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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____
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COMMISSION FILE NUMBER 1-12557
CASCADE CORPORATION
(Exact name of registrant as specified in its charter)
OREGON 93-0136592
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2201 N.E. 201ST AVE. FAIRVIEW, OREGON 97024-9718
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 503-669-6300
Securities registered pursuant to Section 12(b) of the Act: COMMON STOCK, PAR
VALUE $.50 PER SHARE
Name of exchange on which registered: NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
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 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 the 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. / /
The aggregate market value of common stock held by non-affiliates of the
registrant as of March 31, 1998 was $191,995,243.
The number of shares outstanding of the registrant's common stock as of
March 31, 1998 was 11,860,710.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1997 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV. Portions of the definitive Proxy Statement
dated April 14, 1998 to be delivered to shareholders in connection with the
Annual Meeting of Shareholders to be held May 14, 1998 are incorporated by
reference into Parts I and III.
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TABLE OF CONTENTS
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PAGE
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PART I
ITEM 1. BUSINESS 1
General 1
Attachment Products 1
Fork Products 3
Industrial Tires 4
Other 5
ITEM 2. PROPERTIES 6
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 7
ITEM 6. SELECTED FINANCIAL DATA 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 11
ITEM 11. EXECUTIVE COMPENSATION 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 12
SIGNATURES 14
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NOTE: All references to the fiscal year (i.e. Fiscal 1995, 1996 and 1997)
refer to the period ended January 31 of the year subsequent to the fiscal year
(i.e. January 31, 1996, January 31, 1997, and January 31, 1998).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Cascade Corporation is a corporation organized in 1943 under the laws of
the State of Oregon. The term "the Company" as used hereinafter means Cascade
Corporation and subsidiaries. The Company's headquarters are located at 2201
N.E. 201st Ave. Fairview, Oregon 97024 (telephone number 503-669-6300).
The Company has for many years been one of the world's leading
manufacturers of attachments, masts, hose reels, sideshifters, hydraulic
cylinders and related replacement parts, primarily for the lift truck
industry. Acquisitions in 1996 and 1997 expanded the Company's attachment and
hydraulic cylinder capabilities, and broadened its focus to include forks and
solid tires, also primarily for the lift truck industry.
Following these acquisitions, the Company organized itself into three
basic divisions: Attachment Products, Fork Products, and Industrial Tires. A
description of each group follows:
ATTACHMENT PRODUCTS
The Attachment Products division manufactures an extensive line of
hydraulically actuated attachments designed for mounting on industrial lift
trucks. The primary function of these products is to increase the scope and
efficiency of materials handling applications normally performed by lift
trucks. The Attachment Products division offers a wide variety of functionally
different attachments, each of which has several models, capacities and
optional combinations. These attachments have been designed to clamp, lift,
rotate, push, pull, tilt and sideshift a variety of loads such as appliances,
paper rolls, baled materials, textiles, beverage containers, drums, canned
goods, bricks, masonry blocks, lumber, plywood and boxed, packaged, palletized
and containerized products of virtually all types.
In addition, the Attachment Products division manufactures hydraulic
cylinders, which are used to transmit power in lift trucks and other types of
machinery and industrial equipment. A substantial number of cylinders are
utilized in the Company's proprietary lift truck attachment products.
Hydraulic cylinders are also sold to manufacturers of various types of
materials handling and other mobile equipment, usually through the customer's
purchasing and engineering departments.
The Company believes its Attachment Products division is one of the
leading domestic and foreign independent suppliers of hydraulically actuated
materials handling equipment designed for mounting on industrial lift trucks.
Several lift truck manufacturers, who are customers of the Company, are also
competitors in varying degrees to the extent that they manufacture a portion
of their attachment requirements. Since the Attachment Products division
offers a broad line of attachments capable of supplying a significant part of
the total requirements for the entire lift truck industry, the Company
believes lower costs resulting from its relatively high unit volume would be
difficult for any individual lift truck manufacturer to achieve.
This division's products are sold to both original equipment
manufacturers (OEMs) and equipment dealers.
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Products are marketed throughout the United States, Canada, Latin America,
Europe, the Middle East, Australia, Africa and Asia.
Since the Attachment Products division deals with lift truck
manufacturers and their dealers, a substantial portion of its sales are made
to the approximately ten major companies in the industry. NACCO Industries
Inc. is the Attachment Products division's single largest customer. Sales to
NACCO and its subsidiaries, Hyster Company and Yale Materials Handling Inc.,
and to their independent dealers, were 5%, 9.2% and 9.7% of consolidated
Company sales during the years ended January 31, 1998, 1997 and 1996,
respectively, and were 7.2%, 9.2% and 9.7% of division sales during the same
periods.
The Attachment Products division purchases raw materials and components,
principally rolled products from steel mills, unfinished castings and
forgings, hydraulic motors and hardware items such as fasteners, rollers,
hydraulic seals and hose assemblies. The division is not currently
experiencing any shortages in obtaining raw materials or purchased parts. A
significant portion of rolled steel is purchased from a German steel mill.
With respect to other materials, the division has several domestic and foreign
suppliers. Difficulties in obtaining any of those items could affect the
division's results.
The division's headquarters are located in Portland, Oregon. North
American manufacturing activities are conducted in its plants in Portland,
Oregon; Springfield, Ohio; Westminster, South Carolina; Beulaville, North
Carolina, Warner Robins, Georgia; and Toronto, Ontario, Canada. Overseas
manufacturing sites include the United Kingdom, The Netherlands, Australia,
Sweden and China. In addition, this division has sales, engineering and
warehousing facilities in Japan, Korea, Germany, France, Spain, Finland, New
Zealand and South Africa.
During the last five years, sales of attachments accounted for 78% to 55%
of the Company's consolidated sales, and hydraulic cylinders accounted for
approximately 17% to 8%. The lower percentages reflect the addition of Fork
Products and Industrial Tires to the Company's product line. Replacement
parts and other sales accounted for 14% to 7% of total sales. North American
sales ranged from 55% to 63% of division sales, while European sales ranged
from 27% to 32%.
The backlog for this division was approximately $24,783,000 at January
31, 1998. Of this order backlog, approximately 92% was due within 60 days and
substantially all within six months.
The Attachment Products division maintains an extensive research and
development effort aimed at increasing the efficiency, durability and capacity
range of its product line. The Company does not believe patents are important
to the division's business. The division's products are manufactured with the
Cascade name and symbol, for which the Company has secured trademark
protection.
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FORK PRODUCTS
In March 1997, the Company established the Fork Products division with
the purchase of Kenhar Corporation (see note 10 to the 1997 Annual Report to
Shareholders). The Fork Products division continues to market under the
Kenhar brand name. Lift truck forks are carefully designed and engineered
products requiring specially formulated steel, a manufacturing process which
strengthens the "heel", certified welding of the brackets which hold them to
the carriage and heat treatment of the finished product. Forks are certified
lifting devices and subject to strict design, construction and safety
requirements established by industry associations and the International
Standards Association.
The Fork Products division presently offers a wide variety of both
standardized and specialized forks. Fork characteristics are dictated by the
expected capacity to be lifted, the characteristics of the load, the ambient
environment in which they are employed, the terrain over which the load will
be moved and the operational life cycle of the vehicle using the fork.
Accordingly, while there are some standard fork products, a wide range of
forks in custom sizes and shapes is demanded in the market.
The Company believes the Fork Products division is one of the leading
independent manufacturers of forks for lift trucks in the world. Market share
varies by geographic region. In addition to sales to the lift truck market,
the Fork Products division has an increasing market share of forks sold to
OEMs of construction, mining, agricultural and industrial (other than lift
trucks) mobile equipment. The Company believes the Fork Products segment is
the leading manufacturer in North America. It is the preferred supplier of
many OEMs as well as after-market dealers and distributors. This division
also has significant market share in Europe and is continuing its sales and
manufacturing expansion into the Asia/Pacific region. Since the Fork Products
division offers a broad range of both standard and specialized forks it is
capable of supplying a significant part of the total requirements for the lift
truck industry. Management believes that its high-unit volume results in lower
costs that would be difficult for any single competitor to achieve.
As with other divisions of the Company, the division's sales are
primarily to the lift truck industry. A substantial portion of its sales are
made to the approximately ten major companies in the industry. As previously
mentioned, NACCO Industries Inc., along with its subsidiaries and dealers, is
the Company's largest customer. During the eleven-month period ended January
31, 1998 that this division was owned by the Company, division sales to NACCO
and its subsidiaries, Hyster Company and Yale Materials Handling, Inc. were
2.7% of consolidated sales and were 12.5% of division sales.
The Fork Products division purchases material and components necessary to
produce its products. The principal item purchased is bar steel. The
division is not currently experiencing any shortage in obtaining bar steel.
