The information presented in this discussion should be read in conjunction with other financial information provided in the Consolidated Financial Statements and Notes thereto. The analysis of operating results focuses on the Company's three reportable business segments: Engine/Mobile Filtration, Industrial/Environmental Filtration and Packaging. Except as otherwise set forth herein, references to particular years refer to the applicable fiscal year of the Company.

EXECUTIVE SUMMARY

                         Management Discussion Snapshot
                  (Dollars in millions except per share data)


                                                                             Year to                             Year to
                                                                             Year %                              Year %
Years Ended November 30                     2008              2007           Change               2006           Change

Net Sales                               $    1,059.6      $      921.2           15.0 %       $      904.3            1.9 %
Operating Profit                               151.9             129.8           17.0 %              126.3            2.8 %
Operating Margin                                14.3 %            14.1 %          0.2 pts.            14.0 %          0.1 pts.
Other Income/(Expense)                          (6.6 )             0.7            N/A                  0.6            N/A
Provision for Income Taxes                      49.3              39.7           24.3 %               43.8           -9.4 %
Effective Tax Rate                              33.9 %            30.4 %          3.5 pts.            34.5 %         -4.1 pts.
Net Earnings                                    95.7              90.7            5.5 %               82.7            9.6 %
Net Earnings Margin                              9.0 %             9.8 %         -0.8 pts.             9.1 %          0.7 pts.
Diluted Earnings per Share              $       1.86      $       1.78            4.5 %       $       1.59           11.9 %
Average Diluted Shares Outstanding        51,410,436        50,885,314            1.0 %         52,176,515           -2.5 %

Fiscal 2008 was the 16th consecutive year of annual sales and earnings growth for CLARCOR. Fiscal 2008 sales, operating profit and net earnings increased from fiscal 2007 by 15.0%, 17.0% and 5.5%, respectively. Operating margins improved slightly to 14.3% in 2008. The Company's diversity of filtration businesses and the breadth of its product lines and customer base offset fluctuations during 2008 in product demand and material costs in many of its markets primarily caused by domestic and global economic factors. For most of 2008, demand was strong for filters used in oil and natural gas exploration and transmission, for filters used on aircraft, agricultural, mining and construction machinery, for aviation fuel filtration systems and filters and for dust collector systems and replacement cartridges. Demand for filters sold to the over-the-road truck market, railroad market and automobile manufacturers and automotive parts suppliers was lower in 2008 compared to 2007. Overseas, and mostly in Asia, growth was solid in 2008 overall; however, the pace began to slow towards the end of the year compared to 2007 and earlier in 2008. Although the Company experienced significant cost increases in metals, petroleum-based products, energy, natural gas, resins, adhesives, packaging materials and filter media during the first three quarters of fiscal 2008, it was able to implement price increases and cost reduction initiatives to offset most cost increases and slightly improve its operating margin over 2007. During the fourth quarter of fiscal 2008, prices declined for these commodities but the impact to the Company input costs was not significant due to outstanding purchase orders. The Company expects to realize cost reductions for purchases of these raw materials beginning in early 2009.

On December 3, 2007, the Company acquired Perry Equipment Corporation ("Peco"), a privately-owned manufacturer of engineered filtration products and technologies used in a wide array of industries, including oil and natural gas, refining, power generation, petrochemical, food and beverage, electronics, polymers, pulp and paper. Peco is based in Mineral Wells, Texas with operations in Mexico, Canada, the United Kingdom, Italy, Romania, Malaysia and China. Peco was merged with the Company's Facet operations with the combined headquarters based in Mineral Wells. Peco was acquired to expand the Company's product offerings, technology, filtration solutions

and customer base in the oil and natural gas industry. Its results are included as part of the Company's Industrial/Environmental Filtration Segment since the date of its acquisition. The purchase price was approximately $145.8 million including acquisition costs and excluding $11.4 million of cash acquired. The Company issued 2,137,797 shares of CLARCOR common stock with a value of approximately $72 million and paid the remaining purchase price with cash on hand of $5.3 million and approximately $80 million of cash borrowed under the Company's multi-currency revolving credit agreement. The Peco acquisition added approximately $116 million of sales and $15 million of operating profit in 2008.

