-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PIpoLR094q2Oxsq830hO9r6kL0GxgAtAbkUpFY7hhV7+6S5nlUMZ1ZKi7b7fFsez +r9JwkygpTt0LVgRs8+JEw== 0000912057-00-020302.txt : 20000501 0000912057-00-020302.hdr.sgml : 20000501 ACCESSION NUMBER: 0000912057-00-020302 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASCADE CORP CENTRAL INDEX KEY: 0000018061 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL TRUCKS TRACTORS TRAILERS & STACKERS [3537] IRS NUMBER: 930136592 STATE OF INCORPORATION: OR FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12557 FILM NUMBER: 612322 BUSINESS ADDRESS: STREET 1: 2201 N.E. 201ST AVE. CITY: FAIRVIEW STATE: OR ZIP: 97024-9718 BUSINESS PHONE: 5036696300 MAIL ADDRESS: STREET 1: 2201 N.E. 201ST AVE CITY: FAIRVIEW STATE: OR ZIP: 97024-9718 10-K 1 10-K =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------- 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, 2000 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From ____ to ____ --------- 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, 2000 was $125,838,790. The number of shares outstanding of the registrant's common stock as of March 31, 2000 was 11,439,890. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1999 Annual Report to Shareholders are incorporated by reference into Parts I, II and IV. Portions of the definitive Proxy Statement dated April 2000 to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May 11, 2000 are incorporated by reference into Parts I and III. =============================================================================== TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. BUSINESS 1 General 1 Attachment Products 1 Fork Products 2 Other 3 ITEM 2. PROPERTIES 4 ITEM 3. LEGAL PROCEEDINGS 4 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 4 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 5 ITEM 6. SELECTED FINANCIAL DATA 5 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 8 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 8 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 8 ITEM 11. EXECUTIVE COMPENSATION 8 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 8 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 9 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 9 SIGNATURES 10
NOTE: All references to the fiscal year (i.e. Fiscal 1997, 1998 and 1999) refer to the period ended January 31 of the year subsequent to the fiscal year (i.e. January 31, 1998, January 31, 1999, and January 31, 2000). 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" includes 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, 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, also primarily for the lift truck industry. The Company divested its Mast Division in January, 1999, and its Industrial Tires Limited subsidiary in April, 1999, and is now focused on its primary attachment and fork business. Following these acquisitions and divestitures, the Company organized itself into two basic divisions: Attachment Products and Fork Products, however both divisions serve the lift truck industry. 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. 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 to a few major customers, none of which account for more than 10% of the division's total sales. 1 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; 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. 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. FORK PRODUCTS In March 1997, the Company established the Fork Products division with the purchase of Kenhar Corporation (see note 10 to the 1999 Annual Report to Shareholders). 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 continues to market under the Kenhar brand name. Kenhar 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. 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, the market demands a wide range of forks in custom sizes and shapes. 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. As with attachments, the division's sales are primarily related to the lift truck industry. A substantial portion of its sales are to a few major customers. During 1999, the division's largest customer accounted for 14.0% of its sales, while sales to its next largest customer were 7.6%. 2 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. Headquarters of this division are located in Portland, Oregon. North American manufacturing activities are conducted in plants in Guelph, Canada and Findlay, Ohio. 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. 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 is continually involved in developing new products and applications in the materials handling field and improving existing lines. 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 12 of the 1999 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, 2000 the Company had 1,842 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 14 of the 1999 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 cycli- 3 cal 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, Korea 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; Beulaville, North Carolina and Portland, Oregon. Major manufacturing facilities located outside the United States include Almere and Hoorn, The Netherlands; La Machine, France; Manchester and Newcastle, United Kingdom; Vaggeryd, Sweden; Toronto, Mississauga and Guelph, Ontario, 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, Spain, 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 14 facilities that include major manufacturing facilities and certain sales and warehouse buildings, four 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 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 in Note 12 to the Consolidated Financial Statements included in the 1999 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 4 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of January 31, 2000, there were 362 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 16 of the 1999 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. A Form S-3 Registration covering these shares became effective in October, 1998. A subsidiary of the Company repurchased 300,000 of these shares in connection with the sale of the Mast Division in January, 1999, and 800,000 shares remain outstanding. Absent registration, Rule 144 would apply to sales of such common shares. During the year ended January 31, 1998, a Canadian subsidiary of the Company issued 330,000 shares of preferred stock in connection with the purchase of Industrial Tires, Limited, each exchangeable for one common share of the Company. Repurchase of these shares was completed during the year ended January 31, 2000. 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. A Form S-3 Registration covering these shares became effective in October, 1998. Absent registration, Rule 144 would apply to sales of such common shares. ITEM 6. SELECTED FINANCIAL DATA Pages 1 through 15 of the 1999 Annual Report to Shareholders is incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NET REVENUES Consolidated net sales for the fiscal year ended January 31, 2000 totaled $324,778,000, a 20.4% decrease from sales of $407,930,000 for the prior year. Prior year sales include the mast business unit, divested in January 1999 and the Industrial Tire Division, sold in April 1999. Fourth quarter sales of $75,099,000 were 16.5% lower than the $89,985,000 reported in the prior year fourth quarter, also primarily due to the divestitures noted above. Adjusting for the divestitures, comparable consolidated net sales for year over year reflects an increase of 2.3% or $314,046,000 for fiscal year 1999 versus $306,844,000 for fiscal year 1998. Consolidated net sales for 1998 were 10.3% higher than the $369,865,000 reported in 1997. COST OF SALES As a percentage of sales, cost of sales was 66.0% in 1999, 68.9% in 1998, and 70.2% in 1997. The percentage decreased in 1999 as a result of a combination of selected price increases, cost reduction efforts, additional manufacturing efficiencies, and the divestitures of the mast business in 5 January of 1999 and the Industrial Tire Division in April of 1999 which had incurred a significantly higher cost of sales as a percentage of revenues. (See Note 1 to the Consolidated Financial Statements included in the 1999 Annual Report.) The percentage decreased in 1998 compared to 1997 as a result of a combination of selected price increases, cost reduction efforts, and additional manufacturing efficiencies gernerated from higher factory throughput. DEPRECIATION AND AMORTIZATION Depreciation and Amortization expense was $18,386,000, $21,550,000, and $20,280,000 in 1999, 1998 and 1997, respectively. As a percentage of sales, depreciation and amortization was 5.7% in 1999, 5.3% in 1998 and 5.5% in 1997. The increase in the current year is due to the fact that ITL and the Mast business, both now divested, had sales that were proportionately greater than their depreciation and amortization expense. The decrease between 1998 and 1997 resulted from the purchase of Kenhar Corporation in March of 1997. A full year of Kenhar depreciation was taken in 1998 and only a partial year of Kenhar depreciation was taken in 1997. SELLING AND ADMINISTRATIVE EXPENSES Selling and Administrative Expense was $61,238,000 in 1999, $68,500,000 in 1998, and $64,100,000 in 1997. The reduction in Selling and Administrative Expense in 1999 was a result of cost reduction efforts and the divestiture of the mast business in January of 1999 and the divestiture of the Industrial Tire Division in April of 1999. The overall increase in 1998 compared to 1997 was to support increased sales growth. As a percentage of net sales, selling and administrative expenses were 18.9% in 1999, 16.8% in 1998, and 17.3% in 1997. The increase in 1999 compared to 1998 resulted from the divestitures of the mast business in January of 1999 and the Industrial Tire Division in April of 1999. These businesses incurred a significantly lower selling and administrative expense as a percentage of revenues. The decrease in 1998 compared to 1997 resulted from the purchase of Kenhar Corporation in March of 1997 which had lower selling and administrative expense as a percentage of revenues ENVIRONMENTAL EXPENSES, NET Environmental expenses in 1999 include a $12,000,000 addition to the environmental reserve. The charge resulted from a review of potential environmental exposures including an adverse decision rendered March 24, 2000, by the Ninth Circuit Court of Appeals in a CERCLA recovery action brought in 1989 by The Boeing Company. The Boeing Company and Cascade are each remediating groundwater contamination in the vicinity of their neighboring plant sites. (See Note 12 to the Consolidated Financial Statements included in the 1999 Annual Report) NONOPERATING ITEMS Interest expense was $8,686,000, $10,940,000 and $9,440,000 in 1999, 1998 and 1997, respectively. In 1999 the Company paid down debt from funds received from divestitures. In 1997, the Company issued additional debt to fund business acquisitions. Other expense of $4,039,000 in 1999 included special charges that stem from the integration of operations acquired over the past three years, steps taken to assure consistency of global financial reporting and the loss on the sale of ITL. Other income of $4,755,000 in 1998 included the gain on the sale of two parcels of land. TAXES The effective tax rate decreased from 31.6% in 1998 to 30.6% in 1999 due primarily to the increase in U.S. foreign tax credits attributed to foreign earnings not yet repatriated. The effective tax rate decreased from 34.4% in 1997 to 31.6% in 1998 due primarily to a one-time tax refund received in the United Kingdom. 