As with other manufactures using bar steel, the Fork Products division obtains
its bar steel from steel mills under long-term purchase contracts. While the
division has alternative suppliers of bar steel identified, difficulties in
obtaining alternative sources of bar steel could affect the division's
operating results should bar steel from one of its primary suppliers become
unavailable.
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Headquarters of this division are located in Guelph, Ontario, Canada.
North American manufacturing activities are conducted in plants in Guelph,
Canada; Findlay Ohio; and Vancouver, Washington. Overseas manufacturing sites
include Manchester, United Kingdom; La Machine, France; Brescia, Italy; Hebei,
China; and Inchon, South Korea.
This division's products are primarily sold to OEMs and also to lift
truck dealers. Products are marketed extensively throughout North America and
Europe. In addition, the division is continuing to increase marketing
activities and market share in Asia, Australia and New Zealand.
As previously mentioned, this segment was purchased in March 1997.
Accordingly, the Company's consolidated net sales includes sales from the Fork
Products segment for the eleven months ended January 31, 1998. During this
period this division accounted for 21% of total Company sales. During the
year ended January 31, 1998, North American and European sales represented 67%
and 28% of division sales.
The backlog for this division was approximately $9,470,000 at January 31,
1998. Of this order backlog, approximately 79% was due within 60 days and
substantially all within six months.
Patents have been a relatively unimportant factor in the development of
the division's business.
INDUSTRIAL TIRES
In January 1997 the Company purchased Industrial Tires Limited and
created the Industrial Tire division (see note 10 to the consolidated
financial statements of the 1997 Annual Report to Shareholders). The
Industrial Tire division continues to market products under the ITL brand
name. This division designs, manufactures, sells and services non-pneumatic
or solid tires. Solid tires are used extensively on lift trucks and other
industrial mobile equipment such as airport ground support equipment, aerial
platform equipment and large loader and skid steer machinery.
The Industrial Tire division is one of the leading North American
suppliers of solid tires to the lift truck industry. In addition, the
Industrial Tire division has made significant progress in expanding into the
much broader market of high-load, high-hazard, and low-speed applications such
as aerial platform equipment, airport ground support equipment and
off-the-road applications such as waste management and underground mining.
Products are sold primarily to the aftermarket through independent
distributors, equipment dealers and tire dealers. The Industrial Tire
division also sells a significant amount of its volume to OEMs for
installation on new equipment. The Industrial Tire division has recently
expanded its sales and marketing outside of North America and is now actively
engaged in selling tires in Europe, Australia and Asia.
The Industrial Tire division experiences intense competition from large
companies offering a full range of products to smaller companies specializing
in certain segments of the market. Important competitive factors include
price, availability, service, product quality and company image. Management
believes that through its commitment to research and development of new
products
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combined with existing manufacturing resources, low cost contract
manufacturing and commitment to state-of-the-art distribution technologies,
the Industrial Tire division should remain competitive.
The Industrial Tire division purchases materials necessary to produce its
products. The principal products purchased are rubber compounds and precision
manufactured steel wheels ("basebands"). During the year, the division
experienced an interruption in the supply of compounded rubber from its
largest supplier. However, with only a slight effect on operations, the
division was able to quickly identify an alternative supplier at comparable
costs. Basebands are currently purchased from the Fork Products segment. As
with compounded rubber products, management believes alternative suppliers of
basebands are available. The Industrial Tire division is not experiencing any
shortages in obtaining basebands. Nevertheless, difficulties in obtaining any
of these products could affect the division's operating results.
The division's headquarters, manufacturing plant and retail center are
located in Mississauga, Ontario, Canada. Contract manufacturing is conducted
in factories in Mexico and China. In addition to independent distributors,
the division has nine distribution and warehousing centers located throughout
North America.
As with other divisions of the Company, Industrial Tire division sales
are primarily to the lift truck industry. A substantial portion of its sales
are made to the approximately ten major companies in the industry. During
1997, the division's largest customer accounted for 16.7% of its sales, while
sales to its next largest customer were 9.2% of its sales.
As previously mentioned, this division was purchased in January 1997.
For the year ended January 31, 1998, this division accounted for 9% of total
Company sales. Substantially all sales were in North America.
The backlog for this division was approximately $2,610,000 at January 31,
1998. Substantially all of this order backlog was due within 60 days.
Patents have been a relatively unimportant factor in the development of
the division's business.
OTHER
RESEARCH AND DEVELOPMENT
Most of the Company's research and development activities are performed
in a 28,000-square-foot product development center in Portland, Oregon. The
engineering staff develops and designs almost all of the products sold by the
Company. This staff numbers approximately 79 engineers and is continually
involved in developing new products and applications in the materials handling
field and improving existing lines. Consolidated research and development
expenses in the fiscal years ended January 31, 1998, 1997 and 1996 were
approximately $5,500,000, $4,900,000 and $4,700,000, respectively.
5
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ENVIRONMENTAL QUALITY
From time to time the Company is the subject of investigations,
conferences, discussions, and negotiations with various federal, state, local
and foreign agencies with respect to cleanup of hazardous waste and compliance
with environmental laws and regulations. The balance of the response to this
section of Item 1 is incorporated by reference to Note 13 of the Notes to the
Consolidated Financial Statements in the 1997 Annual Report to Shareholders
and the information contained in "Management's Discussion and Analysis of
Financial Conditions and Results of Operations".
EMPLOYEES
At January 31, 1998 the Company had 2,322 full-time employees throughout
the world. The majority of these employees are not subject to collective
bargaining agreements. The Company believes relations with its employees are
excellent.
FOREIGN OPERATIONS
The Company has substantial operations outside the United States. There
are additional business risks attendant to the Company's foreign operation
such as the risk that the relative value of the underlying local currencies
may weaken when compared to the U.S. dollar. For further information about
foreign operations, please see Note 11 on page 18 of the 1997 Annual Report to
Shareholders.
FORWARD-LOOKING STATEMENTS
Forward-looking statements throughout this report are based upon
assumptions involving a number of risks and uncertainties. Factors which
could cause actual results to differ materially from these forward-looking
statements include, but are not limited to competitive factors in, and the
cyclical nature of, the materials handling industry; fluctuations in lift
truck orders or deliveries, availability and cost of raw materials; general
business and economic conditions in North America, Europe and Asia; foreign
currency fluctuations; effectiveness of the Company's cost reduction
initiatives; and the Company's success in organizationally and operationally
integrating recently acquired businesses.
ITEM 2. PROPERTIES
The Company owns and leases various types of properties located
throughout North America, Europe, Australia, South Africa, China and Japan. Of
the above mentioned properties, the following are considered principal
facilities:
The Company's principal executive offices are located at 2201 N.E. 201st
Ave., Fairview, Oregon 97024. The Company operates sales offices,
manufacturing or warehouse facilities in 16 countries. Its major manufacturing
facilities in the United States are located in Springfield and Findlay, Ohio;
Warner Robins, Georgia; Westminster, South Carolina; Beulaville, North
Carolina; Portland, Oregon and Vancouver, Washington. Major manufacturing
facilities outside the United States include Almere and Hoorn, The
Netherlands; La Machine, France; Manchester and Newcastle, United Kingdom;
Vaggeryd, Sweden; Toronto, Mississauga and Guelph, Canada; Brisbane and
Melbourne, Australia; Inchon, Korea; Xiamen and Hebei, China; and Brescia,
Italy. Sales offices and warehouse facilities are located in Japan, South
Africa, New Zealand, Australia, Sweden, Italy, United Kingdom, France,
Germany, The Netherlands, China, Canada and the United States. (See Item 1
Business for more information regarding the location of the principal
facilities for each industry segment.) The Company owns 15 facilities that
include major manufacturing facilities and certain sales and warehouse
buildings, five of which are located in the United States and 10 of which are
located in other countries. The Company leases 33 facilities, 13 of which are
located in
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the United States and 20 of which are located in other countries.
The Company generally considers the productive capacity of the plants
operated by each of its industry segments adequate and suitable for the
requirements of each such segments.
Several subsidiary companies are parties to various leases of office and
computer equipment, storage space and automobiles which are of minor
consequence.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiaries are involved in any
material pending legal proceedings other than litigation related to
environmental matters discussed at pages 18 and 19 of the 1997 Annual Report
to Shareholders or matters in the regular course of business. The Company and
its subsidiaries are adequately insured against product liability, personal
injury and property damage claims which may occasionally arise.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of January 31, 1998, there were 389 holders of the Company's common
stock including blocks of shares held by various depositories. It is the
Company's belief that when the shares held by the depositories are attributed
to the beneficial owners, the total exceeds 2,500. The remainder of the
response to this Item is incorporated by reference to page 20 of the 1997
Annual Report to Shareholders.
During the year ended January 31, 1998, a Canadian subsidiary of the
Company issued 1,100,000 preference shares in connection with the acquisition
of Kenhar Corporation, each exchangeable for one common share of the Company.