Effective May 1, 2008, the Company acquired a 30% share in BioProcess H2O LLC ("BPT"), a Rhode Island based manufacturer of industrial waste water and water reuse filtration systems, for $4 million, payable $2 million in cash with the remaining $2 million to be paid by December 31, 2009. Under the terms of the agreement with BPT, the Company has the right, but not the obligation, to acquire additional ownership shares and eventually complete ownership of the company over several years at a price based on, among other factors, BPT's operating income. The investment, with a carrying value of approximately $4 million, is being accounted for under the equity method. The Company's share of BPT's earnings since the acquisition date is immaterial.

The following are other significant items that occurred during the periods presented:

• In fiscal 2008, the Company recognized a gain on insurance proceeds of approximately $1.8 million, or $0.03 per diluted share, due to weather-related property damage at four of its facilities.

• Other expense in 2008 included a $2.0 million charge related to a mark-to-market adjustment on a two-year interest rate swap which will reverse in total over the next thirteen months, reducing interest expense over that period. The actual impact in any given quarter during 2009 is subject to short-term interest rates. In addition, the Company incurred approximately $3.8 million more in interest expense in 2008 compared to the prior year as a result of debt incurred to purchase Peco and to repurchase Company stock early in fiscal 2008.

• The Company began a restructuring program in 2006 for its heating, ventilating and air conditioning (HVAC) filter operations primarily to rationalize and relocate certain HVAC filter manufacturing plants to improve operating efficiencies and reduce manufacturing and transportation costs. As a part of this plan, the Company discontinued production at facilities in Iowa and North Carolina in 2008 and incurred approximately $1.2 million in costs, including a pension plan curtailment charge. The Company also incurred $0.6 million of additional pension expense related to remeasurement of its pension plan assets and obligations at the time of curtailment.

• In fiscal 2007, the Company recognized one-time tax benefits of $4.5 million, or $0.09 per diluted share, of which $4 million was recorded in the third quarter of 2007 and was related to the completion of various income tax audits and the finalization of certain income tax liabilities. The other $0.5 million was recorded in the first quarter of 2007 and related to the passage of the Research and Experimentation Tax Credit extension.

• During fiscal 2006, the Company recorded a $2.7 million charge to operating profit related to a customer's refusal to pay for products it had ordered and used. In addition, the Company terminated a $10 million annual sales contract with this customer. The Company settled the resulting lawsuit during 2007. The specific terms of the settlement are confidential.

Net sales in fiscal 2008 were $1,059.6 million, a 15.0% increase from $921.2 million in fiscal 2007. The 2008 sales increase was the 22nd consecutive year of sales growth for the Company. Acquisitions during 2008 and 2007 contributed an incremental $118 million to sales in 2008. Fluctuations in foreign currencies increased sales in 2008 by less than 1%, or $9.6 million. In 2007, fluctuations in foreign currencies increased sales by approximately 1.5%, or $13.8 million.

Comparative net sales information related to CLARCOR's operating segments is shown in the following tables.

                                                                        2008 vs. 2007
                                                                            Change
     NET SALES (Dollars in millions)         2008        % Total         $          %

     Engine/Mobile Filtration              $   439.0         41.4 %   $   9.0        2.1 %
     Industrial/Environmental Filtration       543.1         51.3 %     128.6       31.0 %
     Packaging                                  77.5          7.3 %       0.8        1.1 %

                                           $ 1,059.6        100.0 %   $ 138.4       15.0 %

                                                                       2007 vs. 2006
                                                                           Change
      NET SALES (Dollars in millions)        2007       % Total         $          %

      Engine/Mobile Filtration              $ 430.0         46.7 %   $  30.9        7.8 %
      Industrial/Environmental Filtration     414.5         45.0 %      (5.9 )     -1.4 %
      Packaging                                76.7          8.3 %      (8.1 )     -9.6 %