6 NET INCOME Net income for the year of $4,934,000 ($.40 per share) was 76.9% below the $21,370,000 ($1.63 per share) reported in 1998. This year's results include special charges that stem from the integration of operations acquired over the past three years, steps taken to assure consistency of global financial reporting, the sale of the Industrial Tire Division and the significant environmental charge discussed above. Adjusting for above noted divestitures and non-recurring items, comparable operating results were $17,700,000 ($1.42 per share) versus $17,300,000 ($1.32 per share) or 2.3% higher than the prior year. The 7.6% increase in earnings per share after the above noted adjustments also reflects share repurchases during fiscal 1998. We consider the results from continuing operations to be in line with our expectations for gross margin improvements and within the framework of our comprehensive restructuring and ERP implementation programs. Forecasts for 2000 are for comparable results in both revenues and margins. The Company has worked hard in 1999 to improve margins and reduce the cost of doing business, and will continue to take steps to be as efficient as possible in 2000 and coming years. Net income for 1997 was $21,040,000 ($1.60 per share), which included $9,770,000 after tax ($.74 per share) resulting from insurance settlements related to environmental litigation. 1998 operating results showed strong improvement over 1997 as a result of improvements in Australia and China. LIQUIDITY AND CAPITAL RESOURCES For the year ended January 31, 2000, capital expenditures totaled $16,834,000, compared to $15,459,000 for 1998 and $15,453,000 for 1997. Planned capital expenditures for 2000 are $12,000,000. Dividends declared for each of 1999, 1998 and 1997 totaled $.40 per share. The Company's financial condition remains strong. The balance sheet shows $23,188,000 in cash and cash equivalents at January 31, 2000. Together with established short-term lines of credit totaling $22,872,000, 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 operating activities was $50,135,000 in 1999 compared to 20,702,000 in 1998 and $15,701,000 in 1997. The increase in 1999 was pimarily due to decreases in accounts receivable, inventories, and prepaid expenses and increases in accounts payable and accrued environmental expenditures. The increase in 1998 was primarily due to a decrease in deferred income taxes and an increase in accounts payable. The Company's debt to equity ratio improved from 1.33 to 1.00 at January 31, 1999, to 1.09 to 1.00 at January 31, 2000. The US dollar strengthened when compared to most foreign currencies where the Company has substantial operations. As a result, foreign currency translation adjustments decreased shareholders' equity by $4,743,000 ($.38 per share) in 1999. Translation adjustments resulted in decreases in shareholders' equity of $3,184,000 ($.24 per share) and $6,874,000 ($.52 per share) in 1998 and 1997. 7 IMPACT OF THE YEAR 2000 ISSUE The Company experienced no material problems regarding 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 have recognized a date using "00" as the year 1900 rather than the year 2000. The Company initiated the implementation of an enterprise-wide resource planning (ERP) software system to link all of its core business systems throughout the Company. This implementation was the result of 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 replaced those business systems that it believed would encounter the Year 2000 Issue. The Company plans to complete the ERP project in the year 2002. The total cost of the ERP project will approximate $16,000,000, including $6,107,000 and $8,268,000 spent during fiscal 1999 and 1998 and is being funded through leases and operating cash flows. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pages 3 through 15 of the 1999 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 13, 2000 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.
- ----------------------------------------------------------------------------------------------------- Year First Elected Name Age Officer Present Position - ----------------------------------------------------------------------------------------------------- Robert C. Warren, Jr. 51 1984 President, Chief Executive Officer and Director Gregory S. Anderson 51 1991 Vice President - Human Resources Richard S. Anderson 52 1996 Senior Vice President - International Terry H. Cathey 52 1993 Senior Vice President - North America Robert L. Mott 58 1996 Vice President - OEM Product Group Kurt G. Wollenberg 50 1997 Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer Charlie S. Mitchelson 45 1999 Vice President and Managing Director - Europe Art Otsuka 60 2000 Vice President - Asian Operations Anthony F. Spinelli 57 1999 Managing Director - Canadian Operations - -----------------------------------------------------------------------------------------------------
ITEM 11. EXECUTIVE COMPENSATION The definitive Proxy Statement dated April, 13 2000 is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The definitive Proxy Statement dated April, 13 2000 is incorporated by reference. 8 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The definitive Proxy Statement dated April 13, 2000 is incorporated by reference. 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 PricewaterhouseCoopers LLP dated March 28, 2000 appearing on pages 3 to 15 of the accompanying 1999 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 1,3, 5, 6, 7, and 8, the 1999 Annual Report is not to be deemed filed as part of this report. 2. FINANCIAL STATEMENT SCHEDULES--1999, 1998 AND 1997 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, 1999, 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. Bylaws, as amended through February 11, 1999. 2. 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. - 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 Meeting of Shareholders May 13, 1997, filed with the Commission April 13, 1997. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last quarter of fiscal 1999. 9 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/ Kurt G. Wollenberg ----------------------------------------------- By: Kurt G. Wollenberg SENIOR VICE PRESIDENT - FINANCE AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL AND ACCOUNTING 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/ C. Calvert Knudsen April 27, 2000 /s/ Robert C. Warren, Jr. April 27, 2000 - ---------------------------------------- ---------------------------------------- C. Calvert Knudsen, DIRECTOR Date Robert C. Warren, Jr. Date PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIRECTOR /s/ Eric Hoffman April 27, 2000 /s/ Greg H. Kubicek April 27, 2000 - ---------------------------------------- ---------------------------------------- Eric Hoffman, DIRECTOR Date Greg H. Kubicek, DIRECTOR Date /s/ Nicholas R. Lardy April 27, 2000 /s/ Ernest C. Mercier April 27, 2000 - ---------------------------------------- ---------------------------------------- Nicholas R. Lardy, DIRECTOR Date Ernest C. Mercier, DIRECTOR Date /s/ James S. Osterman April 27, 2000 /s/ Jack B. Schwartz April 27, 2000 - ---------------------------------------- ---------------------------------------- James S. Osterman, DIRECTOR Date Jack B. Schwartz, Date ASSISTANT SECRETARY, DIRECTOR /s/ Henry W. Wessinger II April 27, 2000 /s/ Nancy Wilgenbusch April 27, 2000 - ---------------------------------------- ---------------------------------------- Henry W. Wessinger II, DIRECTOR Date Nancy Wilgenbusch, DIRECTOR Date
10 EX-3.2 2 EX-3.2 BYLAWS OF CASCADE CORPORATION (AS AMENDED FEBRUARY 11, 1999) ARTICLE I NAME AND PRINCIPAL OFFICE Section 1. The Name of this corporation is CASCADE CORPORATION, organized and existing under the laws of the State of Oregon. Section 2. The principal office and place of business of the Company shall be located at Portland, Oregon. The Company may have offices and places of business at such other places, within or without the State of Oregon, as the Board of Directors may from time to time determine. ARTICLE II CORPORATE SEAL The seal of the Company shall be an impression stamp with the following inscription: CASCADE CORPORATION - Oregon - Corporate Seal. An impression of said seal so adopted is as shown below. ARTICLE III SHAREHOLDERS Section 1. The annual meeting of the shareholders shall be held on the second Thursday in May of each year (except the second Tuesday in May of 1997) at the principal office of the Company in Portland, Oregon at 10:00 a.m., when the shareholders shall elect a Board of Directors and transact such other business as may properly come before the meeting. Section 2. Special meetings of the shareholders of the Company shall be called by the Secretary on the request of the Chairman or on the request in writing of three Directors, or on demand in writing by shareholders of record holding not less than PAGE 1 - BYLAWS one-tenth of all shares entitled to vote at such meeting. Section 3. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the Secretary, or the person or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder concerned at his address as it appears on the stock books of the Company, with postage thereon prepaid. ARTICLE IV COMMITTEES Section 1. There are hereby established as committees of the Board of Directors an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee, each of which shall have the powers and functions set forth herein, and such additional powers as may be delegated by the Board of Directors. The size and membership of the committees shall be determined by the Board of Directors, and, in the case of the Audit and Compensation Committees, shall be composed solely of Directors independent of management. Section 2. The Audit Committee shall select, on behalf of the Company, independent public accountants to (1) audit the books of account and other Corporate records; and (2) perform such other duties as the Committee may from time to time prescribe. The Committee shall transmit financial statements certified by such independent public accountants to the Board of Directors after the close of each fiscal year. The Committee shall confer with such accountants and approve the scope of the audit of the records. The Committee shall have the power to confer with and direct the officers of the Company to the extent necessary to review the internal controls, accounting practices, financial structure and reporting of the Company. From time to time, the Committee shall report to and advise the Board of Directors concerning the results of its consultation and review such other matters as the Committee believes merit review by the Board of Directors. Section 3. The Compensation Committee shall fix the compensation of members of the Board of Directors who are officers and other members of senior management. Section 4. The Nominating and Governance Committee shall consider and make recommendations to the Board of Directors with respect to the management PAGE 2 - BYLAWS of the Company and the nominations or elections of directors and officers of the Company. The Committee from time to time shall consider the size and composition of the Board of Directors and make recommendations to the Board with respect to such matters. ARTICLE V DIRECTORS Section 1. The business and affairs of the Company shall be managed by a Board of not less than nine, nor more than fourteen Directors. Each Director shall be a Shareholder of the Company and, at the time of election, shall be under the age of 70 (Directors serving as of February 11, 1999, are exempt from the age limitation). A Director who ceases to be a Shareholder in the Company shall likewise cease to be a Director. Commencing with the 1999 Annual Meeting of Shareholders, nominees for election to the Board of Directors shall be divided into three groups. The terms of Directors in Group 1 expire at the first Annual Shareholders' meeting after their election, the terms of Group 2 expire at the second Annual Shareholders Meeting after their election, and the terms of Group 3 expire at the third Annual Shareholders' Meeting after their election. At each Annual Shareholders' Meeting held thereafter, Directors shall be chosen for a term of three years, to succeed those whose terms expire. Each Director shall hold office until his or her successor has been elected and qualified. Section 2. Any vacancy occurring in the Board of Directors, including any Directorship to be filled by reason of an increase in the number of Directors, may be filled by the affirmative vote of the majority of the remaining Directors, though less than a quorum, of the Board of Directors. Any Director so elected shall serve until the next annual meeting of shareholders and until his successor has been elected and has qualified. Section 3. A majority of the number of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. If any meeting of the Directors cannot be organized for want of a quorum, a majority of the Directors there present may adjourn the meeting from time to time without notice until a quorum shall attend. Section 4. The Board of Directors may appoint an Executive Committee consisting of the President and not less than two other officers of the Company, to coordinate the Company's operations and to exercise general supervision over all the property, business and affairs of the Company. The President shall preside over the Executive Committee, which shall be subject to the authority of the Board of Directors and the President. PAGE 3 - BYLAWS Section 5. Immediately after each annual election of Directors, the newly elected Directors shall meet for the purpose of organization, the election of officers of the Board of Directors and the transaction of other business. No notice of such meeting shall be required, and the meeting shall be held at the same place as the shareholders' meeting unless otherwise designated by the Chairman. Section 6. Special meetings of the Board of Directors shall be called by the Secretary, when he is requested to do so by the Chairman, upon two days' notice to each Director. Special meetings shall be called in like manner on the request of the majority of the members of the Board. Such notice may be by telephone, telegraph or mail. Special meetings of the Directors may be held at one time and at any place, without notice, when all members of the Board are present and consent thereto. The Board of Directors shall meet at such places, either within or without the State of Oregon, as may be designated in the notice of the meeting. Any business authorized or required to be transacted by the Directors may be transacted at any special meeting. ARTICLE VI COMPENSATION OF DIRECTORS AND OFFICERS No officer or Director of the Company shall be entitled to any salary or other compensation for any services rendered the Company, except when fixed or otherwise authorized and approved by resolution of the Board of Directors, or when services are rendered as a consultant to the Corporation under compensation arrangements approved by the Board of Directors or the President. ARTICLE VII OFFICERS Section 1. The officers of the Company shall include a Chairman, a President, one or more Vice Presidents as may from time to time be deemed advisable by the Board of Directors, a Secretary, a Treasurer and such other officers as may from time to time be appointed by the Board of Directors. Section 2. In case of the absence of any officer of the Company, or for any other reason that may seem sufficient to the Board, the Board of Directors may delegate his powers and duties to any other officer or to any Director. Section 3. In addition to the specific duties set forth below, the officers shall have such other authorities and perform such other duties as may elsewhere in these Bylaws be required of them or that may be usual for their officers or that may be PAGE 4 - BYLAWS designated by resolution of the Board of Directors. ARTICLE VIII CHAIRMAN The Chairman shall preside at all meetings of the shareholders and Directors; he shall be the inspector of all elections of Directors and certify who are elected; he shall also act as inspector of the voting on any other matter or resolution unless the meeting appoints special inspectors for such purposes. The Chairman may also represent the company in any manner requested by the Board of Directors or the President. ARTICLE IX PRESIDENT Section 1. The President shall be the chief executive officer and head of the Company and shall have the general control of its business affairs. Section 2. The President may sign, on behalf of the Company, all deeds, contracts and promissory notes, unless otherwise expressly directed by the Board of Directors, and shall have general supervision over all the property, business and interests of the Company as well as over its officers, employees and agents. Section 3. The President shall make annual reports showing the condition of the affairs of the Company, making such recommendations as he thinks proper, submitting the same to the Board of Directors, and subsequently, to the annual meeting of the shareholders; and he shall, from time to time, bring before the Directors such information as may be required touching upon the business and property of the Company. ARTICLE X SECRETARY The Secretary shall issue all notices of Directors' and shareholders' meetings, shall have the charge of the corporate seal and the Company's stock and minute books, shall countersign all certificates of stocks, bonds, deeds, mortgages and other documents requiring the seal of the Company, shall affix the corporate seal to all such documents, shall prepare and issue all certificates of stock and register and record PAGE 5 - BYLAWS the same in the stock books and shall properly record therein all transfers, shall produce the stock books whenever required to do so by any shareholder, and shall prepare and submit at every meeting of the shareholders a certified list of the shareholders of the Company and of those shareholders entitled to vote at such meeting, which list shall be prima facie evidence of the right to vote. The Board of Directors may designate one or more Assistant Secretaries to carry out the duties of the Secretary until such vacancy is regularly filled as required. ARTICLE XI TREASURER The Treasurer shall have custody of all funds, securities and other valuables of the Company that may come into his possession and he shall deposit the same to the credit of the Company in such banks or depositories as the Board of Directors may designate. He shall bring to the attention of the Board of Directors any and all measures which in his judgment are necessary and proper to be taken for the preservation and renewal of securities in his custody and for the enforcement of the rights secured thereby and shall render a statement of the accounts of the Company whenever required by the Board of Directors. ARTICLE XII STOCK Section 1. Certificates of stock, on a form to be approved by the Board of Directors, shall be signed by the Chairman, President or any Vice President, and by the Secretary or an Assistant Secretary, and shall have affixed thereto the corporate seal. Each certificate shall be numbered in order and shall show on the face thereof the name of the Company, that it is organized under the laws of the State of Oregon, the name of the person to whom it is issued, the class and number of shares represented thereby and the par value of the shares. A stock book shall be maintained by the Secretary, in which he shall record the name of each shareholder, the number, certificate number and class of shares held by him, the dates or issuance and the dates of any transfers of stock. Section 2. Shares of stock of the Company shall be transferable only on its books by the holder thereof in person, or by his attorney duly authorized thereto in writing, and upon the surrender and cancellation of certificates therefor duly endorsed. Section 3. In case of the loss or destruction of a certificate, another may be issued in its place upon proof of such loss or