was no adjustment to
net earnings during 2002. The net gain included in other comprehensive earnings
for the twelve months ended November 30, 2002 was $1,906 (or $2,932 pretax).
Approximately $1,983 of derivative gains were reclassified into earnings during
the fiscal year ended November 30, 2002 as payments were made on its variable
rate interest debt.

Interest paid totaled $278, $1,868 and $7,482 during 2004, 2003 and 2002,
respectively.

H. LEASES

The Company has various lease agreements for offices, warehouses,
manufacturing plants, and equipment that expire on various dates through
December 2015 and contain renewal options. Some of these leases provide for
payment of property taxes, utilities and certain other expenses. Commitments for
minimum rentals under noncancelable leases at November 30, 2004 for the next
five years are: $9,163 in 2005, $6,547 in 2006, $4,943 in 2007, $4,217 in 2008
and $2,899 in 2009. Rent expense totaled $10,316, $9,999 and $9,879 for the
years ended November 30, 2004, 2003 and 2002, respectively.

I. PENSION AND OTHER POSTRETIREMENT PLANS

The Company has defined benefit pension plans and postretirement health
care plans covering certain current and retired employees. In addition to the
plan assets related to qualified plans, the Company has funded approximately
$1,551 and $1,682 at November 30, 2004 and 2003, respectively, in a restricted
trust for

F-15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

its nonqualified plans. This trust is included in other noncurrent assets in the
Company's Consolidated Balance Sheets.

Effective January 1, 2004, the Company froze participation in one of its
defined benefit plans. Certain current plan participants will continue to
participate in the plan while other participants will not accrue future benefits
under the plan but will participate in an enhanced defined contribution plan
which offers an increased company match.

The Company's policy is to contribute to the qualified U.S. and non-U.S.
pension plans at least the minimum amount required by applicable laws and
regulations, to contribute to the nonqualified plan when required for benefit
payments, and to contribute to the postretirement benefit plan an amount equal
to the benefit payments. During 2005, the minimum required contribution for the
U.S. and non-U.S. pension plans is expected to be zero. The Company from time to
time makes contributions in excess of the minimum amount required as economic
conditions warrant. The Company contributed $6,500 and $3,000 to the qualified
U.S. pension plan in fiscal years 2004 and 2003, respectively. The Company does
not expect to make contributions to the U.S. qualified plan in 2005; however it
does expect to contribute $421 to the U.S. nonqualified plan, $220 to the
non-U.S. plan and $265 to the postretirement benefit plan to pay benefits during
2005.

The following table shows reconciliations of the pension plans and other
postretirement plan benefits as of November 30, 2004 and 2003. The accrued
pension benefit liability includes an unfunded benefit obligation of $12,737 and
$9,189 as of November 30, 2004 and 2003, respectively, related to nonqualified
plans.

F-16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

The assumptions for the discount rate, rate of compensation increase and
expected rate of return and the asset allocations related to the non-U.S. plan
are not materially different than for the U.S. plans. The U.S. plan's target
allocation is 70% equity securities and 30% debt securities. The target
allocation is based on the Company's desire to maximize total return considering
the long-term funding objectives of the pension plans but may change in the
future. With advice from investment managers, plan assets are diversified to
achieve a balance between risk and return. The Company's expected long-term rate
of return considers historical returns on plan assets as well as future
expectation given the target allocation and current economic conditions with
input from investment managers and actuaries.

As of November 30, the actual pension asset allocations were as follows:

F-17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

The expected pension benefit payments for the next ten fiscal years are as
follows:

The components of net periodic benefit cost for pensions are shown below.
Increases in the liability due to changes in plan benefits are recognized in the
net periodic benefit costs through a straight-line amortization over the average
remaining service period of employees expected to receive benefits.

The assumptions for the expected long-term rate of return on plan assets
were based on historical performance and adjusted to reflect the potential range
of returns for the current asset allocations. For fiscal 2005, the Company will
lower its long-term return on assets assumption to 8.00% and its discount rate
assumption to 5.50%, which will increase pension expense by approximately $220
and $600, respectively.

