-----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, Vvvha8NcGN2/UQ7OfmCgM40DaXWz6X+24Ve24CvxHQ2X2X4JTYTfK823VHxWtcfR G0EJVehVkseEQ25O/kIX9A== 0001047469-98-017291.txt : 19980504 0001047469-98-017291.hdr.sgml : 19980504 ACCESSION NUMBER: 0001047469-98-017291 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980430 SROS: NONE 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: 98605758 BUSINESS ADDRESS: STREET 1: 2020 SW FOURTH AVE CITY: PORTLAND STATE: OR ZIP: 97201 BUSINESS PHONE: 5032270024 MAIL ADDRESS: STREET 1: 2020 SW FOURTH AVE CITY: PORTLAND STATE: OR ZIP: 97201 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, 1998 / / 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, 1998 was $191,995,243. The number of shares outstanding of the registrant's common stock as of March 31, 1998 was 11,860,710. DOCUMENTS INCORPORATED BY REFERENCE Portions of the 1997 Annual Report to Shareholders are incorporated by reference into Parts I, II and IV. Portions of the definitive Proxy Statement dated April 14, 1998 to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May 14, 1998 are incorporated by reference into Parts I and III. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- PART I ITEM 1. BUSINESS 1 General 1 Attachment Products 1 Fork Products 3 Industrial Tires 4 Other 5 ITEM 2. PROPERTIES 6 ITEM 3. LEGAL PROCEEDINGS 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 7 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 7 ITEM 6. SELECTED FINANCIAL DATA 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 11 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 11 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 11 ITEM 11. EXECUTIVE COMPENSATION 12 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 12 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 12 SIGNATURES 14
NOTE: All references to the fiscal year (i.e. Fiscal 1995, 1996 and 1997) refer to the period ended January 31 of the year subsequent to the fiscal year (i.e. January 31, 1996, January 31, 1997, and January 31, 1998). PART I ITEM 1. BUSINESS GENERAL Cascade Corporation is a corporation organized in 1943 under the laws of the State of Oregon. The term "the Company" as used hereinafter means Cascade Corporation and subsidiaries. The Company's headquarters are located at 2201 N.E. 201st Ave. Fairview, Oregon 97024 (telephone number 503-669-6300). The Company has for many years been one of the world's leading manufacturers of attachments, masts, hose reels, sideshifters, hydraulic cylinders and related replacement parts, primarily for the lift truck industry. Acquisitions in 1996 and 1997 expanded the Company's attachment and hydraulic cylinder capabilities, and broadened its focus to include forks and solid tires, also primarily for the lift truck industry. Following these acquisitions, the Company organized itself into three basic divisions: Attachment Products, Fork Products, and Industrial Tires. A description of each group follows: ATTACHMENT PRODUCTS The Attachment Products division manufactures an extensive line of hydraulically actuated attachments designed for mounting on industrial lift trucks. The primary function of these products is to increase the scope and efficiency of materials handling applications normally performed by lift trucks. The Attachment Products division offers a wide variety of functionally different attachments, each of which has several models, capacities and optional combinations. These attachments have been designed to clamp, lift, rotate, push, pull, tilt and sideshift a variety of loads such as appliances, paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, plywood and boxed, packaged, palletized and containerized products of virtually all types. In addition, the Attachment Products division manufactures hydraulic cylinders, which are used to transmit power in lift trucks and other types of machinery and industrial equipment. A substantial number of cylinders are utilized in the Company's proprietary lift truck attachment products. Hydraulic cylinders are also sold to manufacturers of various types of materials handling and other mobile equipment, usually through the customer's purchasing and engineering departments. The Company believes its Attachment Products division is one of the leading domestic and foreign independent suppliers of hydraulically actuated materials handling equipment designed for mounting on industrial lift trucks. Several lift truck manufacturers, who are customers of the Company, are also competitors in varying degrees to the extent that they manufacture a portion of their attachment requirements. Since the Attachment Products division offers a broad line of attachments capable of supplying a significant part of the total requirements for the entire lift truck industry, the Company believes lower costs resulting from its relatively high unit volume would be difficult for any individual lift truck manufacturer to achieve. This division's products are sold to both original equipment manufacturers (OEMs) and equipment dealers. 