destruction satisfactory to the PAGE 6 - BYLAWS Board of Directors and the giving of such bond or indemnity or other security as the Board of Directors may require. ARTICLE XIII INDEMNIFICATION The Company shall indemnify any Director, officer or employee or former Director, officer or employee of the Company, or any person who may have served at its request as a Director, officer or employee of another corporation, partnership, joint venture, or other enterprise, against expenses (including attorneys fees) judgments, fines and amounts paid in settlement, actually and necessarily incurred by him in connection with the defense of any action, suit or proceeding whether civil, criminal or administrative in which he is made a party by reason of being or having been such Director, officer or employee. Such indemnification shall not be deemed exclusive of any other rights to which such Director, officer or employee may be entitled. The Company shall also have the authority to indemnify any agent of the Company or any Trustee acting on behalf of the Company to the fullest extent possible under the Oregon Business Corporation Act. ARTICLE XIV ASSESSMENTS A holder of or subscriber to shares of the capital stock of the Company shall be subject to assessment therefor by the Board of Directors to the extent, in the aggregate, of the unpaid portion of the subscription price of the shares so held or subscribed, except as may be limited by law. ARTICLE XV DIVIDENDS Dividends shall be declared by the Board of Directors in such form, in such amounts and at such times as the Board of Directors in its sole discretion shall determine, subject only to the requirements of law, and no dividends shall be paid or other distribution of earnings made except as directed by the Board of Directors. PAGE 7 - BYLAWS ARTICLE XVI SIGNING OF CONTRACTS, CHECKS, NOTES, ETC. In addition to the authority granted to the President by Article VIII, Section 2, the Board of Directors may, by resolution, at any time direct in what manner and by what person or persons, officer or officers all or any of its contracts, checks, notes, bonds, other evidences of indebtedness or other written instruments may be executed, and any such authorized execution shall be deemed the act of the Company. ARTICLE XVII NOTICE AND WAIVER Section 1. Whenever notice is required to be given to any shareholder or Director, and such notice is given be mail, the time of the giving of such notice shall be deemed to be the time when the same shall be deposited in the United States mail addressed to the shareholder or Director at his address as it appears on the official records of the Company, with postage thereon prepaid. Section 2. Whenever any notice is required to be given to any shareholder or Director of the Company, a waiver thereof in writing signed by the person or persons entitled to such notice, whether signed before or after the time stated in such notice, shall be equivalent to the giving of such notice to that person or persons. ARTICLE XVIII AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any regular or special meeting of the Board of Directors by a vote of the majority of the Directors present at such meeting. PAGE 8 - BYLAWS EX-13.1 3 EXHIBIT 13.1 CASCADE-Registered Trademark- CORPORATION 1999 ANNUAL REPORT The World's Leading Producer of Lift Truck Attachments, Forks & Accessories CASCADE CORPORATION & SUBSIDIARY COMPANIES FINANCIAL SUMMARY (Dollars in Thousands) NET SALES OPERATING INCOME [GRAPH] [GRAPH] NET INCOME EARNINGS BEFORE INTEREST, TAXES DEPRECIATION AND AMORTIZATION (EBITDA). [GRAPH] [GRAPH] FINANCIAL HIGHLIGHTS
YEAR ENDED JANUARY 31 2000 1999 1998 1997 1996 - ---------------------------------------------------------------------------------------------------- (Dollars in Thousands except where noted*) Net sales $ 324,778 $407,930 $369,865 $218,485 $234,030 Operating income $ 18,806 $ 36,685 $ 40,770 $ 24,850 $ 16,415 Net income $ 4,934 $ 21,370 $ 21,040 $ 17,420 $ 10,550 EBITDA(1) $ 34,183(2) $ 63,745 $ 61,810(3) $ 36,141 $ 26,685(4) Cash flow from operations $ 50,135 $ 20,702 $ 15,701 $ 22,374 $ 21,765 Cash flow from investing $ 12,411 $ 3,688 $(87,328) $(39,409) $(11,894) Cash flow from financing $ (45,675) $(22,501) $ 72,921 $ 9,985 $ (3,449) Per common share* Net income: Basic $ .40 $ 1.77 $ 1.73 $ 1.48 $ .88 Diluted $ .40(2) $ 1.63 $ 1.60(3) $ 1.48 $ .88(4) Book value $ 9.87(2) $ 10.31 $ 9.32(3) $ 8.46 $ 7.74(4) Working capital $ 66,167 $ 94,548 $ 81,063 $ 32,750 $ 49,829 Expenditures for property, plant and equipment $ 16,834 $ 15,459 $ 15,453 $ 16,624 $ 11,825 Total assets $312,694 $347,857 $349,592 $199,493 $153,190 Long-term debt $109,043 $142,783 $144,785 $ 12,810 $ 9,531 Shareholders' equity $112,933 $119,494 $110,551 $ 98,757 $ 92,057 Number of employees 1,842 2,174 2,322 1,293 1,103 Dividend per share .40 .40 .40 .45 .45
(1) Management believes that Earnings Before Interest Expense, Taxes, Depreciation and Amorti-zation (EBITDA) is a key measure of cash flow. EBITDA should not be viewed as a measurement of financial performance under Generally Accepted Accounting Principles (GAAP) or as a substitute for GAAP measurements such as net income or cash flow from operations. EBITDA is not necessarily comparable to other companies due to the lack of uniform definition of EBITDA by all companies. (2) After $12,000 ($7,600 or $.61 per share, net of tax) charge for environmental expenses. See note 12 to consolidated financial statements. (3) After $14,890 ($9,770 or $.74 per share, net of taxes) credit for environmental insurance settlements, net of certain expenses. See note 12 to consolidated financial statements. (4) After $12,000 ($7,800 or $.65 per share, net of taxes) charge for environmental expenses. See note 12 to consolidated financial statements. TO OUR SHAREHOLDERS Consolidated net sales for the fiscal year ended January 31, 2000 totaled $324,778,000, a 20.4% decrease from sales of $407,930,000 for the prior year. Prior year sales include the mast business unit, divested in January 1999 and the Industrial Tire Division, sold in April 1999. Fourth quarter sales of $75,099,000 were 16.5% lower than the $89,985,000 reported in the prior year fourth quarter, also primarily due to the divestitures noted above. Adjusting for the divestitures, comparable consolidated net sales for year over year reflects an increase of 2.3% or $314,046,000 for fiscal year 1999 versus $306,844,000 for fiscal year 1998. Net income for the year of $4,934,000 ($.40 per share) was 76.9% below the $21,370,000 ($1.63 per share) for the year ended January 31, 1999. This year's results include special charges that stem from the integration of operations acquired over the past three years, steps taken to assure consistency of global financial reporting, the sale of the Industrial Tire Division and the significant environmental charge discussed below. Adjusting for above noted divestitures and non-recurring items, comparable operating results were $17,700,000 ($1.42 per share) versus $17,300,000 ($1.32 per share) or 2.3% higher than the prior year. We consider the results from continuing operations to be in line with our expectations for gross margin improvements and within the framework of our comprehensive restructuring and ERP implementation programs. Cascade has added to its environmental reserve a $12,000,000 pretax charge to income. The charge results from a review of potential environmental exposure including an adverse decision rendered March 24, 2000 by the Ninth Circuit Court of Appeals in connection with a lawsuit brought in 1989 by The Boeing Company. The suit dealt with ongoing environmental cleanup at the two companies' Portland plant sites. Management believes that this charge does not alter the fundamental strength of the Company nor its ability to produce products and serve its markets throughout the world. Operations are continuing to improve and expand. The challenges presented by some prior acquisitions and the environmental issues are not without understandable concern to management but we believe these special circumstances are largely behind us and above all, they do not deter our confidence and optimism in the Company's future. Attachment sales showed strength in North America, rising 9.5%, adjusted for the mast business unit sale, but remained relatively flat in Europe. Asian markets continued their recovery with our China subsidiary continuing to make remarkable progress. Australian markets remain sluggish. Among the many executive additions we have made, around the globe, we are fortunate to announce the appointment of Mr. Art Otsuka as Vice President of Asian Operations. Prior to joining Cascade, Art served as President of Komatsu Forklift USA where he achieved a remarkable 37-year career. His stature, insight and ability will be very helpful to our Asian operations. We welcome Art, and all other new members of the Cascade family. Chairman C. Calvert Knudsen announced on March 30, 2000 that the Board of Directors has appointed a special committee of independent directors to consider options to increase shareholder value. I have also advised the Board that I am working with a management group to explore the possibility for the Company to be taken private in a management-led leveraged buyout. We look forward to working with you as we grow and expand our presence in the global market. We also appreciate the continued support of our customers, suppliers and shareholders. Rest assured, your faith in us will be rewarded as we renew our focus on our core business - simply put, building the best forks and lift truck attachments in the world. Bar none. /s/ Robert C. Warren ROBERT C. WARREN, JR. President & Chief Executive Officer CONSOLIDATED STATEMENT OF INCOME - ------------------------------------------------------------------------------- (Dollars in Thousands, except per share amounts)