F-18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

The postretirement obligations represent a fixed dollar amount per retiree.
The Company has the right to modify or terminate these benefits. The
participants will assume substantially all future health care benefit cost
increases, and future increases in health care costs will not increase the
postretirement benefit obligation or cost to the Company. Therefore, the Company
has not assumed any annual rate of increase in the per capita cost of covered
health care benefits for future years. The prescription drug benefits provided
by this plan are assumed not to be actuarially equivalent to Medicare Part D;
therefore, the Company does not expect to receive a government subsidy under the
Medicare Prescription Drug, Improvement and Modernization Act of 2003. The
components of net periodic benefit cost for postretirement health care benefits
are shown below.

In November 2004, the Company notified active participants that it will
freeze participation in the postretirement healthcare plan to eligible retirees
effective January 1, 2007. As a result, unrecognized prior service costs of
$1,708 will be amortized over the average remaining years of service for active
plan participants, which will lower fiscal 2005 expense by approximately $340.

The Company also sponsors various defined contribution plans that provide
employees with an opportunity to accumulate funds for their retirement. The
Company matches the contributions of participating employees based on the
percentages specified in the respective plans. The Company recognized expense
related to these plans of $2,886, $1,471 and $1,460 in 2004, 2003 and 2002,
respectively.

J. INCOME TAXES

The provision for income taxes consisted of:

Income taxes paid, net of refunds, totaled $25,633, $22,607 and $17,678
during 2004, 2003 and 2002, respectively.

F-19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Earnings before income taxes and minority interests included the following
components:

The provision for income taxes resulted in effective tax rates that differ
from the statutory federal income tax rates. The reasons for these differences
are as follows:

The components of the net deferred tax liability as of November 30, 2004
and 2003 were as follows:

Amounts recognized in the Consolidated Balance Sheets include:

F-20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

In 2004 the Company reduced the valuation allowance by $1,225 related to
carryforward limitations on foreign tax credits. The reduction was due to
changes in tax law, as a result of the American Jobs Creation Act of 2004, and
current and anticipated future usage of the foreign tax credits. The 2004
valuation allowance was recorded to reflect the estimated amount of deferred tax
assets that may not be realized due to foreign net operating losses. The tax
benefit related to approximately $864 of foreign net operating loss
carryforwards that do not expire will reduce goodwill from acquired entities
when realized. The tax benefit related to approximately $2,939 of foreign net
operating loss carryforwards that expire between 2008 and 2014 will be
recognized when the benefits are realized or when is it determined that it is
more likely than not that such benefit will be realized. The Company expects to
realize the remaining deferred tax assets through the reversal of taxable
temporary differences and future earnings.

As of November 30, 2004, the Company has not provided taxes on unremitted
foreign earnings from certain foreign affiliates of approximately $13,878 that
are intended to be indefinitely reinvested in finance operations and expansion
outside the United States. If such earnings were distributed beyond the amount
for which taxes have been provided, foreign tax credits would substantially
offset any incremental U.S. tax liability. The Company is exploring a one time
repatriation of earnings from certain foreign affiliates as a result of the
American Jobs Creation Act of 2004, but has not made a decision regarding such
repatriation. The deduction is subject to a number of limitations and
uncertainty remains as to how to interpret numerous provisions in the American
Jobs Creation Act of 2004. As such, the Company is not yet in a position to
decide on whether, and to what extent, it might repatriate foreign earnings.

K. RELOCATION COSTS

On January 8, 2004, the Company announced that the corporate headquarters
would move to the Nashville, Tennessee area in 2004. Costs for this move, which
were a one-time expense incurred primarily during fiscal 2004, were
approximately $2,209 or $0.05 per diluted share and are included in selling and
administrative expenses. The Company has paid all significant relocation costs
during fiscal year 2004.

L. CONTINGENCIES

The Company is involved in legal actions arising in the normal course of
business. Additionally, the Company is party to various proceedings relating to
environmental issues. The U.S. Environmental Protection Agency (EPA) and/or
other responsible state agencies have designated the Company as a potentially
responsible party (PRP), along with other companies, in remedial activities for
the cleanup of waste sites under the federal Superfund statute.

Although it is not certain what future environmental claims, if any, may be
asserted, the Company currently believes that its potential liability for known
environmental matters does not exceed its present accrual of $50. However,
environmental and related remediation costs are difficult to quantify for a
number of reasons, including the number of parties involved, the difficulty in
determining the extent of the contamination, the length of time remediation may
require, the complexity of the environmental regulation and the continuing
advancement of remediation technology. Applicable federal law may impose joint
and several liability on each PRP for the cleanup.