The preference shares were issued in an exempt private offering transaction
and have not been registered. The Company has agreed to register common
shares issued to the holder of exchangeable shares under certain conditions.
Absent registration, Rule 144 would apply to sales of such common shares.
The Company also issued 225,000 common shares in connection with the
acquisition of Hyco-Cascade Ltd., and 29,006 common shares in connection with
the acquisition of minority interests in two subsidiaries of Kenhar, all in
exempt private offering transactions. These common shares have not been
registered. Absent registration, Rule 144 would apply to sales of such common
shares.
ITEM 6. SELECTED FINANCIAL DATA
Pages 1, 5 and 20 of the 1997 Annual Report to Shareholders is incorporated
by reference.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES
Consolidated net sales for 1997 totaled $369,865,000, a 69.3% increase
from sales of $218,485,000 for 1996. When compared to 1995, 1996 sales
decreased 6.6%. Revenues in 1997 grew dramatically as a result of strong
industry conditions but principally due to the acquisitions made during the
past 18 months. Sales in 1996 were lower than 1995, reflecting softer lift
truck shipments following 1995's record levels.
Attachment Products sales in North America were 10.6% higher than in
1996. Industry booking figures reflected record order levels throughout the
year, although shipments from lift truck manufacturers were only marginally
higher than the previous year, clearly reflecting a decision to allow backlogs
to grow rather than expanding production capacity as has been the case in
previous cyclical upturns. Attachment Products sales in Europe grew 43.7%
from 1996 as a result of management's pricing and other marketing initiatives
designed to improve market share. European economies have shown modest but
steady growth during the year, and prospects are good that this controlled
growth will continue well into the current year. The Company's subsidiaries
in Africa and Asia were hurt by currency and economic crises in those regions,
and its Korean and Japanese operations in particular will continue to be
challenged in 1998 by uncertain business conditions. Sales to these regions
represented 5.9% of consolidated 1997 revenues.
The addition of the Fork Products division increased sales by
$79,745,000. Overall, the Company has been very pleased with the addition of
Kenhar forks to its product line, and with greater emphasis on using the
existing dealer distribution channel, management expects improved
profitability. The addition of the Industrial Tire division increased sales
by $35,380,000 in 1997. ITL solid tires showed a strong revenue increase
during the year as a result of additional OEM business. However,
uncertainties associated with ITL's Chinese contract supplier, as well as
competitive pricing pressures, held tire profitability to marginal levels.
The Company is reviewing market strategy and anticipates improved results in
1998.
Any significant decline in the lift truck market could affect future
operating results.
COST OF SALES
As a percentage of sales, cost of sales was 70.2% in 1997, 65.5% in 1996 and
65.5% in 1995. The percentage increased in 1997 primarily because a greater
proportion of Company sales were to OEMs than in prior years. The Industrial
Tire and Fork Products divisions were added in late fiscal 1996 and early
1997, respectively. Traditionally, due to the emphasis on OEM sales, these
segments have achieved lower margins than the Attachment Products division.
Also, with the addition of these two new divisions, the Company recorded
certain one-time purchase accounting charges of $1,368,000 to cost of sales.
DEPRECIATION AND AMORTIZATION
Cascade invested heavily in the future with the business acquisitions
made in 1997 and 1996. As part of these acquisitions, Cascade has recorded
goodwill totaling $99,688,000 and is amortizing this goodwill over its 20 year
estimated life. Accordingly, depreciation and amortization expense as a
percentage of sales increased to 5.5% in 1997 from 4.7% in 1996 and 4.1% in
1995.
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SELLING AND ADMINISTRATIVE EXPENSES
The increase in the absolute dollar amount of selling and administrative
expenses during fiscal 1997 was the result of the business acquisitions. As a
percentage of sales, selling and administrative expenses were 17.3% in 1997,
18.4% in 1996 and 17.1% in 1995.
ENVIRONMENTAL EXPENSES, NET
Environmental expenses in 1997 include the effect of settlements with
several insurance companies totaling $23,750,000. The net impact of these
settlements after adjusting for certain litigation and environmental expenses
was a credit to environmental expense of $14,890,000.
In 1995, environmental expenses of $14,795,000 included a charge of
$12,000,000 to provide for probable future environmental costs related to the
Portland, Oregon manufacturing facility.
NONOPERATING ITEMS
Interest expense has increased significantly as the result of additional
debt issued to fund business acquisitions. At the same time, interest income
has decreased since excess cash has been used to reduce outstanding borrowings
rather than invest in interest-bearing securities.
PROVISION FOR INCOME TAXES
The effective tax rate was 34.4% in 1997, 30.3% in 1996 and 34.3% in
1995. The 1996 decrease was due to the effect of an IRS settlement of a prior
year's deferred compensation deductions. See note 2 to the consolidated
financial statements relative to the Company's effective tax rate.
NET INCOME
Net income for the year ended January 31, 1998 was a record $21,040,000
($1.60 per share). This compares to $17,420,000 ($1.48 per share) for the
year ended January 31, 1997 and $10,550,000 ($.88 per share) in 1996. The
1997 amount includes after-tax settlements of $9,770,000 ($.74 per share)
related to environmental litigation initiated several years ago. The 1997 net
income (before insurance settlements) was a disappointing 3.0% of sales
compared to 8.0% in 1996. Interest charges from acquisition debt along with
amortization of goodwill totaled $6,945,000, after taxes ($.53 per share).
Income before these charges and insurance settlements was 4.9% of sales. For
the year ended January 31, 1998, net losses at our Australian subsidiary
totaled $2,406,000. The Company has made substantial changes at this
subsidiary and looks forward to improved performance in Australia during 1998.
Net income for 1996 was 8% of sales compared to 4.5% in 1995. In 1995
the Company recorded a charge of $12,000,000 ($7,800,000 after taxes) for
future environmental costs. Before the effect of the environmental charge,
1995 net income was 7.8% of sales.
LIQUIDITY AND CAPITAL RESOURCES
For the year ended January 31, 1998, capital expenditures totaled
$15,453,000 compared to $16,624,000 for 1996 and $11,825,000 for 1995.
Planned capital expenditures for 1998 of $16,336,000 include $5,815,000 for
implementation of an enterprise-wide software system to link all of the
Company's core business systems. Implementation will be phased-in throughout
the operating units with final completion scheduled for fiscal 2000. The
estimated total cost for this project is approximately $9,000,000. Other
capital expenditures have been scaled back from previous year's
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level to redirect cash flow. Goodwill increased significantly in 1997 due to
the Company's business acquisitions.
Dividends for 1997 totaled $.40 per share as compared to $.45 per share
in 1996 and 1995, both of which included a special $.09 year end dividend. In
1997 the Company increased the quarterly dividend rate from $.09 to $.10 per
share but chose not to declare a special year-end dividend.
The Company's financial condition remains strong. The balance sheet
shows $12,966,000 in cash and cash equivalents. Together with established
lines of credit totaling $132,541,000, management believes these resources are
more than sufficient to meet planned short-term needs and provide for working
capital requirements associated with projected growth.
Net cash provided by operations was $15,701,000 in 1997 compared to
$22,374,000 in 1996 and $21,765,000 in 1995. The decrease in 1997 was
primarily due to increases in inventories and deferred taxes and decreases in
accounts payable and accrued expenses, partially offset by increases in net
income and depreciation and amortization.
Borrowings to finance the 1997 and 1996 business acquisitions have caused
the ratio of short and long-term debt to shareholders' equity to rise to 1.45
to 1.00; however, all of the short-term borrowings associated with these
acquisitions have been replaced by very manageable long-term financings
through $75,000,000 private placements of senior unsecured notes at a very
favorable interest rate of 6.92% and a new $100,000,000 revolving credit
agreement.
The U.S. Dollar strengthened significantly when compared to most foreign
currencies where the Company has substantial operations. As a result, foreign
currency translation adjustments decreased shareholders' equity by $6,874,000
($.52 per share) in 1997. Translation adjustments resulted in decrease of
$2,095,000 ($.18 per share) and $120,000 ($.01 per share) in 1996 and 1995,
respectively.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Some of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, ship product or engage in any number of similar business
activities.
Based on a recent assessment, the Company determined that it will need to
modify or replace portions of its software so that its computer systems will
properly handle dates beyond December 31, 1999. The Company presently
believes that with modifications to existing software and conversions to new
software, the Year 2000 Issue can be mitigated. However, if such
modifications and conversions are not made, or not timely completed, the Year
2000 issue could have a material impact on the operations of the Company.