YEAR ENDED JANUARY 31 2000 1999 1998 - -------------------------------------------------------------------------------------------- Net sales $ 324,778 $407,930 $369,865 - -------------------------------------------------------------------------------------------- Operating expenses: Cost of goods sold 214,348 281,195 259,605 Depreciation and amortization 18,386 21,550 20,280 Selling and administrative expenses 61,238 68,500 64,100 Environmental expenses, net (Note 12) 12,000 - (14,890) - -------------------------------------------------------------------------------------------- Total operating expenses 305,972 371,245 329,095 - -------------------------------------------------------------------------------------------- Operating income 18,806 36,685 40,770 Interest expense 8,686 10,940 9,440 Interest income (1,030) (755) (610) Other (income) expense, net 4,039 (4,755) (150) - -------------------------------------------------------------------------------------------- Income before taxes 7,111 31,255 32,090 Income taxes (Note 4) 2,177 9,885 11,050 - -------------------------------------------------------------------------------------------- Net income $ 4,934 $ 21,370 $ 21,040 ============================================================================================ Dividends paid on preferred shares of subsidiaries $ 423 $ 530 $ 570 ============================================================================================ Net income applicable to common shareholders $ 4,511 $ 20,840 $ 20,470 ============================================================================================ Basic earnings per share $ .40 $ 1.77 $ 1.73 ============================================================================================ Diluted earnings per share $ .40 $ 1.63 $ 1.60 ============================================================================================
The accompanying notes to consolidated financial statements are an integral part of this statement. CONSOLIDATED BALANCE SHEET - -------------------------------------------------------------------------------- (Dollars in Thousands except share and per share amounts)
AS OF JANUARY 31 2000 1999 - --------------------------------------------------------------------------------------------------- ASSETS Current assets: Cash and cash equivalents $ 23,188 $ 11,460 Accounts receivable, less allowance for doubtful accounts of $1,511 and $1,009 54,934 72,354 Inventories, at average cost which is lower than market: Finished goods and components 34,712 44,496 Goods in process 1,654 2,309 Raw materials 11,121 15,210 - --------------------------------------------------------------------------------------------------- 47,487 62,015 Deferred income taxes (Note 4) 3,544 254 Prepaid expenses and other current assets 1,693 7,640 - --------------------------------------------------------------------------------------------------- Total current assets 130,846 153,723 Property, plant and equipment, net (Notes 5 and 9) 86,716 100,075 Deferred income taxes (Note 4) 9,356 3,370 Goodwill 75,179 86,462 Other assets 10,597 4,227 - --------------------------------------------------------------------------------------------------- Total assets $ 312,694 $ 347,857 =================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 5) $ 8,408 $ 9,817 Current portion of long-term debt (Note 5) 6,137 6,510 Accounts payable 22,960 26,789 Accrued payroll and payroll taxes 5,707 6,954 Accrued environmental expenditures (Note 12) 7,910 1,000 Other accrued expenses 13,557 8,105 - --------------------------------------------------------------------------------------------------- Total current liabilities 64,679 59,175 Long-term debt (Note 5) 109,043 142,783 Accrued environmental expenditures (Note 12) 10,405 7,228 Other liabilities 4,260 3,228 - --------------------------------------------------------------------------------------------------- Total liabilities 188,387 212,414 =================================================================================================== Commitments and contingencies (Notes 11, 12, 13) Mandatorily redeemable convertible preferred stock and minority interest (Note 7) 11,374 15,949 Shareholders' equity: (Notes 6 and 7) Common stock, $.50 par value, authorized 20,000,000 shares; 11,439,890 and 11,587,990 outstanding 5,784 5,858 Additional paid-in capital 399 -- Retained earnings 122,922 125,065 Accumulated other comprehensive income (loss): Cumulative foreign currency translation adjustments (15,943) (11,200) Treasury stock, at cost, 127,498 shares (229) (229) - --------------------------------------------------------------------------------------------------- Total shareholders' equity 112,933 119,494 - --------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $ 312,694 $ 347,857 ===================================================================================================
The accompanying notes to consolidated financial statements are an integral part of this statement. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- (Dollars in Thousands except per share amounts)
Accumulated Common Stock Additional Other Annual ------------------ Paid-In Treasury Retained Comprehensive Comprehensive Shares Amount Capital Stock Earnings Income Income - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 31, 1997 11,667 $ 6,024 $ - $ (686) $ 94,561 $ (1,142) Net income - - - - 21,040 - $21,040 Dividends ($0.40 per share) - - - - (5,505) - - Common stock repurchased (60) (30) (1,005) - - Treasury shares issued for acquisitions 254 - 3,711 457 - - - Translation adjustment - - - - - (6,874) (6,874) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 31, 1998 11,861 5,994 3,711 (229) 109,091 (8,016) $14,166 ======= Net income - - - - 21,370 - $21,370 Dividends ($0.40 per share) - - - - (5,361) - - Common stock repurchased (289) (145) (3,919) - - - - Stock options exercised 15 8 239 - - - - Redemption of mandatorily redeemable convertible preferred stock - - (54) - (35) - - Translation adjustment - - - - - (3,184) (3,184) Other 1 1 23 - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 31, 1999 11,588 5,858 - (229) 125,065 (11,200) $ 18,186 ======== Net income - - - - 4,934 - $ 4,934 Dividends ($0.40 per share) - - - - (5,321) - - Common stock repurchased (176) (88) - - (1,756) - - Conversion of preferred stock 28 14 399 - - - - Translation adjustment - - - - - (4,743) (4,743) - ------------------------------------------------------------------------------------------------------------------------------------ Balance at January 31, 2000 11,440 $ 5,784 $ 399 $ (229) $ 122,922 $ (15,943) $ 191 - ------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part of this statement. CONSOLIDATED STATEMENT OF CASHFLOWS - -------------------------------------------------------------------------------- (Dollars in Thousands)
Year Ended January 31 2000 1999 1998 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,934 $ 21,370 $ 21,040 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,386 21,550 20,280 Deferred income taxes (9,373) 1,770 (9,863) Loss (gain) on sale of property 1,223 (3,873) - Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: Accounts receivable 9,847 (10,083) (963) Inventories 3,877 (3,735) (6,626) Prepaid expenses 5,778 (1,629) (3,577) Accounts payable and accrued expenses 4,344 2,570 (7,018) Accrued environmental expenditures 10,087 (3,088) 1,403 Other liabilities 1,032 (4,150) 1,025 - -------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 50,135 20,702 15,701 - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment (16,834) (15,459) (15,453) Business acquisitions - - (72,534) Proceeds from sale of assets 29,785 11,375 5,036 Other assets (540) 7,772 (4,377) - -------------------------------------------------------------------------------------------------------------- Net cash provided (used) by investing activities 12,411 3,688 (87,328) - -------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on long-term debt (61,783) (5,241) (36,034) Proceeds from issuance of long-term debt 28,844 - 135,759 Notes payable to banks, net (1,409) (3,376) (20,264) Redemption of convertible preferred stock and minority interest (4,162) (4,730) - Repurchase of common stock (1,844) (4,064) (1,035) Issuance of common stock - 271 - Cash dividends paid (5,321) (5,361) (5,505) - -------------------------------------------------------------------------------------------------------------- Net cash (used) provided by financing activities (45,675) (22,501) 72,921 - -------------------------------------------------------------------------------------------------------------- EFFECT OF EXCHANGE RATE CHANGES (5,143) (3,395) (3,970) - -------------------------------------------------------------------------------------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 11,728 (1,506) (2,676) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,460 12,966 15,642 - -------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 23,188 $ 11,460 $ 12,966 ============================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest $ 8,515 $ 12,220 $ 8,608 Income taxes $ 8,561 $ 13,925 $ 12,936 Conversion of mandatorily redeemable convertible preferred stock to common stock $ 413 $ - $ - Exchangeable preferred stock issued for acquisition $ - $ - $ 15,640
The accompanying notes to consolidated financial statements are an integral part of this statement. 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 material 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 hydraulic cylinders 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 1,800 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. 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 long-lived assets based upon expectations of nondiscounted cash flows of the acquired businesses. As of January 31, 2000, the Company believes that there are no significantly impaired long-lived assets. Accumulated amortization of goodwill and other assets was $12,451,000 and $9,518,000 at January 31, 2000 and 1999, 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. DIVESTITURE OF INDUSTRIAL TIRES LIMITED On April 29, 1999 the Company completed the sale of its tire, wheel and baseband business to Maine Rubber Company for approximately $38,108,000 including the assumption of liabilities. The Company recorded an after tax loss on the sale of approximately $1,085,000. In fiscal 1999 and 1998 the tire, wheel, and baseband business contributed approximately $10,832,000 and $47,086,000 in sales respectively. DIVESTITURE OF WORLDMAST PRODUCT LINE On January 22, 1999, the Company completed the sale of its Worldmast product line to Lift Technologies, Inc. for approximately $11,242,000. A former Cascade officer and director is the principal owner of Lift Technologies, Inc. The Company recorded a gain on the sale of $582,000. The transaction included the sale of the Worldmast factory in Westminster, South Carolina as well as other related manufacturing assets in North America and Europe. In fiscal 1998, the Worldmast product line contributed approximately $54,000,000 in net sales. FORWARD EXCHANGE CONTRACTS The Company enters into foreign exchange contracts to manage its exposure to foreign currency exchange risk. At January 31, 2000, the Company had approximately $18,252,000 in contracts to buy or sell foreign currency in the future. Substantially all of these contracts mature in one month or less. 