It is the opinion of management, after consultation with legal counsel that
additional liabilities, if any, resulting from these legal or environmental
issues, are not expected to have a material adverse effect on the Company's
financial condition or consolidated results of operations.

In the event of a change in control of the Company, termination benefits
may be required for certain executive officers and other key employees.

F-21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

M. PREFERRED STOCK PURCHASE RIGHTS

In March 1996, the Board of Directors of CLARCOR adopted a Shareholder
Rights Plan to replace an existing plan that expired on April 25, 1996. Under
the terms of the Plan, each shareholder received rights to purchase shares of
CLARCOR Series B Junior Participating Preferred Stock. The rights become
exercisable only after the earlier to occur of (i) 10 business days after the
first public announcement that a person or group (other than a CLARCOR-related
entity) has become the beneficial owner of 15% or more of the outstanding shares
of CLARCOR Common Stock; or (ii) 10 business days (unless extended by the
CLARCOR Board in accordance with the Rights Agreement) after the commencement
of, or the intention to make, a tender or exchange offer, the consummation of
which would result in any person or group (other than a CLARCOR-related entity)
becoming such a 15% beneficial owner. Each right entitles the holder to buy
one-hundredth of a share of such preferred stock at an exercise price of $80
subject to certain adjustments.

Once the rights become exercisable, each right will entitle the holder,
other than the acquiring person or group, to purchase a number of CLARCOR common
shares at a 50% discount to the then-market price of CLARCOR Common Stock. In
addition, under certain circumstances, if the rights become exercisable, the
holder will be entitled to purchase the stock of the acquiring individual or
group at a 50% discount. The Board may also elect to redeem the rights at $.01
per right. The rights expire on April 25, 2006.

The authorized preferred stock includes 300,000 shares designated as Series
B Junior Participating Preferred Stock.

N. INCENTIVE PLAN

In 1994, the shareholders of CLARCOR adopted the 1994 Incentive Plan, which
allowed the Company to grant stock options, restricted stock and performance
awards to officers, directors and key employees. The 1994 Incentive Plan, as
amended on March 25, 2000, allowed grants and awards of up to 1.5% of the
outstanding common stock as of January 1 of each calendar year. In addition, the
Compensation Committee of the Company's Board of Directors could approve an
additional 1% of outstanding common stock to be awarded during any calendar
year.

On March 24, 2003, the shareholders of CLARCOR approved the 2004 Incentive
Plan, which replaced the 1994 Incentive Plan on its termination date of December
14, 2003. The 2004 Incentive Plan provides for similar types of awards and
grants as were permitted by the 1994 Incentive Plan of up to 1,500,000 shares.
After the close of fiscal year 2004, 303,472 shares were granted, including the
restricted stock units discussed hereafter.

The following is a description and a summary of key provisions related to
these Plans.

Stock Options

Under the 2004 Incentive Plan, nonqualified stock options may only be
granted at the fair market value at the date of grant. All outstanding stock
options have been granted at the fair market value on the date of grant. Options
granted to key employees vest 25% per year beginning at the end of the first
year; therefore, they become fully exercisable at the end of four years. Options
granted to non-employee directors vest immediately. All options expire ten years
from the date of grant unless otherwise terminated.

F-22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

The following table summarizes the activity under the nonqualified stock
option plans.

The following table summarizes information about the options at November
30, 2004.

The weighted average fair value per option at the date of grant for options
granted in 2004, 2003 and 2002 was $11.37, $7.80 and $7.87, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions by grant year. Adjustments for forfeitures are made as they occur.

Restricted Stock Awards

During 2004, 2003 and 2002, respectively, the Company granted 18,916,
22,645 and 25,436 restricted units of Company common stock with a fair value of
$45.59, $32.30 and $27.50 per share, the respective market price of the stock at
the date granted. The restricted share units require no payment from the
employee and compensation cost is recorded based on the market price on the
grant date and is recorded equally over the vesting period of four years. During
the vesting period, officers and key employees receive compensation equal to
dividends declared on common shares. Upon vesting, the employee may elect to
defer receipt of their shares. Subsequent to the end of fiscal year 2004, the
Company granted 16,072 restricted stock units in December 2004 at the
then-market price of $52.15. Compensation expense related to restricted stock
awards totaled $770, $569 and $426 in 2004, 2003 and 2002, respectively.