1 Products are marketed throughout the United States, Canada, Latin America, Europe, the Middle East, Australia, Africa and Asia. Since the Attachment Products division deals with lift truck manufacturers and their dealers, a substantial portion of its sales are made to the approximately ten major companies in the industry. NACCO Industries Inc. is the Attachment Products division's single largest customer. Sales to NACCO and its subsidiaries, Hyster Company and Yale Materials Handling Inc., and to their independent dealers, were 5%, 9.2% and 9.7% of consolidated Company sales during the years ended January 31, 1998, 1997 and 1996, respectively, and were 7.2%, 9.2% and 9.7% of division sales during the same periods. The Attachment Products division purchases raw materials and components, principally rolled products from steel mills, unfinished castings and forgings, hydraulic motors and hardware items such as fasteners, rollers, hydraulic seals and hose assemblies. The division is not currently experiencing any shortages in obtaining raw materials or purchased parts. A significant portion of rolled steel is purchased from a German steel mill. With respect to other materials, the division has several domestic and foreign suppliers. Difficulties in obtaining any of those items could affect the division's results. The division's headquarters are located in Portland, Oregon. North American manufacturing activities are conducted in its plants in Portland, Oregon; Springfield, Ohio; Westminster, South Carolina; Beulaville, North Carolina, Warner Robins, Georgia; and Toronto, Ontario, Canada. Overseas manufacturing sites include the United Kingdom, The Netherlands, Australia, Sweden and China. In addition, this division has sales, engineering and warehousing facilities in Japan, Korea, Germany, France, Spain, Finland, New Zealand and South Africa. During the last five years, sales of attachments accounted for 78% to 55% of the Company's consolidated sales, and hydraulic cylinders accounted for approximately 17% to 8%. The lower percentages reflect the addition of Fork Products and Industrial Tires to the Company's product line. Replacement parts and other sales accounted for 14% to 7% of total sales. North American sales ranged from 55% to 63% of division sales, while European sales ranged from 27% to 32%. The backlog for this division was approximately $24,783,000 at January 31, 1998. Of this order backlog, approximately 92% was due within 60 days and substantially all within six months. The Attachment Products division maintains an extensive research and development effort aimed at increasing the efficiency, durability and capacity range of its product line. The Company does not believe patents are important to the division's business. The division's products are manufactured with the Cascade name and symbol, for which the Company has secured trademark protection. 2 FORK PRODUCTS In March 1997, the Company established the Fork Products division with the purchase of Kenhar Corporation (see note 10 to the 1997 Annual Report to Shareholders). The Fork Products division continues to market under the Kenhar brand name. Lift truck forks are carefully designed and engineered products requiring specially formulated steel, a manufacturing process which strengthens the "heel", certified welding of the brackets which hold them to the carriage and heat treatment of the finished product. Forks are certified lifting devices and subject to strict design, construction and safety requirements established by industry associations and the International Standards Association. The Fork Products division presently offers a wide variety of both standardized and specialized forks. Fork characteristics are dictated by the expected capacity to be lifted, the characteristics of the load, the ambient environment in which they are employed, the terrain over which the load will be moved and the operational life cycle of the vehicle using the fork. Accordingly, while there are some standard fork products, a wide range of forks in custom sizes and shapes is demanded in the market. The Company believes the Fork Products division is one of the leading independent manufacturers of forks for lift trucks in the world. Market share varies by geographic region. In addition to sales to the lift truck market, the Fork Products division has an increasing market share of forks sold to OEMs of construction, mining, agricultural and industrial (other than lift trucks) mobile equipment. The Company believes the Fork Products segment is the leading manufacturer in North America. It is the preferred supplier of many OEMs as well as after-market dealers and distributors. This division also has significant market share in Europe and is continuing its sales and manufacturing expansion into the Asia/Pacific region. Since the Fork Products division offers a broad range of both standard and specialized forks it is capable of supplying a significant part of the total requirements for the lift truck industry. Management believes that its high-unit volume results in lower costs that would be difficult for any single competitor to achieve. As with other divisions of the Company, the division's sales are primarily to the lift truck industry. A substantial portion of its sales are made to the approximately ten major companies in the industry. As previously mentioned, NACCO Industries Inc., along with its subsidiaries and dealers, is the Company's largest customer. During the eleven-month period ended January 31, 1998 that this division was owned by the Company, division sales to NACCO and its subsidiaries, Hyster Company and Yale Materials Handling, Inc. were 2.7% of consolidated sales and were 12.5% of division sales. The Fork Products division purchases material and components necessary to produce its products. The principal item purchased is bar steel. The division is not currently experiencing any shortage in obtaining bar steel. As with other manufactures using bar steel, the Fork Products division obtains its bar steel from steel mills under long-term purchase contracts. While the division has alternative suppliers of bar steel identified, difficulties in obtaining alternative sources of bar steel could affect the division's operating results should bar steel from one of its primary suppliers become unavailable. 