The Company has initiated formal communications with all of its
significant suppliers and large customers to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate their own
Year 2000 Issue. There can be no guarantee that the systems of other companies
on which the Company's systems rely will be timely converted, or that a
failure to convert by another company, or a conversion that is incompatible
with the Company's systems, would not have a material adverse effect on the
Company. The Company has determined that it has no
10
<PAGE>
exposure to contingencies related to the Year 2000 Issue for the products it
has sold.
The Company has initiated the implementation of an enterprise-wide
resource planning (ERP) software system to link all of its core business
systems throughout the Company. This project was the result of a normal
business migration to improved and expanded software systems to increase the
Company's ability to improve its operational efficiency, reduce costs and
enhance overall quality. As part of this implementation, the Company will
also replace those software systems that will encounter the Year 2000 Issue.
The Company plans to complete the ERP project in the year 2000 and will
complete those portions of the project that will address the Year 2000 Issue
in 1999. The total remaining cost of the ERP project is estimated at
$9,000,000 and is being funded through operating cash flows and through
leasing portions of the system. Of the project cost, approximately
$7,900,000 will be capitalized. The remaining $1,100,000 will be expensed or
placed under operating leases.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates
which were derived using numerous assumptions of future events including the
continued availability of certain resources, third party modifications, plans
and other factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ materially from those plans.
Specific factors that might cause such material differences include, but are
not limited to, the availability and cost of personnel trained in this area,
the ability to locate and correct all relevant computer codes and similar
uncertainties.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 4 through 19 to the 1997 Annual Report to Shareholders are
incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The definitive Proxy Statement dated April 14, 1998 is incorporated by
reference.
The term of office of all officers is one year. Names, ages and
positions of all executive officers of Cascade Corporation follow.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Year First
Elected
Name Age Officer Present Position
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert C. Warren, Jr. 49 1984 President, Chief Executive Officer and Director
James P. Miller 50 1992 Executive Vice President, Secretary and Chief Financial Officer
William J. Harrison 59 1997 Executive Vice President
Gregory S. Anderson 49 1991 Vice President-Human Resources
Richard S. Anderson 50 1996 Vice President-Material Handling Product Group
Terry H. Cathey 50 1993 Vice President-Material Handling Operations
Robert L. Mott 56 1996 Vice President-OEM Product Group
Kurt G. Wollenberg 48 1997 Treasurer
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The definitive Proxy Statement dated April 14, 1998 is incorporated by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The definitive Proxy Statement dated April 14, 1998 is incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
INDEX TO FINANCIAL STATEMENTS
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements, together with the report thereon
of Price Waterhouse LLP dated March 20, 1998, appearing on pages 4 to 19 of
the accompanying 1997 Annual Report are incorporated by reference in this
Form 10-K Annual Report. With the exception of the aforementioned
information and information incorporated in Items 1, 5, 6 and 8, the 1997
Annual Report is not to be deemed filed as part of this report.
2. FINANCIAL STATEMENT SCHEDULES-1997, 1996 AND 1995
Financial statement schedules not included in this Form 10-K Annual
Report have been omitted because they are not applicable or not required.
The individual financial statements of the registrant and its
subsidiaries have been omitted since the registrant is primarily an
operating company and all subsidiaries included in the consolidated financial
statements, in the aggregate, do not have minority equity interests and/or
indebtedness to any person other than the registrant or its consolidated
subsidiaries in amounts which together exceed 5% of the total consolidated
assets at January 31, 1998, except indebtedness incurred in the ordinary
course of business which is not overdue and which matures within one year
from the year of its creation.
3. EXHIBITS
1. Copy of Notice of Annual Meeting dated April 14, 1998.
2. Copy of Form of Proxy for Annual Meeting.
3. Basic documents incorporated by reference:
- Articles of Incorporation filed with the Commission
May 28, 1965.
- Amendment to Articles of Incorporation filed in Proxy
Statement for annual meeting of shareholders May 12, 1987,
filed with the Commission April 14, 1988.
- Amendment to Articles of Incorporation filed in Proxy
Statement for annual meeting of shareholders May 9, 1989,
filed with the Commission April 27, 1990.
- By-Laws, as amended to February 8, 1989, filed with the
Commission April 27, 1990.
- Specimen copy of stock certificate, filed as Exhibit 4-1
to Form S-1, filed with the Commission May 28, 1965.
- Amendment to Articles of Incorporation included in the
Proxy Statement for Annual
12
<PAGE>
Meeting of Shareholders May 13, 1997, filed with the
Commission April 13, 1997.
4. Documents required by Item 14(c), all of which are exhibits to
Form 8-K filed with the Commission March 27, 1997, and are
incorporated by reference:
- Share Purchase Agreement dated March 11, 1997, among the
Company, Cascade (Canada) Holdings, Inc., and the
shareholders of Kenhar Corporation, Exhibit 2.1.
- Employment agreement dated March 11, 1997, among Cascade
Corporation, Couphar Ltd., and William J. Harrison,
Exhibit 10.1.
- Refusal Agreement dated March 11, 1997, among Cascade
Corporation, Couphar Ltd., and William J. Harrison,
Exhibit 10.2.
- Registration Rights Agreement dated March 11, 1997,
between Cascade Corporation and Couphar Ltd.,
Exhibit 10.3.
- Shareholders' Agreement dated March 11, 1997, between
the Trustees of the Robert C. and Nani S. Warren Revocable
Trust and Couphar Ltd., Exhibit 10.4.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the registrant, CASCADE CORPORATION has duly caused
this annual report to be signed on its behalf by the undersigned thereunto
duly authorized.
CASCADE CORPORATION
/s/ James P. Miller
------------------------------------
By: James P. Miller
EXECUTIVE VICE PRESIDENT, SECRETARY
AND CHIEF FINANCIAL 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 on the dates indicated.
/s/ Joseph J. Barclay 4/10/98 /s/ Robert C. Warren, Jr. 4/10/98
- ------------------------------------- -------------------------------------
Joseph J. Barclay Date Robert C. Warren, Jr. Date
CHAIRMAN, DIRECTOR PRESIDENT AND CHIEF EXECUTIVE
OFFICER, DIRECTOR
/s/ William J. Harrison 4/10/98 /s/ Richard C. Hire 4/10/98
- ------------------------------------- -------------------------------------
William J. Harrison Date Richard C. Hire, DIRECTOR Date
EXECUTIVE VICE PRESIDENT,
DIRECTOR
/s/ Eric Hoffman 4/10/98 /s/ C. Calvert Knudsen 4/10/98
- ------------------------------------- -------------------------------------
Eric Hoffman, DIRECTOR Date C. Calvert Knudsen, DIRECTOR Date
/s/ Nicholas R. Lardy 4/10/98 /s/ Ernest C. Mercier 4/10/98
- ------------------------------------- -------------------------------------
Nicholas R. Lardy, DIRECTOR Date Ernest C. Mercier, DIRECTOR Date
/s/ James S. Osterman 4/10/98 /s/ Jack B. Schwartz 4/10/98
- ------------------------------------- -------------------------------------
James S. Osterman, DIRECTOR Date Jack B. Schwartz, Date
ASSISTANT SECRETARY, DIRECTOR
/s/ Nancy Wilgenbusch 4/10/98
- -------------------------------------
Nancy Wilgenbusch, DIRECTOR Date
14
<PAGE>
FINANCIAL
SUMMARY
(IN THOUSANDS)
FINANCIAL
HIGHLIGHTS
(IN THOUSANDS EXCEPT
WHERE NOTED*)
<TABLE>
<CAPTION>
January 31
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 369,865 $ 218,485 $ 234,030 $ 183,365 $ 141,325
Operating income $ 40,770 $ 24,850 $ 16,415 $ 19,350 $ 9,735
Net income $ 21,040(1) $ 17,420 $ 10,550(2) $ 12,250 $ 3,885(3)
Per common share*
Net income:
Basic $ 1.73(1) $ 1.48 $ .88(2) $ 1.02 $ .32(3)
Diluted $ 1.60(1) $ 1.48 $ .88(2) $ 1.02 $ .32(3)
Book value $ 9.32 $ 8.46 $ 7.74 $ 7.37 $ 6.47
Working capital $ 81,063 $ 32,750 $ 49,829 $ 40,821 $ 37,337
Expenditures for property,
plant and equipment $ 15,453 $ 16,624 $ 11,825 $ 21,921 $ 8,126
Total assets $ 349,592 $ 199,493 $ 153,190 $ 137,109 $ 106,571
Long-term debt $ 144,785 $ 12,810 $ 9,531 $ 7,809 $ 682
Shareholders' equity $ 110,551 $ 98,757 $ 92,057 $ 88,538 $ 77,751
Number of employees* 2,322 1,293 1,103 993 838
</TABLE>
(1) After $14,890 ($9,770 or $.74 per share, net of taxes) credit for
environmental insurance settlements, net of certain expenses. See note
13 to consolidated financial statements.