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 for a contract to be consummated on the same future date as the original contract. STOCK-BASED COMPENSATION The Company accounts for its stock-based compensation under 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 $4,743,000, $3,184,000, and $6,874,000 for the years ended January 31, 2000, 1999 and 1998, 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 evaluated 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 the Company's monetary assets and liabilities approximates fair value as of January 31, 2000 and 1999. 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. NOTE 2 - ADOPTION OF FINANCIAL ACCOUNTING STANDARDS NUMBER 133 The Company adopted Statement of Financial Accounting Standards No. 133 (FAS 133), "Accounting for Derivative Instruments and Hedging Activities" in 1998. The adoption resulted in no material adjustment to the Company's financial statements. NOTE 3 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company has operations and sells products to dealers and original equipment manufacturers throughout the world. The Company's activities expose it to a variety of market risks, including the effects of changes in foreign currency exchange rates. These financial exposures are monitored and managed by the Company within the Company's foreign exchange management policy as approved by the Board of Directors. The Company's risk-management program focuses on the unpredictability of financial markets and seeks to reduce the effects that the volatility of these markets may have on its operating results. The Company maintains a foreign currency risk-management strategy that uses derivative instruments to protect its interests from unanticipated fluctuations in earnings caused by volatility in currency exchange rates. Various amounts of the Company's payables, receivables and subsidiary royalties are denominated in foreign currencies, thereby creating exposures to changes in exchange rates. The Company purchases foreign currency forward-exchange contracts, with contract terms normally lasting less than one month, to protect against the adverse effects that exchange rate fluctuations may have on foreign currency denominated trade receivables and trade payables. These derivatives do not qualify for hedge accounting, in accordance with FAS 133, because they relate to existing assets or liabilities denominated in a foreign currency. The gains and losses on both the derivatives and the foreign currency denominated trade receivables and payables are recorded as transaction adjustments in current earnings thereby minimizing the effect on current earnings of exchange-rate fluctuations. By using derivative financial instruments to hedge exposures to changes in exchange rates, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counter-party to perform under the terms of the derivatives contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates repayment risk for the Company. When the fair value of a derivative contract is negative, the Company owes the counterparty and, therefore, it does not possess repayment risk. The Company minimizes the credit or repayment risk in derivative instruments by: entering into transactions with counterparties whose credit ratings are AA or higher; monitoring the amount of exposure to each counterparty; and monitoring the financial condition of its counterparties. Market risk is the adverse effect on the value of a foreign-exchange contract that results from a change in the underlying exchange rates. The market risk associated with foreign-exchange contracts is managed by the establishment and monitoring of parameters that limit the types and degree of market risk that may be undertaken. NOTE 4 - INCOME TAXES
Year Ended January 31 2000 1999 1998 - ------------------------------------------------------------------------------------------------ (Dollars in Thousands) Income before taxes was as follows: United States $ 3,323 $23,260 $28,260 Foreign 3,788 7,995 3,830 - ------------------------------------------------------------------------------------------------ Total $ 7,111 $31,255 $32,090 - ------------------------------------------------------------------------------------------------ Taxes charged (credited) against operations were as follows: Current Federal $ 1,852 $ 6,625 $ 9,105 State 406 1,300 925 Foreign 8,624 1,425 4,260 - ------------------------------------------------------------------------------------------------ Total 10,882 9,350 14,290 - ------------------------------------------------------------------------------------------------ Deferred Federal (2,353) 150 (430) State (58) 65 (80) Foreign (6,294) 320 (2,730) - ------------------------------------------------------------------------------------------------ Total (8,705) 535 (3,240) - ------------------------------------------------------------------------------------------------ Total income taxes $ 2,177 $ 9,885 $11,050 - ------------------------------------------------------------------------------------------------ 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 2.9 2.9 1.7 Effect of foreign tax rates 15.0 (3.8) .6 Foreign sales corporation (3.3) (.4) (.7) International financing (17.0) (3.9) (.7) Tax credits and other (2.0) 1.8 (1.5) - ------------------------------------------------------------------------------------------------ Effective income tax rate 30.6% 31.6% 34.4% - ------------------------------------------------------------------------------------------------
The deferred tax liabilities (assets) recorded on the consolidated balance sheet are comprised of the following:
January 31 2000 1999 - ---------------------------------------------------------------- (Dollars in Thousands) Accruals not deductible until paid $ (1,148) $ (968) Accrued environmental expenditures (2,230) 799 Other (166) (85) - ---------------------------------------------------------------- Current deferred income taxes $ (3,544) $ (254) - ---------------------------------------------------------------- Depreciation $ 6,986 $ 4,030 Employee benefits (1,189) (1,178) Accrued environmental expenditures (4,570) (3,920) Foreign tax credits (8,085) (2,208) Net operating losses (791) - Other (2,498) (94) - ---------------------------------------------------------------- (10,147) (3,370) Deferred tax asset valuation allowance 791 - - ---------------------------------------------------------------- Noncurrent deferred income taxes $(9,356) $ (3,370) - ----------------------------------------------------------------
The Company has foreign loss carryforwards of $2,198,000 at January 31, 2000, which do not expire. No benefit for the foreign tax losses has been recognized in the financial statements. The Company has recognized the benefit of U.S. foreign tax credit carryforwards of $493,000 which expire on January 31, 2005. Additionally, a benefit of $7,592,000 has been recognized for U.S. foreign tax credits attributed to foreign earnings not yet repatriated. The five-year expiration period does not begin until the foreign earnings are repatriated. NOTE 5 - BORROWINGS
January 31 2000 1999 - ----------------------------------------------------------------------------------------- (Dollars in Thousands) $50 million Commercial Paper, backed by $100 million revolving credit facility, sold at discount, interest at variable rates (6.35% at 1/31/2000) $ 27,844 $ - $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 (6.73% at 1/31/00); principal payable in 2002 - 59,000 6.7% mortgage note, due quarterly through 2008 secured by plant 5,241 6,856 6.92% series A and series B senior notes, interest payable currently, principal due annually 2002 through 2007 75,000 75,000 Fixed assets under capital lease, variable interest (7.3% at 1/31/00), monthly payments through 200l 6,527 5,908 4.1% mortgage note, due semi-annually through 2001, secured by building - 1,031 Other 568 1,498 - ----------------------------------------------------------------------------------------- 115,180 149,293 Less current maturities 6,137 6,510 - ----------------------------------------------------------------------------------------- Total long-term debt $109,043 $142,783 - -----------------------------------------------------------------------------------------
The revolving line of credit agreement, the series A and B senior notes, and the commercial paper backed by the revolving line of credit contain dividend restrictions and certain covenants, including covenants related to subsidiary indebtedness, additional indebtedness, net worth, fixed charges, funded debt and leverage ratios. Maturities of long-term debt for the years January 31, 2001 through January 31, 2005, and thereafter, respectively, are $6,137,000, $14,691,000, $40,960,000, $13,117,000, $13,117,000 and $27,158,000. Borrowing arrangements with commercial banks provided short-term lines of credit at January 31, 2000 totalling $22,872,000, of which $14,464,000 was unused. Average interest rates on short-term borrowings were 4.5% and 3.7% at January 31, 2000 and 1999, respectively. Commercial paper maturities are 60 days or less. However, it is management's intention to extend these maturities based on market acceptance. NOTE 6 - 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 or four 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 $358,000, $362,000, and $247,000 for 1999, 1998, and 1997, respectively, using the following assumptions:
Year Ended January 31 2000 1999 1998 - --------------------------------------------------------------------- (Dollars in Thousands) Risk-free interest rate 5.4% 5.5% 6.5% Expected life 5 Years 5 Years 5 Years Expected volatility 33% 35% 30% Expected dividend yield 3.1% 2.5% 2.5%
A summary of the Plan's status at January 31, 2000, 1999 and 1998 together with changes during the periods then ended are presented in the following table:
Weighted Average Shares Price Per Share ------ --------------- 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 Granted 237,337 16.37 Exercised (15,077) 16.37 Forfeited (122,794) 15.87 - --------------------------------------------------------------------- Balance January 31, 1999 379,189 $16.00 Granted 49,595 13.00 Exercised - - Forfeited (89,304) 15.75 - --------------------------------------------------------------------- Balance January 31, 2000 339,480 $15.70 =====================================================================
The following table summarizes information about fixed options outstanding at January 31, 2000.