F-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Directors' Restricted Stock Compensation

The incentive plans provide for grants of shares of common stock to all
non-employee directors equal to a one-year annual retainer in lieu of cash. The
directors' rights to the shares vest immediately on the date of grant. In 2004,
2003 and 2002, respectively, 6,320, 7,176 and 8,120 shares of Company common
stock were issued under the plans. Compensation expense related to directors'
restricted stock totaled $260 for each year 2004, 2003 and 2002.

O. EARNINGS PER SHARE

The Company calculates basic earnings per share by dividing net earnings by
the weighted average number of shares outstanding. Diluted earnings per share
reflects the impact of outstanding stock options if exercised during the periods
presented using the treasury stock method. The following table provides a
reconciliation of the denominators utilized in the calculation of basic and
diluted earnings per share:

For fiscal years ended November 30, 2004, 2003 and 2002, respectively,
287,850, 7,773 and 55,458 stock options with a weighted average exercise price
of $45.59, $38.80 and $31.66 were not included in the computation of diluted
earnings per share as the exercise prices of the options were greater than the
average market price of the common shares during the respective periods.

F-24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

P. UNAUDITED QUARTERLY FINANCIAL DATA

The unaudited quarterly data for 2004 and 2003 were as follows:

Tax benefits arising from the recently enacted American Jobs Creation Act
of 2004 decreased income taxes $1,225 and increased diluted EPS by $0.05 during
the fourth quarter of 2004. During the fourth quarter of 2003, the Company
changed its method of accounting for inventory as described in Note C which
increased gross profit by $456, net earnings by $289 and diluted EPS by $0.01.

Q. SEGMENT INFORMATION

Based on the economic characteristics of the Company's business activities,
the nature of products, customers and markets served, and the performance
evaluation by management and the Company's Board of Directors, the Company has
identified three reportable segments: Engine/Mobile Filtration, Industrial/
Environmental Filtration and Packaging.

The Engine/Mobile Filtration segment manufactures and markets a complete
line of filters used in the filtration of oils, air, fuel, coolant, hydraulic
and transmission fluids in both domestic and international markets. The
Engine/Mobile Filtration segment provides filters for certain types of
transportation equipment including automobiles, heavy-duty and light trucks,
buses and locomotives, marine and mining equipment, industrial equipment and
heavy-duty construction and agricultural equipment. The products are sold to
aftermarket distributors, original equipment manufacturers and dealer networks,
private label accounts and directly to truck service centers and large national
accounts.

The Industrial/Environmental Filtration segment manufactures and markets a
complete line of filters, cartridges, dust collectors and filtration systems
used in the filtration of air and industrial fluid processes in both domestic
and international markets. The filters and filter systems are used in commercial
and industrial buildings, hospitals, manufacturing processes, pharmaceutical
processes, clean rooms, airports, shipyards, refineries, power generation plants
and residences. The products are sold to commercial and industrial distributors,
original equipment manufacturers and dealer networks, private label accounts,
retailers and directly to large national accounts.

F-25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

The Packaging segment manufactures and markets consumer and industrial
packaging products including custom-designed plastic and metal containers and
closures and lithographed metal sheets in both domestic and international
markets. The products are sold directly to consumer and industrial packaging
customers.

Net sales represent sales to unaffiliated customers. No single customer or
class of product accounted for 10% or more of the Company's consolidated 2004
sales. Intersegment sales are not material. Assets are those assets used in each
business segment. Corporate assets consist of cash and short-term cash
investments, deferred income taxes, headquarters facility and equipment, pension
assets and various other assets that are not specific to an operating segment.
Unallocated amounts include interest income and expense and other non-operating
income and expense items.

The segment data for the years ended November 30, 2004, 2003 and 2002 were
as follows:

F-26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) -- (CONTINUED)

Financial data relating to the geographic areas in which the Company
operates are shown for the years ended November 30, 2004, 2003 and 2002. Net
sales by geographic area are based on sales to final customers within that
region.

F-27

CLARCOR INC.

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED NOVEMBER 30, 2004, 2003 AND 2002
(DOLLARS IN THOUSANDS)

NOTES:

(A) Due to business acquisitions and reclassifications.

(B) Bad debts written off during year, net of recoveries.

S-1