(2) After $12,000 ($7,800 or $.65 per share, net of taxes) charge for
environmental expenses. See note 13 to consolidated financial statements.
(3) After $1,980 or $.17 per share charge related to cumulative effect of
accounting change. See note 9 to consolidated financial statements.
1
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
CONSOLIDATED
STATEMENT OF
INCOME
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997 1996
(Dollars in Thousands except Per Share)
<S> <C> <C> <C>
Net sales $ 369,865 $ 218,485 $ 234,030
---------- --------- ----------
Operating expenses:
Cost of goods sold 259,605 143,080 153,345
Depreciation and amortization 20,280 10,280 9,540
Selling and administrative expenses 64,100 40,275 39,935
Environmental expenses, net (Note 13) (14,890) - 14,795
---------- --------- ----------
329,095 193,635 217,615
---------- --------- ----------
Operating income 40,770 24,850 16,415
Interest expense 9,440 876 1,085
Interest income (610) (1,076) (1,045)
Other (income) expense, net (150) 65 315
---------- --------- ----------
Income before income taxes 32,090 24,985 16,060
Income taxes (Note 2) 11,050 7,565 5,510
---------- --------- ----------
Net income 21,040 17,420 10,550
Dividends paid on preferred shares
of subsidiaries 570 60 -
---------- --------- ----------
Net income applicable to common
shareholders $ 20,470 $ 17,360 $ 10,550
---------- --------- ----------
---------- --------- ----------
Basic earnings per share $ 1.73 $ 1.48 $ .88
---------- --------- ----------
---------- --------- ----------
Diluted earnings per share $ 1.60 $ 1.48 $ .88
---------- --------- ----------
---------- --------- ----------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
4
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
CONSOLIDATED
BALANCE SHEET
<TABLE>
<CAPTION>
January 31
1998 1997
(Dollars in Thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,966 $ 15,642
Accounts receivable, less allowance for doubtful accounts
of $743 and $227 62,271 43,469
Inventories, at average cost which is lower than market:
Finished goods and components 42,280 26,701
Goods in process 3,965 4,634
Raw materials 12,035 4,667
--------- ---------
58,280 36,002
Deferred income taxes (Note 2) 1,165 1,496
Prepaid expenses 6,011 2,020
--------- ---------
Total current assets 140,693 98,629
Property, plant and equipment,
at cost less accumulated depreciation (Notes 3 and 7) 101,147 81,393
Deferred income taxes (Note 2) 4,044 1,139
Goodwill (Note 10) 94,982 16,804
Other Assets 8,726 1,528
--------- ---------
Total assets $ 349,592 $ 199,493
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks (Note 3) $ 13,193 $ 29,846
Current portion of long-term debt (Note 3) 2,501 2,264
Accounts payable 23,604 21,373
Accrued payroll and payroll taxes 7,331 4,222
Other accrued expenses 13,001 8,174
--------- ---------
Total current liabilities 59,630 65,879
Long-term debt (Note 3) 144,785 12,810
Deferred income taxes (Note 2) - 5,151
Accrued environmental expenditures (Note 13) 10,316 8,913
Other liabilities 3,720 3,033
--------- ---------
Total liabilities 218,451 95,786
--------- ---------
Commitments and contingencies (Notes 12 and 13)
Manditorily redeemable convertible preferred stock and
minority interest (Note 10) 20,590 4,950
--------- ---------
Shareholders' equity (Notes 4 and 5):
Common stock, $.50 par value, authorized
20,000,000 shares; 11,988,208 and 12,048,208
shares issued 5,994 6,024
Additional paid-in capital 3,711 -
Retained earnings 109,091 94,561
Cumulative foreign currency translation adjustments (8,016) (1,142)
Treasury stock, at cost, 127,498 and 381,504 shares (229) (686)
--------- ---------
Total shareholders' equity 110,551 98,757
--------- ---------
Total liabilities and shareholders' equity $ 349,592 $ 199,493
--------- ---------
--------- ---------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
5
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
CONSOLIDATED
STATEMENT OF
CHANGES IN
SHAREHOLDERS'
EQUITY
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Common stock
Beginning balance $ 6,024 $ 6,139 $ 6,196
Common stock repurchased (30) (115) (57)
-------- ------- --------
5,994 6,024 6,139
-------- ------- --------
Additional paid-in capital
Beginning balance - 568 2,045
Common stock repurchased - (568) (1,477)
Treasury shares issued
for acquisitions 3,711 - -
-------- ------- --------
3,711 - 568
-------- ------- --------
Retained earnings
Beginning balance 94,561 85,083 79,910
Net income 21,040 17,420 10,550
Cash dividends (per share: 1997, $.40;
1996, $.45; 1995, $.45) (5,505) (5,340) (5,377)
Common stock repurchased (1,005) (2,602) -
-------- ------- --------
109,091 94,561 85,083
-------- ------- --------
Cumulative foreign currency adjustments
Beginning balance (1,142) 953 1,073
Translation adjustments (6,874) (2,095) (120)
-------- ------- --------
(8,016) (1,142) 953
-------- ------- --------
Treasury stock
Beginning balance (686) (686) (686)
Treasury shares issued for acquisitions 457 - -
-------- ------- --------
(229) (686) (686)
-------- ------- --------
Total shareholders' equity $110,551 $ 98,757 $ 92,057
-------- ------- --------
-------- ------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
6
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
CONSOLIDATED
STATEMENT OF
CASH FLOWS
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 21,040 $ 17,420 $ 10,550
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,280 10,280 9,540
Deferred income taxes (9,863) 613 (4,099)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (963) 535 (3,297)
Inventories (6,626) (258) (4,148)
Income taxes 2,904 (2,099) 1,133
Prepaid expenses (3,577) (1,073) 70
Accounts payable and accrued expenses (7,018) (1,523) 1,457
Accrued environmental expenditures 1,403 (1,587) 10,500
Other liabilities (1,879) 66 59
-------- -------- --------
Net cash provided by operating activities 15,701 22,374 21,765
-------- -------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (15,453) (16,624) (11,825)
Business acquisitions (72,534) (22,849)
Proceeds from sale of property, plant and equipment 5,036
Other assets (4,377) 64 (69)
-------- -------- --------
Net cash used in investing activities (87,328) (39,409) (11,894)
-------- -------- --------
Cash flows from financing activities:
Payments on long-term debt (36,034) (2,742) (3,273)
Proceeds from issuance of long-term debt 135,759 2,055 7,532
Notes payable to banks, net (20,264) 19,297 (797)
Repurchase of common stock (1,035) (3,285) (1,534)
Cash dividends paid (5,505) (5,340) (5,377)
-------- -------- --------
Net cash provided (used) by financing activities 72,921 9,985 (3,449)
-------- -------- --------
Effect of exchange rate changes (3,970) (634) (299)
-------- -------- --------
Increase (decrease) in cash and cash equivalents (2,676) (7,684) 6,123
Cash and cash equivalents at beginning of year 15,642 23,326 17,203
-------- -------- --------
Cash and cash equivalents at end of year $ 12,966 $ 15,642 $ 23,326
-------- -------- --------
-------- -------- --------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 8,608 $ 804 $ 1,025
Income taxes $ 12,936 $ 8,864 $ 8,434
Manditorily redeemable convertible preferred
stock issued for acquisition $ - $ 4,950 $ -
Exchangeable preferred stock issued for
acquisition $ 15,640 $ - $ -
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
7
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 1 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES
THE COMPANY
Cascade Corporation (the Company) is an international company engaged in the
business of designing, manufacturing and selling equipment used primarily in
materials handling applications. The Company manufactures an extensive line of
hydraulically actuated attachments designed for mounting on lift trucks. Other
major products include forks for lift trucks and non-pneumatic (solid) tires
used primarily in material handling operations. Accordingly, the Company's
sales and the collection of accounts receivable are largely dependent on the
sales of lift trucks and on the sales of replacement parts. In addition, the
majority of the Company's sales are made in North America.
Headquartered in Portland, Oregon, the Company employs more than 2,300 people
and maintains operations in 15 countries outside the United States. The
Company was founded in 1943.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned except for certain of its
Canadian subsidiaries which have issued convertible preferred stock (Note 10).
Intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on deposit and highly liquid
investments with maturities of three months or less.
DEPRECIATION AND AMORTIZATION
Property, plant and equipment are stated at cost. Depreciation is generally
provided on the straight-line basis over the estimated useful lives of the
assets ranging from 15 to 35 years for buildings and 3 to 12 years for
machinery and equipment. Goodwill consists of the cost of acquired businesses
(Note 10) in excess of the fair value of net identifiable assets acquired.