Exercise Number Weighted Weighted Average Price of Shares Average Price Contractual Life 13.00 40,147 13.00 9 15.25 68,355 15.25 7 16.00 31,430 16.00 6 16.38 199,548 16.38 7
NOTE 7 - CAPITAL STOCK There were 1,100,000 exchangeable preferred shares of Cascade (Canada) Ltd. outstanding with an approximate value of $15,640,000. In fiscal 1998, 300,000 exchangeable shares were redeemed for $4,350,000. Holders of exchangeable shares are entitled to voting rights of an equivalent number of the Company common shares and are entitled to dividends equivalent to those declared and paid on like numbers of Cascade common stock. As of January 31, 2000, 800,000 of the shares are still outstanding. Cascade (Canada) Ltd. 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. 330,000 shares of Cascade (Ontario), Inc. preferred stock have been repurchased by the Company. Each share of preferred stock was convertible into one share of the Company's common stock at the holders' option. The preferred stock gave 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 approximately $4,950,000. Therefore, the Preferred Stock was classified as "Mandatorily Redeemable Convertible Preferred Stock". The provisions of the preferred stock also entitled 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. As of January 31, 2000 no shares were outstanding. There are 200,000 shares authorized of no par value preferred stock. As of January 31, 2000 no shares were outstanding. NOTE 8 - 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.
Year Ended January 31 2000 1999 1998 - ---------------------------------------------------------------------------- (Dollars and Shares in Thousands Except Per Share Amounts) Basic Earnings Per Share: Net income $ 4,934 $ 21,370 $21,040 Preferred stock dividends (423) (530) (570) - ---------------------------------------------------------------------------- Income available to common shareholders 4,511 20,840 20,470 - ---------------------------------------------------------------------------- Basic weighted-average shares of common stock outstanding 11,402 11,748 11,858 - ---------------------------------------------------------------------------- Basic EPS $ .40 $ 1.77 $ 1.73 ============================================================================ Diluted Earnings Per Share: Income available to common shareholders 4,511 20,840 $20,470 Effect of dilutive securities: Mandatorily redeemable convertible preferred stock 320 410 440 Exchangeable preferred stock 103 120 130 - ---------------------------------------------------------------------------- Net income $ 4,934 $ 21,370 $21,040 ============================================================================ Weighted-Average shares of common stock outstanding 11,402 11,748 11,858 Assumed conversion of mandatorily convertible preferred stock 800 1,091 985 Exchangeable preferred stock 183 309 330 Dilutive effect of stock options - - 17 - ---------------------------------------------------------------------------- Diluted weighted-average shares of common stock outstanding 12,385 13,148 13,190 - ---------------------------------------------------------------------------- Diluted EPS $ .40 $ 1.63 $ 1.60 ============================================================================
NOTE 9 - PROPERTY, PLANT AND EQUIPMENT
January 31 2000 1999 - ---------------------------------------------------------------- (Dollars in Thousands) Land $ 4,850 $ 5,261 Construction in progress 442 99 Buildings 39,394 43,146 Machinery and equipment 143,090 162,194 - ---------------------------------------------------------------- 187,776 210,700 Accumulated depreciation (101,060) (110,625) - ---------------------------------------------------------------- $ 86,716 $ 100,075 ================================================================
NOTE 10 - 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) Ltd. (Exchangeable Shares valued at approximately $15,640,000.) 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. NOTE 11 - 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 ending January 31, 2001 through January 31, 2005, respectively, are $3,896,000, $2,396,000, $1,675,000, $917,000 and $316,000. For the years ended January 31, 2000, 1999 and 1998 total rentals charged to expense amounted to $1,986,000, $4,800,000 and $2,042,000. NOTE 12 - 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, 2000 include a charge for $12,000,000 resulting from the Company's change in estimate regarding its environmental exposures. This change in estimate was caused by a number of factors, including an adverse legal decision rendered in March 2000 in connection with a lawsuit brought by the Boeing Corporation. The after-tax impact of this accrual on net income was approximately $7,600,000. Earnings for the year ended January 31, 1998 include the effect of settlements with several insurers totaling $23,750,000. The impact of these settlements on 1998 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. The Company's accrued environmental liability at January 31, 2000 totalled $18,315,000, of which $7,910,000 is expected to be spent in 2000. The Company believes this accrual is adequate and fairly approximates known future remediation costs. However, since future remediation costs are subject to many uncertainties, company estimates may continue to be revised and therefore, actual expenses may exceed the amount recorded at January 31, 2000. NOTE 13 - PENSION AND OTHER POSTRETIREMENT BENEFITS The Company has defined benefit plans covering certain 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 U.S. pension obligation under this plan by funding lump sum distributions or non-participating annuity contracts. The Company's funding policy for the foreign pension plan is to make annual contributions based on actuarially determined funding requirements. The pension benefits are based on years of service and average earnings over a specified five-year period of time. 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 $2,243,000, $2,267,000, and $1,901,000 for the years ended January 31, 2000, 1999 and 1998, respectively. The Company provides health care benefits for eligible retirees. The Company accounts for such costs under Statement of Financial Accounting Standards No.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. To estimate the costs of health care benefits for eligible retirees, health care costs were assumed to increase at an annual rate of 10% with the rate of increase declining ratably to 4% by 2005 and thereafter. If the cost trend rates were increased by one percentage point, the accumulated post-retirement benefit obligation as of January 31, 2000 would increase by $491,469 and net periodic post-retirement benefit cost would increase by $52,783. NOTE 13 - PENSION AND OTHER POSTRETIREMENT BENEFITS (continued) The status of employee pension and other postretirement benefit plans is summarized below:
Pension Benefits Other Benefits Year Ended January 31 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ (Dollars in Thousands) CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year $ 7,904 $ 6,001 $ 5,629 $ 5,120 $ 4,890 $ 4,007 Service cost 193 289 237 83 83 69 Interest cost 310 392 529 324 320 281 Participant contributions 94 134 187 - - - Plan amendments - - - - - - Acquisition and divestitures (2,578) (142) 3,653 - - - Exchange rate changes - (10) - - - - Settlements 8 - (4,603) - - - Benefits paid (452) (230) (625) (540) (470) (403) Actuarial (gain) or loss 366 1,470 994 (395) 297 936 - ------------------------------------------------------------------------------------------------------------------------------------ Benefit obligation at end of year $ 5,845 $ 7,904 $ 6,001 $ 4,592 $ 5,120 $ 4,890 ==================================================================================================================================== CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year $ 7,185 $ 6,070 $ 5,656 $ - $ - $ - Actual return on plan assets 529 1,129 468 - - - Acquisition and divestitures (2,482) (261) 3,691 - - - Settlements - - (4,603) - - - Employer contributions 376 374 1,296 540 470 403 Participant contributions 87 134 187 - - - Benefits paid (452) (230) (625) (540) (470) (403) Exchange rate changes - (31) - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Fair value of plan assets at end of year $ 5,243 $ 7,185 $ 6,070 $ - $ - $ - ==================================================================================================================================== RECONCILIATION OF FUNDED STATUS Funded status $ (602) $ (719) $ 69 $ (4,592) $(5,120) $ (4,890) Unrecognized actuarial (gain) or loss 751 19 - 1,461 2,021 1,860 Unrecognized prior service cost - - - - - - Prepaid costs - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Net amount recognized at year-end $ 149 $ (700) $ 69 $ (3,131) $(3,099) $ (3,030) ==================================================================================================================================== AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION CONSIST OF: Prepaid benefit cost $ 149 $ - $ 69 $ - $ - $ - Accrued benefit liability - (700) - (3,131) (3,099) (3,030) - ------------------------------------------------------------------------------------------------------------------------------------ Net amount recognized at year-end $ 149 $ (700) $ 69 $ (3,131) $(3,099) $ (3,030) ==================================================================================================================================== COMPONENTS OF NET PERIODIC BENEFIT COST Service cost $ 193 $ 289 $ 237 $ 83 $ 83 $ 69 Interest cost 310 392 529 324 320 281 Expected return on plan assets (370) (312) (425) - - - Amortization of prior service cost - - 5 - - - Amortization of transitional (asset) or obligation - - 25 - - - Recognized net actuarial (gain) or loss 3 - - 165 136 49 - ------------------------------------------------------------------------------------------------------------------------------------ Net periodic benefit cost $ 136 $ 369 $ 371 $ 572 $ 539 $ 399 ==================================================================================================================================== WEIGHTED-AVERAGE ASSUMPTIONS AS OF DEC. 31 Discount rate 5.75% 6.50% 7.50% 7.50% 6.50% 6.75% Expected long-term rate of return on plan 7.00% 6.50% 8.00% N/A N/A N/A assets
