<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 2-23666
CASCADE CORPORATION
AN OREGON CORPORATION
I.R.S. Employer Identification Number 93-0136592
2201 N.E. 201st Avenue
Fairview, Oregon 97024
(503) 669-6300
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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 for 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: common shares outstanding
11,831,704, net of treasury shares.
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
PART 1
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
October 31, January 31,
1997 1997
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,083 $ 15,642
Accounts receivable, less allowance
for doubtful accounts of $698 and $227 66,808 43,469
Inventories, at average cost
which is lower than market:
Finished goods and components 43,716 26,701
Goods in process 2,426 4,634
Raw materials 9,221 4,667
--------- ---------
55,363 36,002
Deferred income taxes 118 1,496
Insurance settlement receivable 3,000
Prepaid expenses 2,113 2,020
--------- ---------
Total current assets 139,485 98,629
Property, plant and equipment, at cost less
accumulated depreciation 108,092 81,393
Deferred income taxes 2,162 1,139
Goodwill and other assets 105,762 18,332
--------- ---------
Total assets $ 355,501 $ 199,493
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 113,001 $ 29,846
Current portion of long-term debt 4,341 2,264
Accounts payable 28,124 21,373
Accrued payroll and payroll taxes 6,846 4,222
Other accrued expenses 12,806 8,174
--------- ---------
Total current liabilities 165,118 65,879
Long-term debt 36,172 12,810
Deferred income taxes 3,385 5,151
Accrued environmental expenditures 13,112 8,913
Other liabilities 3,960 3,033
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Total liabilities 221,747 95,786
--------- ---------
--------- ---------
Mandatorily redeemable convertible preferred
stock, no par value, 330,000 shares issued 4,950 4,950
--------- ---------
--------- ---------
Shareholders' equity:
Exchangeable preferred stock, no par value,
1,100,000 and 0 shares authorized, issued and
outstanding at October 31, 1997 and
January 31, 1997 15,640
Common stock, $.50 par value, 20,000,000 shares
authorized, 11,988,208 and 12,048,208 shares
issued 5,994 6,024
Additional paid-in capital 2,246
Retained earnings 109,416 94,561
Cumulative foreign currency
translation adjustments (4,211) (1,142)
Treasury stock, at cost
(156,504 and 381,504 shares) (281) (686)
--------- ---------
Total shareholders' equity 128,804 98,757
--------- ---------
Total liabilities and
shareholders' equity $ 355,501 $ 199,493
--------- ---------
--------- ---------
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(unaudited - in thousands, except share and per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 31 October 31
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 97,525 $ 54,870 $ 272,590 $ 166,685
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold,
excluding depreciation 68,295 35,710 188,980 108,820
Depreciation 5,715 2,440 15,740 7,715
Selling and administrative
expenses 16,415 9,920 47,125 29,685
Environmental insurance
settlement, net (4,920) (14,170)
----------- ----------- ----------- -----------
85,505 48,070 237,675 146,220
----------- ----------- ----------- -----------
Operating income 12,020 6,800 34,915 20,465
Interest expense 2,650 210 7,125 620
Interest income (330) (180) (580) (650)
Other expense (income), net (170) 330 (550) 945
----------- ----------- ----------- -----------
Income before taxes 9,870 6,440 28,920 19,550
Income taxes 3,390 2,075 9,835 6,460
----------- ----------- ----------- -----------
Net income 6,480 4,365 19,085 13,090
Retained earnings, beginning
of period 104,491 90,388 94,561 85,083
Stock repurchase (1,317) (2,607)
Cash dividends (1,555) (1,051) (4,230) (3,181)
----------- ----------- ----------- -----------
Retained earnings, end
of period $ 109,416 $ 92,385 $ 109,416 $ 92,385
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share $ 0.49 $ 0.37 $ 1.46 $ 1.11
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Dividends per share $ 0.10 $ 0.09 $ 0.30 $ 0.27
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average shares
outstanding 13,261,704 11,744,856 13,089,873 11,818,164
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited - in thousands) Nine months ended
October 31
---------------------
1997 1996
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Cash flows from operating activities:
Net income $ 19,085 $ 13,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,740 7,715
Deferred income taxes (2,933) (19)
Changes in operating assets and liabilities:
Accounts receivable (5,781) (234)
Inventories (4,315) (1,298)