Generally, goodwill is amortized on the straight-line basis over 20 years. On a
periodic basis the Company reviews the realizability of recorded goodwill based
upon expectations of nondiscounted cash flows and operating income of the
acquired businesses. As of January 31, 1998, the Company believes that there
are no significantly impaired intangible assets. Accumulated amortization of
goodwill and other assets was $4,706,000 and $75,000 at January 31, 1998 and
1997, respectively.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Research and
development expense is related to developing new products and to improving
existing products or processes.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes." Deferred
income taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax bases
of existing assets and liabilities.
FORWARD EXCHANGE CONTRACTS
The Company enters into foreign exchange contracts to manage its exposure of
foreign currency exchange risk. At January 31, 1998, the Company had
approximately $16,444,000 in contracts to buy or sell foreign currency in the
future. Gains or losses on such contracts are recognized in income and are
measured over the period of the contract by reference to the forward rate
8
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 1 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES CONTINUED
for a contract to be consummated on the same future date as the original
contract. For the year ended January 31, 1998, the Company recorded
unrealized losses of $399,000 related to forward exchange contracts.
Realized gains or losses are recognized upon settlement of each contract.
STOCK-BASED COMPENSATION
The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS
123) "Accounting for Stock-Based Compensation" in 1996. This statement allows
companies to choose whether to account for stock-based compensation under the
current method as prescribed by APB 25 or use a fair value method described in
SFAS 123. The Company continues to follow the provisions of APB 25.
FOREIGN CURRENCY TRANSLATION
The Company translated the balance sheets of its foreign subsidiaries using
fiscal year end exchange rates. The statements of income are translated using
the average exchange rates for the fiscal year. The effects of such
translations are included in the shareholders' equity account "cumulative
foreign currency translation adjustments" as decreases of $6,874,000,
$2,095,000 and $120,000 for the years ended January 31, 1998, 1997 and 1996,
respectively.
ENVIRONMENTAL REMEDIATION
The Company accrues environmental remediation costs if it is probable that an
asset has been impaired or a liability incurred at the financial statement date
and the amount can be reasonably estimated. Environmental compliance costs are
expensed as incurred. Certain environmental costs are capitalized and
depreciated over their estimated useful lives.
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The fair value of the Company's monetary assets and liabilities are based
upon the existing interest rates related to such assets and liabilities
compared to current market rates of interest. The carrying value of all of
its monetary assets and liabilities approximates fair value as of January 31,
1998 and 1997.
REVENUE RECOGNITION
The Company recognizes revenue when products are shipped to customers.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements.
Changes in such estimates may affect amounts reported in future periods.
Significant estimates and judgements made by management of the Company include
matters such as the collectibility of accounts receivable, realizability of
deferred income tax assets, realizability of intangible assets and future costs
of environmental matters.
9
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 2 - INCOME TAXES
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Income before taxes was as follows:
United States $28,260 $15,990 $ 5,295
Foreign 3,830 8,995 10,765
------- ------- -------
$32,090 $24,985 $16,060
------- ------- -------
------- ------- -------
Taxes charged (credited) against operations were as
follows:
Current
Federal $9,105 $2,572 $ 5,507
State 925 819 889
Foreign 4,260 2,816 3,740
------- ------- -------
Total 14,290 6,207 10,136
------- ------- -------
Deferred
Federal (430) 932 (4,038)
State (80) 296 (651)
Foreign (2,730) 130 63
------- ------- -------
Total (3,240) 1,358 (4,626)
------- ------- -------
Total income taxes $11,050 $7,565 $ 5,510
------- ------- -------
------- ------- -------
The federal rate reconciles to the effective rate as
follows:
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefits 1.7 2.9 1.0
Effect of foreign tax rates .6 (.8) .2
IRS settlement (1) - (5.7) -
Tax credits and other (2.9) (1.1) (1.9)
------- ------- -------
Effective income tax rate 34.4% 30.3% 34.3%
------- ------- -------
------- ------- -------
<CAPTION>
January 31
1998 1997
(Dollars in Thousands)
<S> <C> <C>
The deferred tax liabilities (assets) recorded on the
consolidated balance sheet are comprised of
the following:
Accruals not deductible until paid $(1,113) $(1,052)
Other (52) (197)
------- -------
Current deferred income taxes $(1,165) $(1,249)
------- -------
------- -------
Depreciation $ 4,651 $ 7,181
Employee benefits (1,151) (902)
Accrued environmental expenditures (4,983) (3,302)
Other (2,561) 1,035
------- -------
Noncurrent deferred income taxes $(4,044) $ 4,012
------- -------
------- -------
</TABLE>
(1) IRS settlement is the result of the resolution of prior years' deferred
compensation deductions.
10
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 3 - BORROWINGS
<TABLE>
<CAPTION>
January 31
1998 1997
(Dollars in Thousands)
<S> <C> <C>
$100 million revolving line of credit, interest payable currently
at a variable rate (based on certain financial ratios
of the Company) over prime or LIBOR (6.625% at January
31, 1998); principal payable in 2002 $ 60,000 $ -
6.7% mortgage note, due quarterly through 2008
secured by plant 7,127 10,650
6.92% series A and series B senior notes, interest payable
currently, principal due annually 2002 through 2007 75,000 -
4.1% mortgage note, due semi-annually through 2001,
secured by building 2,424 -
9.0% mortgage note, repaid in 1997 - 2,421
Other 2,735 2,003
-------- -------
147,286 15,074
Less current maturities 2,501 2,264
-------- -------
Total long-term debt $144,785 $12,810
-------- -------
-------- -------
</TABLE>
The revolving line of credit agreement and the series A and B senior notes
contain dividend restrictions and certain covenants, including covenants
related to subsidiary indebtedness, additional indebtedness, net worth, fixed
charges, funded debt and leverage ratios. At January 31, 1998, the Company was
in compliance with its loan covenants.
Maturities of long-term debt for the years January 31, 1999 through January 31,
2003, and thereafter, respectively, are $2,501,000, $3,203,000, $1,412,000,
$73,244,000, $13,195,000, and $53,731,000. Borrowing arrangements with
commercial banks provided short-term lines of credit at January 31, 1998
totalling $32,541,000, of which $19,348,000 was unused. Average interest rates
on short-term borrowings were 4.1% and 5.4% at January 31, 1998 and 1997,
respectively.
NOTE 4 - STOCK OPTION PLAN
The Company has reserved 800,000 shares of common stock for the Cascade
Corporation 1995 Senior Managers' Incentive Stock Option Plan (the Plan). The
Plan permits the award of incentive stock options (ISO) to officers and key
employees. Under the terms of the Plan, the purchase price of shares subject
to each ISO granted must not be less than the fair market value on the date of
grant. Accordingly, no compensation cost has been recognized for the stock
option plan. Outstanding options vest after three years and are exercisable
for ten years from the date of grant.
The Company has determined that the pro forma effects of applying SFAS 123
would reduce earnings by $247,000, $100,000, and $45,000 for 1997, 1996, and
1995, respectively, using the following assumptions:
<TABLE>
<CAPTION>
January 31
1998 1997 1996
<S> <C> <C> <C>
Risk-free interest rate 6.5% 6.7% 6.1%
Expected life 5 Years 5 Years 5 Years
Expected volatility 30% 26% 26%
Expected dividend yield 2.5% 3.0% 3.0%
</TABLE>
11
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 4 - STOCK OPTION PLAN CONTINUED
A summary of the Plan's status at January 31, 1998, 1997 and 1996 together
with changes during the periods then ended are presented in the following
table:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE PER
SHARES SHARE
-------- ---------
<S> <C> <C>
BALANCE JANUARY 31, 1995 - $ -
Granted 77,355 16.37
Forfeited (2,102) 16.37
------- ------
BALANCE JANUARY 31, 1996 75,253 16.37
Granted 93,341 16.00
Forfeited (23,162) 16.17
------- ------
BALANCE JANUARY 31, 1997 145,432 16.17
Granted 136,262 15.25
Forfeited (1,971) 15.25
------- ------
BALANCE JANUARY 31, 1998 279,723 $15.73
-------
-------
</TABLE>
At January 31, 1998, 1997 and 1996 no options were exercisable.
The following table summarizes information about fixed options outstanding at
January 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE NUMBER OF WEIGHTED CONTRACTUAL
PRICE SHARES AVERAGE PRICE LIFE
-------- --------- ------------- -----------
<S> <C> <C> <C>
$16.37 64,455 $16.37 7
$16.00 80,977 $16.00 8
$15.25 134,291 $15.25 9
</TABLE>
NOTE 5 - CAPITAL STOCK
There are 200,000 shares authorized of no par value preferred stock; none are
outstanding.
12
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 6 - EARNINGS PER SHARE
The Company calculates earnings per share in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share."
Accordingly, basic earnings per share is computed by dividing income available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects potential
dilution that could occur if convertible securities or stock options were
exercised or converted into common stock.