                                            $ 921.2        100.0 %   $  16.9        1.9 %

The Engine/Mobile Filtration Segment's sales increased 2.1% in 2008 from 2007 and 7.8% in 2007 from 2006. Fluctuations in foreign currencies added approximately $3 million to sales for this segment in 2008 compared to 2007. Approximately $3 million of the 2008 increase and $6 million of the 2007 increase was due to the 2007 acquisition of an 80% ownership share in Sinfa SA (Sinfa), a manufacturer of automotive and heavy-duty engine filters based in Casablanca, Morocco. Heavy-duty engine filter sales through independent distributors, in both domestic and international aftermarkets, original equipment manufacturer dealers, truck fleets and national accounts were about even with 2007's sales. Sales to domestic trucking companies were slow in North America during 2008 and began softening in the rest of the world towards the end of fiscal 2008. Filter markets for off-road applications for construction, mining and agricultural equipment were stronger in 2007 and 2006 than in 2008 as economic conditions in these markets slowed during the latter part of 2008. Heavy-duty engine filter sales grew in Mexico, South Africa and China by double digits in 2008 although growth slowed towards the end of 2008 compared to earlier in the year. Heavy-duty engine filter sales in Europe were relatively unchanged for fiscal year 2008 overall compared to fiscal 2007. Railroad filter sales declined slightly in 2008 from 2007 levels. The Company expects the commercial rail industry to remain soft through most of 2009 as economic pressures continue in the coal, housing and automotive sectors, which are important to the railroad industry. Construction activity is also expected to remain slow in 2009. The Company anticipates over-the-road trucking will rebound slightly towards the end of 2009 as lower fuel prices reduce the costs to ship products. However, the Company expects that 2009 will be an exceptionally difficult year for the U.S. and world economies and that in the first fiscal quarter of 2009, the Company will report lower sales and operating profit than in the first quarter of 2008 in this segment.

The segment implemented price increases in 2008 for its products in response to high energy costs and rising raw material costs, particularly with respect to various grades and types of steel, filter media and oil-based raw materials. The segment will continue to evaluate further price changes in response to changing commodity costs.

Over-the-road truck mileage and railroad traffic began softening in the United States in 2007; however, international Engine/Mobile Filtration operations, led by sales increases of over 15% in China, Australia and Europe, recorded higher sales in 2007 than 2006. New product introductions and the breadth of the segment's filter product line also contributed to sales growth in 2007 from 2006. Approximately $4.4 million of the sales increase was due to the weakening of the U.S. dollar during 2007 compared to 2006. There was no material impact from currency fluctuations in 2006. Price increases averaged 1% to 2% in 2006. There were no significant price increases in 2007.

The Company's Industrial/Environmental Filtration Segment reported increased sales of $128.6 million or 31.0% in 2008 from 2007 and decreased sales of $5.9 million or 1.4% in 2007 from 2006. The segment implemented several price increases during 2008 to offset rising commodity costs. Approximately $116 million

of the 2008 increase in sales was due to the Peco acquisition. Peco's sales were higher in 2008 than its previous fiscal year's sales. The Company experienced strong global demand throughout 2008 for Peco's filtration products and systems, which are used primarily in the natural gas industry. However, demand in 2009 remains uncertain. The significant reduction in the cost of oil and natural gas will affect drilling programs and the building of transmission facilities and pipelines over the long-term although the impact is expected to be very uneven across geographies. The Company expects less money will be spent on building new facilities if oil and natural gas prices stay at current levels. The Company believes the decline in oil and natural gas prices will eventually result, however, in an increase in usage which would benefit sales of aftermarket filters. The Company's strategy is to focus heavily on the sale of aftermarket products.

Demand for the segment's dust collector cartridges, which incorporate Proturatm nanofiber technology, continues to grow. Environmental filtration systems and filter sales for aerospace, polymer and fiber, aviation fuel and specialty filter applications also grew by double digits in 2008 compared with 2007 although the Company experienced slower growth in its fourth quarter than earlier in 2008. If capital spending due to economic conditions throughout the world continues to be slow, the Company expects sales of dust collector systems and other environmental filtration systems to decline in 2009. The Company also expects sales of resin and fiber filters to be slow for 2009.

HVAC filter sales, especially those used in the automotive manufacturing and residential home-building industries, continued to be slow during 2008 compared with 2007. Lower HVAC filter sales partially offset the growth in other product lines within the segment. The Company does not expect to see any improvement in HVAC filter sales until the economy begins to recover. Sales to automobile manufacturers and automotive parts suppliers were less than 4% of the Company's total sales in 2008. Therefore, the impact of continued weak sales to this industry is not significant to CLARCOR's total sales. The weakening of the U.S. dollar during 2008 compared to 2007 added approximately $6 million to sales in 2008.