Insurance settlement receivable (13,067)
Prepaid expenses 321 (455)
Accounts payable and accrued expenses (2,392) (7,195)
Accrued environmental expenditures 6,187
Other liabilities (1,627) 70
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Net cash provided by operating activities 11,218 11,674
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Cash flows from investing activities:
Acquisition of property, plant and equipment (13,302) (12,074)
Business acquisitions (70,741)
Other assets 102 (573)
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Net cash used in investing activities (83,941) (12,647)
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Cash flows from financing activities:
Long-term debt, including current portion (6,724) (1,378)
Notes payable to banks 79,544 20
Stock repurchase (1,035) (3,286)
Cash dividends (4,230) (3,181)
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Net cash provided by (used in) financing
activities 67,555 (7,825)
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Effect of exchange rate changes 1,609 258
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Decrease in cash and cash equivalents (3,559) (8,540)
Cash and cash equivalents at beginning of year 15,642 23,326
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Cash and cash equivalents at end of period $ 12,083 $ 14,786
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 5,685 $ 574
Income taxes $ 7,724 $ 6,376
The accompanying notes to consolidated financial statements are an integral part
of this statement.
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACQUISITIONS
The consolidated financial statements for the nine months ended October 31, 1997
reflect the acquisition of Kenhar Corporation (Kenhar) and Hyco-Cascade Pty.
Ltd. ( Hyco) by the Company. The aggregate purchase price for the Kenhar
acquisition was approximately $71.9 million and includes $55.9 million in
borrowings and approximately $15.6 million in preference shares exchangeable
share for share into Cascade Corporation common stock. The aggregate Hyco
acquisition cost was approximately $12.6 million which consisted of $1.2
million, $3.6 million and $7.8 million in cash, stock and debt. As part of the
Hyco acquisition agreement, if certain of Hyco's sales reach specified targets
over each of the next two years additional consideration totalling $1.5 million
will be paid.
The borrowings used in the acquisitions were funded using a short-term line of
credit. Subsequent to quarter end the Company issued long-term notes to
refinance this debt. See Note 4.
NOTE 2 - PRO FORMA INFORMATION
In accordance with APB 16, the following unaudited pro forma information is
provided. The total revenues include the consolidated revenues of the Company
as reported and the net revenues of the acquired business as if they had been
acquired as of the beginning of the period. The acquired businesses include
Kenhar, Hyco, Industrial Tire Limited, White Systems International Pty. Ltd. and
EML Industry AB. The revenues have not been adjusted to consider any benefit
that may have occurred from the combination of the operations. The pro forma
net income and net income per share have been adjusted to include the additional
costs of depreciation, goodwill amortization and interest expense based on the
actual purchase price and related borrowings. Expenses have not been reduced to
reflect any operational efficiencies that may have resulted from the combination
of the entities. The unaudited pro forma information is not necessarily
indicative of what actual results would have been had the acquisitions been
completed by the Company at the beginning of the periods.
NINE MONTHS ENDED OCTOBER 31
1997 1996
(Dollars in thousands except per share)
UNAUDITED
Total Revenue $ 280,269 $ 270,391
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Net Income $ 19,228 $ 10,900
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Net income per share $ 1.45 $ .81
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NOTE 3 - ENVIRONMENTAL INSURANCE SETTLEMENT
Earnings for the three months ended October 31, 1997 include the effect of a
$14,000,000 settlement of claims against four insurance companies in connection
with environmental matters ($3,245,000 or $.25 per share after taxes, adjusted
for certain litigation expenses and after providing for certain future
environmental expenses). The $14,000,000 is due in three installments which
extend into the year 1999. Earnings for the nine months ended October 31, 1997
also include the effect of a $9,750,000 settlement of claims in connection with
environmental matters ($6,105,000 after taxes adjusted for accrued expenses
related to litigation).