<TABLE>
<CAPTION>
Year Ended January 31, 1998
PER SHARE
INCOME SHARES AMOUNT
(Numerator) (Denominator)
<S> <C> <C> <C>
Net income $21,040
Less: preferred stock dividends 572
-------
BASIC EPS
Income available to common shareholders 20,468 11,858 $1.73
-----
-----
Effect of dilutive securities
Manditorily redeemable convertible
preferred stock 440 985
Exchangeable preferred stock 132 330
Incentive stock options - 17
------- ------
DILUTED EPS
Income available to common shareholders
plus assumed conversions $21,040 13,190 $1.60
------- ------ -----
------- ------ -----
</TABLE>
Options to purchase 145,000 and 75,000 shares of common stock were outstanding
at January 31, 1997 and 1996. These options were not dilutive.
The weighted average common shares outstanding for calculating diluted EPS for
the years ended January 31, 1997 and 1996 was 11,797,000 and 11,990,000,
respectively. For the year ended January 31, 1997, 16,000 weighted average
shares of mandatorily redeemable convertible stock were included in the
computation of diluted EPS. There were no dilutive securities during fiscal
1995.
13
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
January 31
1998 1997
(Dollars in Thousands)
<S> <C> <C>
Land $ 5,555 $ 4,229
Construction in progress 592 4,493
Buildings 43,675 31,437
Machinery and equipment 150,603 115,642
-------- --------
200,425 155,801
Accumulated depreciation (99,278) (74,408)
-------- --------
$101,147 $ 81,393
-------- --------
-------- --------
</TABLE>
NOTE 8 - BENEFIT PLANS
The Company has defined benefit plans covering certain U.S. and Canadian
employees. In December 1988, the Company amended the plan covering its U.S.
employees to limit benefits to those accrued through December 31, 1988. During
1997, the Company settled the pension obligation under this plan by funding
lump sum distributions or non-participating annuity contracts.
The Company's funding policy is to make annual contributions based on
actuarially determined funding requirements. The benefits are based on years
of service and average earnings over a specified five-year period of time. The
net pension cost, the plans' funded status and significant assumptions include
the following:
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Interest cost on projected benefit obligation $ 467 $ 248 $ 314
Actual return on assets (468) (257) (517)
Net amortization and deferral 12 268 432
------- ------- -------
Net periodic pension cost $11 $259 $229
------- ------- -------
------- ------- -------
Projected and accumulated vested benefit obligation $(5,987) $(6,106) $(4,261)
Plan assets at fair value 6,239 6,147 3,866
------- ------- -------
Plan assets in excess of (less than)
projected benefit obligation 252 41 (395)
Unrecognized prior service cost - 120 133
Unrecognized net loss - 1,208 1,231
------- ------- -------
Prepaid pension expense $ 252 $ 1,369 $ 969
------- ------- -------
------- ------- -------
Discount rate 7.5% 7.25% 6.75%
Expected long-term rate of return 8.0% 7.25% 8.00%
</TABLE>
The Company sponsors a number of defined contribution plans covering
substantially all North American employees. Employees may contribute to these
plans and the Company matches these contributions in varying degrees. The
Company also makes contributions to certain plans based on a percentage of
wages. Defined contribution pension expense for the Company was $1,901,000,
$1,488,000 and $1,318,000 for 1997, 1996 and 1995, respectively.
14
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care benefits for eligible retirees. The Company
accounts for such costs under Statement of Financial Accounting Standards
No.106 (SFAS 106) "Employers' Accounting for Postretirement Benefits Other Than
Pensions". Therefore, the Company is accruing the future costs of providing
such benefits to eligible active employees during the years they render
service.
The following table sets forth the plan's status reconciled with the amount
included in the Consolidated Balance Sheets:
<TABLE>
<CAPTION>
January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $(2,694) $(2,342) $(2,551)
Fully eligible active plan participants (578) (416) (350)
Other active plan participants (1,618) (1,249) (1,502)
------- ------- -------
(4,890) (4,007) (4,403)
Plan assets at fair value - - -
------- ------- -------
Accumulated postretirement benefit obligation
in excess of plan assets (4,890) (4,007) (4,403)
Unrecognized net loss 1,860 974 1,436
------- ------- -------
$(3,030) $(3,033) $(2,967)
------- ------- -------
------- ------- -------
</TABLE>
The net periodic postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
January 31
1998 1997 1996
(Dollars in Thousands)
<S> <C> <C> <C>
Service cost $ 68 $ 83 $ 56
Interest cost 281 288 295
Net amortization and deferral 50 84 23
---- ---- ----
Net periodic postretirement benefit cost $399 $455 $374
---- ---- ----
---- ---- ----
</TABLE>
To estimate these costs, health care costs were assumed to increase at an
annual rate of 9% after 1996 with the rate of increase declining ratably to 4%
by 2003 and thereafter. The weighted average discount rate was assumed to be
6.75%, 7.25% and 6.75% for 1997, 1996 and 1995, respectively. If the cost trend
rates were increased by one percentage point, the accumulated postretirement
benefit obligation as of January 31, 1998 would increase by $544,000 and net
periodic postretirement benefit cost would increase by $53,000.
15
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 10 - ACQUISITIONS
1997 ACQUISITIONS
In February 1997, the Company purchased all of the outstanding capital stock of
Hyco-Cascade Pty., Ltd., an Australian manufacturer and distributor of lift
truck attachments and accessories. The amount paid in connection with this
purchase was $12,603,000, which consisted of $7,447,000 in debt, $3,656,000 in
common stock and $1,500,000 in cash.
On March 11, 1997 the Company acquired all of the outstanding capital stock of
Kenhar Corporation. Kenhar Corporation is the world's leading manufacturer of
forks for lift trucks with sales and manufacturing locations in North America,
Europe and Asia. The aggregate purchase price for this acquisition was
approximately $71,944,000 and included $56,304,000 in debt and 1,100,000
exchangeable preferred shares of Cascade (Canada) Holdings, Inc. (Exchangeable
Shares) valued at approximately $15,640,000. The Exchangeable Shares are
convertible share for share into Cascade Corporation common stock. Holders of
Exchangeable Shares are entitled to voting rights of an equivalent number of
Company common shares and are entitled to dividends equivalent to those
declared and paid on like numbers of Cascade common shares. Cascade (Canada)
Holdings Inc. is a wholly owned subsidiary of Cascade Corporation. Therefore,
although the Exchangeable Shares have rights comparable with the Company's
common stock, the Exchangeable Shares have been accounted for, based on their
form, as minority interest on the Company's balance sheet.
The Company also made other acquisitions during 1997 totaling $10,377,000.
When the Company purchased Kenhar Corporation, a number of Kenhar's
subsidiaries had minority interest holders. The Company has now acquired all
of these minority interests. In addition, during 1997, the Company purchased a
U.S. manufacturer of hydraulic cylinders and a European fork manufacturer.
1996 ACQUISITIONS
In January 1997, the Company purchased all of the outstanding capital stock of
Industrial Tires Limited, a Canadian corporation that manufactures solid rubber
tires for the material handling industry. The total purchase price, including
direct costs of acquisition and 330,000 shares of Cascade (Canada), Inc.
Preferred Stock (the Preferred Stock) was $23,660,000.
Each share of the Preferred Stock is convertible into one share of the
Company's common stock at the holder's option. In addition, the Preferred
Stock gives the holder the ability to require the Company to repurchase the
shares on or after January 13, 2002 at the original issuance price of
approximately $15 per share, for a maximum repurchase obligation of ap-
proximately $4,950,000. Consequently, the Preferred Stock is classified as
"Mandatorily Redeemable Convertible Preferred Stock." The provisions of the
Preferred Stock also entitle the holder to cumulative dividends paid on the
common shares of Cascade Corporation and to a liquidation preference equal to
approximately $15 per share in priority to any payment on any shares ranking
junior to the Preferred Stock.
In addition to the acquisitions discussed above, during 1996 the Company
acquired two other manufacturers in related businesses. The purchase price for
these acquisitions was $4,063,000.
All of the above acquisitions were accounted for under the purchase method of
accounting. The acquired businesses have been included in the Company's results
of operations since each respective acquisition date.
16
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 10 - ACQUISITIONS CONTINUED
PRO FORMA INFORMATION
The following unaudited combined pro forma information shows the company's
results of operations as though the 1996 and 1997 acquisitions had occurred on
February 1, 1995 and 1996 respectively.
<TABLE>
<CAPTION>
Year ended January 31
1998 1997 1996
(Dollars in Thousands except per share)
UNAUDITED
<S> <C> <C> <C>
Total revenue $377,565 $358,268 $286,229
Net income 21,516 13,616 7,995
Net income per share:
Basic $1.77 $1.16 $.65
Diluted $1.62 $1.01 $.65
</TABLE>
The pro forma results of operations 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 result from the
combination of these entities. The pro forma results are not necessarily
indicative of the actual results of operations that would have occurred had the
purchases been made at the beginning of the respective periods or of results
that may occur in the future.