Most of the segment's sales decrease in 2007 was due to lower sales volume at the Company's environmental air filter manufacturing operations. Sales at the Company's HVAC filter manufacturing operations were 13% lower in 2007 than in 2006. This was caused by a number of factors including the elimination of certain low margin customers and delays in deliveries to customers due to transitional issues at the Company's HVAC plants arising from its HVAC filter restructuring program. As part of the HVAC filter restructuring program, the Company is regionalizing its manufacturing facilities to serve designated areas of the United States with a more complete product line at each facility. This requires moving equipment between facilities and adding new manufacturing plants, such as the plant in Pittston, Pennsylvania which began production late in the second quarter of 2007. As a result of this activity, the HVAC filter plants were sometimes unable to ship customer orders and sales suffered during 2007. The Company believes it has resolved these delivery problems resulting in improved service levels during the fourth quarter of fiscal 2007 and throughout fiscal 2008.

Excluding the results of the HVAC filter manufacturing operations, the Company's other Industrial/Environmental filtration operations improved sales by approximately 6% in 2007 compared to 2006. Sales growth occurred, both domestically and internationally, in most product lines including process liquid filters, systems and filter cartridges for the aviation fuel and defense sectors, filters for aerospace applications, specialty filtration, pollution control systems, sand control filters used in off-shore oil and gas drilling, filters for plastic and polymer fiber and resin applications and sales to the Company's Total Filtration Program customers. Sales of environmental filtration equipment were also stronger in 2007 than in 2006. In 2007, the Company introduced dust collector cartridges containing Proturatm nanofiber media, which helped grow sales for this product line in 2007 compared to 2006. A first quarter 2007 acquisition contributed approximately $1 million of sales to 2007. The weakening of the U.S. dollar during 2007 compared to 2006 added approximately $9.4 million to sales for 2007. Changes in currency translation rates did not significantly impact sales growth in 2006.

In addition to the lower HVAC filter sales volumes in 2007 discussed above, this segment was impacted by the 2006 loss of a $10 million annual sales contract with a customer who had refused to pay amounts owed to the Company. The Company terminated this contract during the second quarter of 2006. Approximately $4.8 million of sales were reported in 2006 related to this contract. In the fourth quarter of 2007, the Company settled its litigation against this customer.

The Packaging Segment's 2008 sales of $77.5 million were slightly higher than 2007's sales of $76.7 million. Sales did not significantly increase due to continued slow growth in customers' sales of their products and delayed new product introductions by the segment's customers, particularly in the confectionary market. In addition, sales of decorated flat sheet metal, particularly for the film industry, were slow. Sales in 2007 decreased $8.1 million or 9.6% from 2006. The segment's 2006 sales were unusually strong at $84.8 million due to the introduction of a wide array of new packaging designs, primarily in partnership with major consumer product companies, and price increases. Customer demand for fabricated metal packages, combination metal/plastic packages and plastic packaging was also stronger in 2006.

Operating Profit

Operating profit for 2008 increased 17.0% to $151.9 million from the 2007 level of $129.8 million. Although each of the Company's segments experienced rising raw materials costs during the year, particularly in steel, resins, adhesives, filter media and packaging materials, they were able to offset most of the cost increases through price adjustments and production improvements. In addition, the acquisition of Peco contributed $15 million to operating profit in 2008. In the second quarter of fiscal 2008, four of the Company's facilities in three states were damaged in weather-related events. The Company recognized a net gain, resulting from the excess of insurance proceeds received over the net book value of the property, of approximately $1.8 million (net of the $0.7 million deductible paid by the Company) as a reduction of cost of sales. The Company incurred approximately $1.2 million in costs, including a pension plan curtailment cost, related to closing HVAC filter manufacturing plants in Iowa and North Carolina during 2008. The Company also incurred $0.6 million of additional pension expense related to remeasurement of its pension plan assets and obligations at the time of curtailment. Despite these charges, additional bad debt expense and rising raw materials costs, the Company achieved higher operating profit and operating margin for 2008. Operating margin increased slightly to 14.3% in 2008 compared to 14.1% in 2007 and 14.0% in 2006. Although costs for freight and purchased materials, including metal products, filter media and petroleum-based products, have increased significantly over the past two years, price increases to customers have been implemented to help offset the cost increases. During the latter part of 2008, commodity costs related to oil and gas started to decline. This is expected to have an impact on the Company's cost structure for 2009.

The 2.8% increase in operating profit for 2007 to $129.8 million was primarily due to higher Engine/Mobile Filtration Segment sales, increased specialty and process liquid filtration sales and Company-wide cost reduction efforts that offset losses in the environmental air filter operations. The cost savings during 2007 related to the HVAC restructuring were not significant, although the Company did realize anticipated savings in fiscal 2007 related to a European manufacturing restructuring.