3 Headquarters of this division are located in Guelph, Ontario, Canada. North American manufacturing activities are conducted in plants in Guelph, Canada; Findlay Ohio; and Vancouver, Washington. Overseas manufacturing sites include Manchester, United Kingdom; La Machine, France; Brescia, Italy; Hebei, China; and Inchon, South Korea. This division's products are primarily sold to OEMs and also to lift truck dealers. Products are marketed extensively throughout North America and Europe. In addition, the division is continuing to increase marketing activities and market share in Asia, Australia and New Zealand. As previously mentioned, this segment was purchased in March 1997. Accordingly, the Company's consolidated net sales includes sales from the Fork Products segment for the eleven months ended January 31, 1998. During this period this division accounted for 21% of total Company sales. During the year ended January 31, 1998, North American and European sales represented 67% and 28% of division sales. The backlog for this division was approximately $9,470,000 at January 31, 1998. Of this order backlog, approximately 79% was due within 60 days and substantially all within six months. Patents have been a relatively unimportant factor in the development of the division's business. INDUSTRIAL TIRES In January 1997 the Company purchased Industrial Tires Limited and created the Industrial Tire division (see note 10 to the consolidated financial statements of the 1997 Annual Report to Shareholders). The Industrial Tire division continues to market products under the ITL brand name. This division designs, manufactures, sells and services non-pneumatic or solid tires. Solid tires are used extensively on lift trucks and other industrial mobile equipment such as airport ground support equipment, aerial platform equipment and large loader and skid steer machinery. The Industrial Tire division is one of the leading North American suppliers of solid tires to the lift truck industry. In addition, the Industrial Tire division has made significant progress in expanding into the much broader market of high-load, high-hazard, and low-speed applications such as aerial platform equipment, airport ground support equipment and off-the-road applications such as waste management and underground mining. Products are sold primarily to the aftermarket through independent distributors, equipment dealers and tire dealers. The Industrial Tire division also sells a significant amount of its volume to OEMs for installation on new equipment. The Industrial Tire division has recently expanded its sales and marketing outside of North America and is now actively engaged in selling tires in Europe, Australia and Asia. The Industrial Tire division experiences intense competition from large companies offering a full range of products to smaller companies specializing in certain segments of the market. Important competitive factors include price, availability, service, product quality and company image. Management believes that through its commitment to research and development of new products 4 combined with existing manufacturing resources, low cost contract manufacturing and commitment to state-of-the-art distribution technologies, the Industrial Tire division should remain competitive. The Industrial Tire division purchases materials necessary to produce its products. The principal products purchased are rubber compounds and precision manufactured steel wheels ("basebands"). During the year, the division experienced an interruption in the supply of compounded rubber from its largest supplier. However, with only a slight effect on operations, the division was able to quickly identify an alternative supplier at comparable costs. Basebands are currently purchased from the Fork Products segment. As with compounded rubber products, management believes alternative suppliers of basebands are available. The Industrial Tire division is not experiencing any shortages in obtaining basebands. Nevertheless, difficulties in obtaining any of these products could affect the division's operating results. The division's headquarters, manufacturing plant and retail center are located in Mississauga, Ontario, Canada. Contract manufacturing is conducted in factories in Mexico and China. In addition to independent distributors, the division has nine distribution and warehousing centers located throughout North America. As with other divisions of the Company, Industrial Tire division sales are primarily to the lift truck industry. A substantial portion of its sales are made to the approximately ten major companies in the industry. During 1997, the division's largest customer accounted for 16.7% of its sales, while sales to its next largest customer were 9.2% of its sales. As previously mentioned, this division was purchased in January 1997. For the year ended January 31, 1998, this division accounted for 9% of total Company sales. Substantially all sales were in North America. The backlog for this division was approximately $2,610,000 at January 31, 1998. Substantially all of this order backlog was due within 60 days. Patents have been a relatively unimportant factor in the development of the division's business. OTHER RESEARCH AND DEVELOPMENT Most of the Company's research and development activities are performed in a 28,000-square-foot product development center in Portland, Oregon. The engineering staff develops and designs almost all of the products sold by the Company. This staff numbers approximately 79 engineers and is continually involved in developing new products and applications in the materials handling field and improving existing lines. Consolidated research and development expenses in the fiscal years ended January 31, 1998, 1997 and 1996 were approximately $5,500,000, $4,900,000 and $4,700,000, respectively. 