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - SUBSEQUENT EVENT
Subsequent to October 31, 1997, the Company and it subsidiaries issued $25
million and $50 million in Series A Notes and Series B Senior Notes
(collectively referred to as "the Notes"). The proceeds received from the sale
of the Notes were used to repay existing debt. Among other restrictions, the
debt agreements contain financial covenants relating to specified levels of
indebtedness and net worth. Principal payments are due annually beginning in
2002 through 2007. Interest is paid semi-annually at 6.92%.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended October 31, 1997 totaled
$97,525,000, an increase of 77.7% compared to sales of $54,870,000 recorded
in the third quarter of 1996. Net income for the third quarter of 1997 was
$6,480,000 ($.49 per share) or 48.5% higher than net income of $4,365,000
($.37 per share) for the corresponding 1996 period. Earnings for the quarter
include the effect of a $14,000,000 settlement of claims against four
insurers in connection with environmental matters ($3,245,000 or $.25 per
share after taxes, adjusted for certain litigation expenses and after
providing for certain future environmental expenses). Expressed as a return
on sales, net income for the third three-month period of 1997 was 3.3% before
the insurance settlement. Trial with respect to other insurers concluded
during the quarter with a favorable verdict. Final court rulings are
pending. The quarter results were also affected by consolidation of several
acquisitions completed earlier in 1997.
Consolidated net sales for the first nine months of 1997 totaled
$272,590,000, an increase of 63.5% compared to sales of $166,685,000 recorded
in the first three quarters of 1996. Net income for the first nine months of
1997, including current and previously announced environmental insurance
settlements, was $19,085,000 ($1.46 per share) or 45.8% higher than net
income of $13,090,000 ($1.11 per share) for the corresponding 1996 period.
The lift truck industry remains very strong in our major markets. North
American factory orders for new trucks continue to outpace shipments, and the
resulting original equipment manufacturer (OEM) backlogs suggest that demand
for attachments, forks and tires will remain high throughout 1998. While
European OEM numbers are not as dramatic, they continue to show solid
improvement over 1996, and industry analysts forecast continued modest growth
into 1999.
In Asian markets, major currency movements have occurred with respect to the
U.S. Dollar and business conditions are uncertain. The Company's exposure in
these markets is limited. Over the long-term, Asian markets will provide
significant growth for the full range of Cascade products, and we intend to
continue to serve this important region of the world.
All of the Company's operations showed operating profit improvement in the
third quarter, with the exception of our Australian subsidiary, Hyco-Cascade.
Steps were being taken to return Hyco-Cascade to profitability. Those steps
included a substantial reduction in personnel and expenses, and as a result,
Hyco-Cascade reported a profitable October, after significant losses in
August and September. Incoming orders and factory operations continue to
improve in Australia and we remain confident that Hyco-Cascade will be
profitable in 1998.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1997, the Company generated $11,218,000 in
cash flows from operating activities. These cash flows were primarily
provided by net income and include the results of Kenhar Corporation and
Hyco-Cascade subsequent to their acquisition in the first quarter and the
receipt of an environmental insurance settlement of $9,750,000 in the second
quarter; offset by recognition of the third quarter insurance settlement
which will be collected in three subsequent installments. Cash used by
investing activities through October 31, 1997 totaled $83,941,000 and
includes $70,741,000 used to complete the Company's fiscal 1998 acquisitions.
Year to date cash provided by financing activities was primarily generated
from short-term bank borrowings (used to pay for the current year
acquisitions) and totaled $67,555,000.
In summary, cash on hand, along with $63,170,000 drawn on available lines of
credit, issuance of exchangeable preferred stock valued at $15,640,000 and
issuance of Cascade common shares valued at $3,365,000 was used to acquire
all of the outstanding stock of Kenhar Corporation and Hyco-Cascade Pty. Ltd.
during the first quarter of 1997.
As of October 31, 1997, the Company and its subsidiaries had lines of credit
available totaling $141,582,000 ($28,581,000 of which was unused at October
31, 1997).