17
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 11 - INFORMATION ABOUT OPERATIONS
The Company designs, manufactures and markets equipment and supplies used in
materials handling applications. Sales to the largest single customer were
7.7%, 9.2% and 9.7% of consolidated sales during the years ended January 31,
1998, 1997 and 1996, respectively. Information about the Company's operations
in different geographic areas is shown below:
<TABLE>
<CAPTION>
Year ended January 31
(Dollars in Thousands)
NORTH ELIMIN- CONSOLI-
AMERICA EUROPE OTHER ATIONS DATED
-------- -------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
1998
Sales to unaffiliated customers $230,140 $102,570 $37,155 $ $369,865
Transfers between areas 17,500 1,020 310 (18,830)
-------- -------- ------- -------- ---------
Total revenue $247,640 $103,590 $37,465 $(18,830) $369,865
-------- -------- ------- -------- ---------
-------- -------- ------- -------- ---------
Net income $ 19,125 $ 2,895 $ (980) $ 21,040
-------- -------- ------- ---------
-------- -------- ------- ---------
Identifiable assets $220,194 $95,894 $33,504 $349,592
-------- -------- ------- ---------
-------- -------- ------- ---------
1997
Sales to unaffiliated customers $130,145 $67,925 $20,415 $ $218,485
Transfers between areas 16,971 305 334 (17,610)
-------- -------- ------- -------- ---------
Total revenue $147,116 $68,230 $20,749 $(17,610) $218,485
-------- -------- ------- -------- ---------
-------- -------- ------- -------- ---------
Net income $ 12,845 $ 2,815 $ 1,760 $ 17,420
-------- -------- ------- ---------
-------- -------- ------- ---------
Identifiable assets $114,873 $65,932 $18,688 $199,493
-------- -------- ------- ---------
-------- -------- ------- ---------
1996
Sales to unaffiliated customers $139,950 $75,375 $18,705 $ $234,030
Transfers between areas 14,607 587 747 (15,941)
-------- -------- ------- -------- ---------
Total revenue $154,557 $75,962 $19,452 $(15,941) $234,030
-------- -------- ------- -------- ---------
-------- -------- ------- -------- ---------
Net income $ 5,809 $ 4,078 $ 663 $ 10,550
-------- -------- ------- ---------
-------- -------- ------- ---------
Identifiable assets $ 72,847 $64,367 $15,976 $153,190
-------- -------- ------- ---------
-------- -------- ------- ---------
</TABLE>
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment under noncancelable
operating leases. The minimum rental commitments under these leases for the
years ended January 31, 1999 through January 31, 2003, respectively, are
$3,130,000, $2,735,000, $2,058,000, $1,715,000 and $1,052,000. For the years
ended January 31, 1998, 1997 and 1996 total rentals charged to expense amounted
to $2,042,000, $789,000 and $705,000.
NOTE 13 - ENVIRONMENTAL MATTERS
The Company is engaged in environmental investigations and remediation efforts
in its ordinary course of business. The Company has sued a number of its
insurers to enforce policies it contends provide coverage for expenses
associated with these efforts. Earnings for the year ended January 31, 1998
include the effect of settlements with several of these insurers totaling
$23,750,000. The impact of these settlements on net income, after adjusting
for certain litigation and environmental expenses and income taxes, was
approximately $9,770,000. Litigation against two remaining insurers resulted
in a jury verdict in the Company's favor. As issues involving damages,
prejudgment interest, attorneys fees, and declaratory relief are pending before
the trial court, the financial statements have not been adjusted to account for
the jury verdict.
18
<PAGE>
CASCADE CORPORATION & SUBSIDIARY COMPANIES
NOTES TO
CONSOLIDATED
FINANCIAL
STATEMENTS
NOTE 13 - ENVIRONMENTAL MATTERS CONTINUED
During the year ended January 31, 1996, the Company accrued a charge of
$12,000,000 ($7,800,000 after tax) to provide for probable future environmental
costs related to its Portland, Oregon manufacturing facility. The Company has
reviewed the remaining accrued liability of $13,335,000 at January 31, 1998,
and determined it fairly approximates future known remediation costs. However,
since future remediation costs are subject to many uncertainties, actual
expenses may vary from the amount recorded at January 31,1998.
QUARTERLY
FINANCIAL
INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
(Dollars in Thousands except per share figures)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
YEAR ENDED JANUARY 31, 1998
<S> <C> <C> <C> <C>
Net sales $84,725 $90,340 $97,525 $97,275
Gross profit before depreciation 26,485 27,895 29,230 26,650
Net income 2,900 9,705 6,480 1,955
Net income per share:
Basic $.23 $.80 $.54 $.15
Diluted $.23 $.73 $.49 $.15
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
YEAR ENDED JANUARY 31, 1997
<S> <C> <C> <C> <C>
Net sales $57,010 $54,805 $54,870 $51,800
Gross profit before depreciation 19,665 19,040 19,160 17,540
Net income 4,390 4,335 4,365 4,330
Net income per share:
Basic $.37 $.37 $.37 $.37
Diluted $.37 $.37 $.37 $.37
</TABLE>
REPORT OF
INDEPENDENT
ACCOUNTANTS
TO THE BOARD OF DIRECTORS & SHAREHOLDERS OF CASCADE CORPORATION
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Cascade Corporation and its subsidiaries at January 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended January 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
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 the opinion expressed above.
/s/ PRICE WATERHOUSE LLP
Portland, Oregon
March 20, 1998
19
<PAGE>
INVESTOR
INFORMATION
TRANSFER AGENT &
REGISTRAR
Chase Mellon
Shareholder Services L.L.C.
Shareholder Relations
P.O. Box 3315
South Hackensack, N. J. 07606
(800) 522-6645
www.chasemellon.com
STOCK EXCHANGE LISTING
The Company's stock is
traded on the New York Stock Exchange under the
symbol CAE
INVESTOR RELATIONS COUNSEL
Gerald A. Parsons
(503) 228-2909
SHAREHOLDER INFORMATION
Cascade's Form 10-K Report to the Securities and Exchange Commission for 1997
is available to shareholders and others who request it.
To obtain copies, please write to Cascade Corporation, P.O. Box 20187,
Portland, Oregon 97294-0187.
ANNUAL MEETING
The Annual Meeting of the shareholders of Cascade Corporation will be held at
The Governor Hotel, 611 S.W. 10th Avenue, Portland, Oregon at 10:00 a.m. on
Thursday, May 14, 1998.
A formal notice of the meeting, together with a proxy statement and proxy form,
will be mailed to shareholders.
MARKET INFORMATION
The high and low sales prices of the common stock of Cascade Corporation during
1997 and 1996 were as follows:
<TABLE>
<CAPTION>
Year ended January 31
1998 1997
--------------------- ---------------------
High Low High Low
<S> <C> <C> <C> <C>
Market price range
First quarter $16.63 $14.50 $14.50 $11.75
Second quarter 19.75 14.50 16.50 12.75
Third quarter 20.44 16.19 14.50 11.50
Fourth quarter 19.00 14.88 16.50 11.50
</TABLE>
COMMON STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended January 31
1998 1997
------ ------
<S> <C> <C>
First quarter $.10 $.09
Second quarter .10 .09
Third quarter .10 .09
Fourth quarter .10 .18
------ ------
$.40 $.45
------ ------
------ ------
</TABLE>
FORWARD-LOOKING STATEMENTS
Forward-looking statements throughout this report are based upon assumptions
involving a number of risks and uncertainties. Factors which could cause
actual results to differ materially from these forward-looking statements
include, but are not limited to competitive factors in, and the cyclical nature
of, the materials handling industry; fluctuations in lift truck orders or
deliveries, availability and cost of raw materials; general business and
economic conditions in North America, Europe and Asia; foreign currency
fluctuations; effectiveness of the Company's cost reduction initiatives; and
the Company's success in organizationally and operationally integrating
recently acquired businesses.
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 12,966
<SECURITIES> 0
<RECEIVABLES> 63,014
<ALLOWANCES> 747
<INVENTORY> 58,280
<CURRENT-ASSETS> 140,693
<PP&E> 200,425
<DEPRECIATION> 99,278
<TOTAL-ASSETS> 349,592
<CURRENT-LIABILITIES> 59,630
<BONDS> 0
5,994
20,590
<COMMON> 0
<OTHER-SE> 104,557
<TOTAL-LIABILITY-AND-EQUITY> 349,592
<SALES> 369,865
<TOTAL-REVENUES> 369,865
<CGS> 259,605
<TOTAL-COSTS> 259,605
<OTHER-EXPENSES> (150)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,830
<INCOME-PRETAX> 32,090
<INCOME-TAX> 11,050
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,040
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.60
</TABLE>