5 ENVIRONMENTAL QUALITY From time to time the Company is the subject of investigations, conferences, discussions, and negotiations with various federal, state, local and foreign agencies with respect to cleanup of hazardous waste and compliance with environmental laws and regulations. The balance of the response to this section of Item 1 is incorporated by reference to Note 13 of the Notes to the Consolidated Financial Statements in the 1997 Annual Report to Shareholders and the information contained in "Management's Discussion and Analysis of Financial Conditions and Results of Operations". EMPLOYEES At January 31, 1998 the Company had 2,322 full-time employees throughout the world. The majority of these employees are not subject to collective bargaining agreements. The Company believes relations with its employees are excellent. FOREIGN OPERATIONS The Company has substantial operations outside the United States. There are additional business risks attendant to the Company's foreign operation such as the risk that the relative value of the underlying local currencies may weaken when compared to the U.S. dollar. For further information about foreign operations, please see Note 11 on page 18 of the 1997 Annual Report to Shareholders. FORWARD-LOOKING STATEMENTS Forward-looking statements throughout this report are based upon assumptions involving a number of risks and uncertainties. Factors which could cause actual results to differ materially from these forward-looking statements include, but are not limited to competitive factors in, and the cyclical nature of, the materials handling industry; fluctuations in lift truck orders or deliveries, availability and cost of raw materials; general business and economic conditions in North America, Europe and Asia; foreign currency fluctuations; effectiveness of the Company's cost reduction initiatives; and the Company's success in organizationally and operationally integrating recently acquired businesses. ITEM 2. PROPERTIES The Company owns and leases various types of properties located throughout North America, Europe, Australia, South Africa, China and Japan. Of the above mentioned properties, the following are considered principal facilities: The Company's principal executive offices are located at 2201 N.E. 201st Ave., Fairview, Oregon 97024. The Company operates sales offices, manufacturing or warehouse facilities in 16 countries. Its major manufacturing facilities in the United States are located in Springfield and Findlay, Ohio; Warner Robins, Georgia; Westminster, South Carolina; Beulaville, North Carolina; Portland, Oregon and Vancouver, Washington. Major manufacturing facilities outside the United States include Almere and Hoorn, The Netherlands; La Machine, France; Manchester and Newcastle, United Kingdom; Vaggeryd, Sweden; Toronto, Mississauga and Guelph, Canada; Brisbane and Melbourne, Australia; Inchon, Korea; Xiamen and Hebei, China; and Brescia, Italy. Sales offices and warehouse facilities are located in Japan, South Africa, New Zealand, Australia, Sweden, Italy, United Kingdom, France, Germany, The Netherlands, China, Canada and the United States. (See Item 1 Business for more information regarding the location of the principal facilities for each industry segment.) The Company owns 15 facilities that include major manufacturing facilities and certain sales and warehouse buildings, five of which are located in the United States and 10 of which are located in other countries. The Company leases 33 facilities, 13 of which are located in 6 the United States and 20 of which are located in other countries. The Company generally considers the productive capacity of the plants operated by each of its industry segments adequate and suitable for the requirements of each such segments. Several subsidiary companies are parties to various leases of office and computer equipment, storage space and automobiles which are of minor consequence. ITEM 3. LEGAL PROCEEDINGS Neither the Company nor any of its subsidiaries are involved in any material pending legal proceedings other than litigation related to environmental matters discussed at pages 18 and 19 of the 1997 Annual Report to Shareholders or matters in the regular course of business. The Company and its subsidiaries are adequately insured against product liability, personal injury and property damage claims which may occasionally arise. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS As of January 31, 1998, there were 389 holders of the Company's common stock including blocks of shares held by various depositories. It is the Company's belief that when the shares held by the depositories are attributed to the beneficial owners, the total exceeds 2,500. The remainder of the response to this Item is incorporated by reference to page 20 of the 1997 Annual Report to Shareholders. During the year ended January 31, 1998, a Canadian subsidiary of the Company issued 1,100,000 preference shares in connection with the acquisition of Kenhar Corporation, each exchangeable for one common share of the Company. The preference shares were issued in an exempt private offering transaction and have not been registered. The Company has agreed to register common shares issued to the holder of exchangeable shares under certain conditions. Absent registration, Rule 144 would apply to sales of such common shares. The Company also issued 225,000 common shares in connection with the acquisition of Hyco-Cascade Ltd., and 29,006 common shares in connection with the acquisition of minority interests in two subsidiaries of Kenhar, all in exempt private offering transactions. These common shares have not been registered. Absent registration, Rule 144 would apply to sales of such common shares. ITEM 6. SELECTED FINANCIAL DATA Pages 1, 5 and 20 of the 1997 Annual Report to Shareholders is incorporated by reference. 