Over the preceding five years, expenditures for new facilities, machinery,
equipment and tooling have totaled approximately $47,000,000. Capital
expenditures of $15,347,000 have been recorded during the first nine months
of this fiscal year. This is higher than the $12,074,000 recorded during the
corresponding period in 1996. Planned expenditures for 1997 total
$18,500,000. During the quarter a major expansion and remodel of the Portland
offices was completed. This and other capital expenditures are directed at
increased productivity, quality improvements and new product introductions.
The Company used cash generated from operations and existing credit
facilities to fund these expenditures. Future capital expenditures will come
from similar sources.
In early November, the Company purchased the manufacturing assets of North
Carolina Hydraulics Manufacturing Company of Beulaville, North Carolina for
$3,243,000. NC Hydraulics is a well-established, quality manufacturer of
hydraulic cylinders supplying the mobile materials handling industry and we
are pleased to welcome its employees to our team. This purchase is the first
step in executing our long-standing plan to duplicate our European success in
the hydraulic cylinder business here in North America.
The Company's total long and short-term debt to equity ratio was 1.19 to 1.00
and working capital was a negative $25,633,000. Included in working capital
are borrowings under short-term credit lines used for temporary financing of
the acquisitions completed during the past quarters. Subsequent to quarter
end, the Company placed $75,000,000 principal amount Senior Unsecured Notes
to institutional investors. This private placement, with a very favorable
interest coupon of 6.92% fixed for ten years, is an important part of our
planned refinancing of short-term debt owed under the company's revolving
credit facility. The proceeds were used to retire existing borrowings. The
Company's available cash and credit facilities plus cash flows generated from
operating activities are more than sufficient to meet its short-term cash
requirements.
During the third quarter the U.S. dollar weakened slightly against the major
foreign currencies affecting our financial consolidations. However, for the
nine months ended October 31, 1997 the U.S. dollar strengthened against the
Dutch guilder and the Canadian dollar. As a result, the adjustment for currency
translation in our financial statements reflects a credit to shareholders'
equity of $471,000 ($.04 per share) for the current quarter and a charge of
$3,069,000 ($.23 per share) for the nine months ended October 31, 1997.
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
PART II
ITEM 1. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries are involved in any
material pending legal proceedings other than enviromental litigation
or litigation incidental to the regular course of business. The
company and its subsidiaries are adequately insured against product
liability, personal injury and property damage claims which may arise
occasionally.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
None
<PAGE>
CASCADE CORPORATION AND SUBSIDIARY COMPANIES
SIGNATURES
The enclosed financial statements have not been certified by independent
accountants. However, to the best of my knowledge and belief these financial
statements have been prepared in conformity with generally accepted accounting
principles and on a basis substantially consistent with audited financial
statements included in the annual report filed with the Commission for the
preceding fiscal year.
The Company believes that all adjustments, consisting of normal recurring
adjustments, necessary for a fair statement of the results of operations, have
been included.
Pursuant to the requirements 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.
CASCADE CORPORATION
12/12/97 /s/ James P. Miller
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Date James P. Miller
Executive Vice President
Secretary
12/12/97 /s/ Kurt G. Wollenberg
---------------- -------------------------------------
Date Kurt G. Wollenberg
Treasurer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 12,083
<SECURITIES> 0
<RECEIVABLES> 67,506
<ALLOWANCES> 698
<INVENTORY> 55,363
<CURRENT-ASSETS> 139,485
<PP&E> 194,290
<DEPRECIATION> 86,197
<TOTAL-ASSETS> 355,501
<CURRENT-LIABILITIES> 165,118
<BONDS> 36,172
4,950
15,640
<COMMON> 5,994
<OTHER-SE> 107,170
<TOTAL-LIABILITY-AND-EQUITY> 355,501
<SALES> 272,590
<TOTAL-REVENUES> 272,590
<CGS> 188,980
<TOTAL-COSTS> 237,675
<OTHER-EXPENSES> (550)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,125
<INCOME-PRETAX> 28,920
<INCOME-TAX> 9,835
<INCOME-CONTINUING> 19,085
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,085
<EPS-PRIMARY> 1.46
<EPS-DILUTED> 1.46
</TABLE>