NOTE 14 - INFORMATION ABOUT OPERATIONS
YEAR ENDED JANUARY 31 NORTH AMERICA EUROPE OTHER ELIMINATIONS CONSOLIDATED - --------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands) 2000 Sales to unaffiliated customers $ 201,710 $ 89,307 $ 33,761 $ - $ 324,778 Transfers between areas 26,071 34,406 508 (60,985) - - --------------------------------------------------------------------------------------------------------------------------------- Total revenue $ 227,781 $ 123,713 $ 34,269 $ (60,985) $ 324,778 - --------------------------------------------------------------------------------------------------------------------------------- Net income $ 6,462 $ 74 $ (1,602) $ - $ 4,934 - --------------------------------------------------------------------------------------------------------------------------------- Identifiable assets $ 186,397 $ 90,905 $ 34,899 $ - $ 312,201 - --------------------------------------------------------------------------------------------------------------------------------- 1999 Sales to unaffiliated customers $ 264,625 $ 111,245 $ 32,060 $ - $ 407,930 Transfers between areas 15,626 7,679 352 (23,657) - - --------------------------------------------------------------------------------------------------------------------------------- Total revenue $ 280,251 $ 118,924 $ 32,412 $ (23,657) $ 407,930 - --------------------------------------------------------------------------------------------------------------------------------- Net income $ 18,135 $ 3,605 $ (370) $ - $ 21,370 - --------------------------------------------------------------------------------------------------------------------------------- Identifiable assets $ 183,943 $ 130,390 $ 33,524 $ - $ 347,857 - --------------------------------------------------------------------------------------------------------------------------------- 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 - ---------------------------------------------------------------------------------------------------------------------------------
NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER - --------------------------------------------------------------------------------------------------------------------------------- (Dollars in Thousands except per share amounts) YEAR ENDED JANUARY 31, 2000 Net sales $ 89,500 $ 77,709 $ 82,470 $ 75,099 Gross profit before depreciation $ 30,670 $ 27,671 $ 27,113 $ 24,976 Net income (loss) $ 4,110 $ 4,442 $ 1,340 $ (4,958) Net income (loss) per share: Basic $ .35 $ .38 $ .11 $ (.44) Diluted $ .33 $ .35 $ .11 $ (.44) YEAR ENDED JANUARY 31, 1999 Net sales $ 107,125 $ 105,160 $ 105,660 $ 89,985 Gross profit before depreciation $ 33,490 $ 32,075 $ 33,320 $ 27,850 Net income $ 6,815 $ 5,490 $ 6,025 $ 3,040 Net income per share: Basic $ .56 $ .45 $ .50 $ .26 Diluted $ .51 $ .41 $ .46 $ .24
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 statement 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, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2000 in conformity with accounting principles generally accepted in the United States. 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 auditing standards generally accepted in the United States, 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/ PricewaterhouseCoopers LLP Portland, Oregon March 28, 2000 SHAREHOLDER INFORMATION Cascade's Form 10-K Report to the Securities and Exchange Commission 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. Or visit our website at www.cascorp.com. ANNUAL MEETING The Annual Meeting of the shareholders of Cascade Corporation will be held at Cascade Corporation Corporate Headquarters, 2201 N.E. 201st Ave, Fairview, Oregon at 10:00 a.m. on Thursday, May 11, 2000. 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 2000 and 1999 were as follows:
YEAR ENDED JANUARY 31 2000 1999 - ------------------------------------------------------------------------------------------------------------------- HIGH LOW HIGH LOW Market price range First quarter $ 17.25 $ 9.94 $ 18.25 $ 14.31 Second quarter 14.88 12.94 18.44 15.08 Third quarter 13.38 8.94 16.94 11.63 Fourth quarter 11.13 8.00 16.25 13.00
COMMON STOCK DIVIDENDS
YEAR ENDED JANUARY 31 2000 1999 - --------------------------------------------------------------- First quarter $ .10 $ .10 Second quarter .10 .10 Third quarter .10 .10 Fourth quarter .10 .10 - --------------------------------------------------------------- Total $ .40 $ .40 ===============================================================
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. INVESTOR INFORMATION TRANSFER AGENT & REGISTRAR ChaseMellon 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. THE BOARD C. CALVERT KNUDSEN Chairman Director, West Fraser Timber Co., Ltd.; Trustee, Washington Research Foundation; ROBERT C. WARREN, JR. President & Chief Executive Officer of the Corporation Director, Esco Corporation, manufacturers and distributors of high-alloy steel products. ERIC HOFFMAN Chairman, Hoffman Corporation, general contractors. GREG H. KUBICEK President, The Holt Company, a commercial real estate development company; President, Holt Homes, Inc., and Affiliates; Director, Bay Audio, an in-home audio and electronics firm. NICHOLAS R. LARDY Senior Fellow, The Brookings Institution, a policy research institution. ERNEST C. MERCIER Chairman, Oxford Properties Group Inc.,a company owning and managing commercial real estate; Director, Camvec Corporation, a transportation company; Director, Golden Star Resources Ltd., a gold and diamond exploration company. JAMES S. OSTERMAN President, Outdoor Products Group, Oregon Cutting Systems, Division of Blount, Inc., a diversified manufacturer. JACK B. SCHWARTZ Partner, Newcomb, Sabin, Schwartz & Landsverk, LLP, Attorneys; Assistant Secretary of the Corporation. HENRY W. WESSINGER II Senior Vice President, Ragen MacKenzie Inc., a brokerage firm; Trustee, Oregon Graduate Institute of Science and Technology; Trustee, Catlin Gabel School Foundation. Director, River View Cemetery. NANCY A. WILGENBUSCH President, Marylhurst University; Director, Pacificorp, an energy company; Director, Power Cor, an Australian subsidiary of Pacificorp; Director and Chairman, Portland branch of the Federal Reserve Bank of San Francisco. CORPORATE OFFICERS ROBERT C. WARREN, JR. President & Chief Executive Officer RICHARD S. ANDERSON Senior Vice President - International TERRY H. CATHEY Senior Vice President - Americas KURT G. WOLLENBERG Senior Vice President - Finance, Secretary and Treasurer GREGORY S. ANDERSON Vice President - Human Resources CHARLIE S. MITCHELSON Vice President and Managing Director - Europe ROBERT L. MOTT Vice President - OEM Group ART OTSUKA Vice President - Asian Operations ANTHONY F. SPINELLI Managing Director - Canadian Operations GLOBAL NETWORK AUSTRALIA Adelaide Brisbane Melbourne Perth Sydney CANADA Guelph, Ontario Mississauga, Ontario CHINA Xiamen Hebei ENGLAND Cramlington Manchester Sheffield FINLAND Vantaa FRANCE La Machine Paris GERMANY Monchengladbach ITALY Brescia JAPAN Osaka KOREA Inchon NEW ZEALAND Auckland SOUTH AFRICA Johnannesburg SPAIN Barcelona SWEDEN Vaggeryd THE NETHERLANDS Almere Hoorn UNITED STATES CALIFORNIA Los Angeles San Francisco GEORGIA Atlanta Warner Robins ILLINOIS Chicago NEW YORK Buffalo NORTH CAROLINA Beulaville OHIO Findlay Springfield OREGON Portland TENNESSEE Memphis TEXAS Dallas A TOP 100 COMPANY For the second year in a row, Cascade has been selected as one of the 100 Best Companies to Work For in Oregon for the year 2000 by Oregon Business Magazine. Cascade ranked in the top third of companies selected. Companies are judged on five criteria: pay and benefits; employee involvement; community involvement; advancement and training; and workplace culture. 1999 ANNUAL REPORT [LOGO] CORPORATE HEADQUARTERS 2201 NE 201st Fairview, OR 97024 MAILING ADDRESS P.O. Box 20187 Portland, OR 97294-0187 800 CASCADE (227-2233) www.cascorp.com - -C- 2000 Cascade is a registered trademark of Cascade Corporation -C- 2000 All Rights Reserved. EX-27.1 4 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999 ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS 12-MOS 12-MOS JAN-31-2000 JAN-31-1999 JAN-31-1998 JAN-31-2000 JAN-31-1999 JAN-31-1998 23,188 11,460 12,966 0 0 0 54,934 72,354 62,271 1,511 1,009 743 47,487 62,015 52,280 130,846 153,723 140,693 187,776 210,700 200,425 101,060 110,625 99,278 312,694 347,857 349,592 64,679 59,175 59,630 109,043 142,783 144,785 11,374 15,949 20,590 0 0 0 5,784 5,858 5,994 107,149 113,636 104,557 312,694 347,857 349,592 324,778 407,930 369,865 324,778 407,930 369,865 214,348 281,195 259,605 305,972 371,245 329,095 4,039 (4,755) (150) 0 0 0 8,686 10,940 9,440 7,111 31,255 32,090 2,177 9,885 11,050 4,934 21,370 21,040 0 0 0 0 0 0 0 0 0 4,934 21,370 21,040 .40 1.77 1.73 .40 1.63 1.60
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