A weakened U.S. dollar in 2008 and 2007 added approximately $1.4 million and $1.5 million, respectively, to operating profit. Foreign currency fluctuations did not have a material impact on consolidated operating profit in 2006. Comparative operating profit information related to the Company's business segments is as follows.

                                                                         2008 vs. 2007
                                                                             Change
     OPERATING PROFIT (Dollars in millions)    2008       % Total         $          %

     Engine/Mobile Filtration                 $  99.4         65.4 %   $   0.6        0.6 %
     Industrial/Environmental Filtration         45.8         30.2 %      20.3       80.1 %
     Packaging                                    6.7          4.4 %       1.2       20.6 %

                                              $ 151.9        100.0 %   $  22.1       17.0 %

                                                                         2007 vs. 2006
                                                                             Change
     OPERATING PROFIT (Dollars in millions)    2007       % Total        $           %

     Engine/Mobile Filtration                 $  98.8         76.1 %   $  6.2         6.7 %
     Industrial/Environmental Filtration         25.5         19.6 %        -           -
     Packaging                                    5.5          4.3 %     (2.7 )     -32.6 %

                                              $ 129.8        100.0 %   $  3.5         2.8 %

        OPERATING MARGIN AS A PERCENT OF NET SALES    2008       2007       2006

        Engine/Mobile Filtration                       22.6 %     23.0 %     23.2 %
        Industrial/Environmental Filtration             8.4 %      6.1 %      6.1 %
        Packaging                                       8.6 %      7.2 %      9.7 %
        Total                                          14.3 %     14.1 %     14.0 %

The Engine/Mobile Filtration Segment reported operating profit of $99.4 million, which was relatively unchanged from 2007 profit of $98.8 million. Operating profit for 2008 was impacted by a charge for an insurance deductible recorded in the second quarter of 2008 due to a weather-related incident, increased legal costs and expense from the expiration of certain sales tax credits offset by lower employee health care, incentive compensation and benefits. The segment's operating margin of 22.6% remains strong, although it declined slightly from 23.0% for 2007 due to a decline in domestic sales growth overall and higher international sales growth where margins are somewhat lower than in the United States. For fiscal 2009, the Company expects overall operating margin for this segment to decline slightly. The weakening of the U.S. dollar for 2008 compared to 2007 added less than $1 million to operating profit for 2008. Operating profit for 2007 improved 6.7% from 2006 primarily from sales growth and continued cost reduction efforts partially offset by a litigation settlement. The impact of foreign currency fluctuations to this segment's operating profit for 2008 and 2007 was not material.

The Industrial/Environmental Filtration Segment reported operating profit of $45.8 million in 2008, an 80.1% increase over 2007 profit of $25.5 million. Operating margins improved from 6.1% in 2007 to 8.4% in 2008, a 2.3 percentage point increase. The Peco acquisition accounted for approximately $15 million of the increase in operating profit. This segment recognized a gain, resulting from the excess of insurance proceeds received over the net book value of the property, of approximately $2.0 million (net of the $0.5 million deductible paid by the Company) as a reduction of cost of sales related to a tornado and hail storm that damaged three of the Company's facilities in two states. The Company has completed most of the repairs associated with the hail damage. The remaining increase in operating profit was due to higher sales of plastic and polymer fiber and resin filters, environmental equipment and replacement cartridge sales and filters used in aviation fuel, aerospace and oil and gas applications. Operating profit in 2008 also included the $1.2 million of costs associated with closing two HVAC filter manufacturing plants.

The HVAC restructuring program, which began in 2006, is continuing with improved labor and production efficiencies at its HVAC operating facilities. The program's goal is based on achieving significantly improved manufacturing productivity and a lower product cost structure driven by the new equipment which will be installed at every one of the Company's HVAC filter manufacturing locations. The restructuring plan includes relocating several HVAC filter manufacturing facilities to more closely align their shipments to their customers' locations. This will reduce its inter-plant freight costs and transform its HVAC filter manufacturing plants into multi-product manufacturing facilities to improve product availability and on-time shipments to customers. The Company closed two plants during 2008 and one plant in 2007. It also opened a new plant in Pittston, Pennsylvania in 2007. In early fiscal 2009, the Company began consolidating four Louisville, Kentucky area HVAC related facilities into one location in Jeffersonville, Indiana. This is expected to be the last major plant consolidation effort in the restructuring plan.

Although the Company initially anticipated the HVAC restructuring program would result in an improvement in operating profit of $14 million annually by the end . . .