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS NET REVENUES Consolidated net sales for 1997 totaled $369,865,000, a 69.3% increase from sales of $218,485,000 for 1996. When compared to 1995, 1996 sales decreased 6.6%. Revenues in 1997 grew dramatically as a result of strong industry conditions but principally due to the acquisitions made during the past 18 months. Sales in 1996 were lower than 1995, reflecting softer lift truck shipments following 1995's record levels. Attachment Products sales in North America were 10.6% higher than in 1996. Industry booking figures reflected record order levels throughout the year, although shipments from lift truck manufacturers were only marginally higher than the previous year, clearly reflecting a decision to allow backlogs to grow rather than expanding production capacity as has been the case in previous cyclical upturns. Attachment Products sales in Europe grew 43.7% from 1996 as a result of management's pricing and other marketing initiatives designed to improve market share. European economies have shown modest but steady growth during the year, and prospects are good that this controlled growth will continue well into the current year. The Company's subsidiaries in Africa and Asia were hurt by currency and economic crises in those regions, and its Korean and Japanese operations in particular will continue to be challenged in 1998 by uncertain business conditions. Sales to these regions represented 5.9% of consolidated 1997 revenues. The addition of the Fork Products division increased sales by $79,745,000. Overall, the Company has been very pleased with the addition of Kenhar forks to its product line, and with greater emphasis on using the existing dealer distribution channel, management expects improved profitability. The addition of the Industrial Tire division increased sales by $35,380,000 in 1997. ITL solid tires showed a strong revenue increase during the year as a result of additional OEM business. However, uncertainties associated with ITL's Chinese contract supplier, as well as competitive pricing pressures, held tire profitability to marginal levels. The Company is reviewing market strategy and anticipates improved results in 1998. Any significant decline in the lift truck market could affect future operating results. COST OF SALES As a percentage of sales, cost of sales was 70.2% in 1997, 65.5% in 1996 and 65.5% in 1995. The percentage increased in 1997 primarily because a greater proportion of Company sales were to OEMs than in prior years. The Industrial Tire and Fork Products divisions were added in late fiscal 1996 and early 1997, respectively. Traditionally, due to the emphasis on OEM sales, these segments have achieved lower margins than the Attachment Products division. Also, with the addition of these two new divisions, the Company recorded certain one-time purchase accounting charges of $1,368,000 to cost of sales. DEPRECIATION AND AMORTIZATION Cascade invested heavily in the future with the business acquisitions made in 1997 and 1996. As part of these acquisitions, Cascade has recorded goodwill totaling $99,688,000 and is amortizing this goodwill over its 20 year estimated life. Accordingly, depreciation and amortization expense as a percentage of sales increased to 5.5% in 1997 from 4.7% in 1996 and 4.1% in 1995. 8 SELLING AND ADMINISTRATIVE EXPENSES The increase in the absolute dollar amount of selling and administrative expenses during fiscal 1997 was the result of the business acquisitions. As a percentage of sales, selling and administrative expenses were 17.3% in 1997, 18.4% in 1996 and 17.1% in 1995. ENVIRONMENTAL EXPENSES, NET Environmental expenses in 1997 include the effect of settlements with several insurance companies totaling $23,750,000. The net impact of these settlements after adjusting for certain litigation and environmental expenses was a credit to environmental expense of $14,890,000. In 1995, environmental expenses of $14,795,000 included a charge of $12,000,000 to provide for probable future environmental costs related to the Portland, Oregon manufacturing facility. NONOPERATING ITEMS Interest expense has increased significantly as the result of additional debt issued to fund business acquisitions. At the same time, interest income has decreased since excess cash has been used to reduce outstanding borrowings rather than invest in interest-bearing securities. PROVISION FOR INCOME TAXES The effective tax rate was 34.4% in 1997, 30.3% in 1996 and 34.3% in 1995. The 1996 decrease was due to the effect of an IRS settlement of a prior year's deferred compensation deductions. See note 2 to the consolidated financial statements relative to the Company's effective tax rate. NET INCOME Net income for the year ended January 31, 1998 was a record $21,040,000 ($1.60 per share). This compares to $17,420,000 ($1.48 per share) for the year ended January 31, 1997 and $10,550,000 ($.88 per share) in 1996. The 1997 amount includes after-tax settlements of $9,770,000 ($.74 per share) related to environmental litigation initiated several years ago. The 1997 net income (before insurance settlements) was a disappointing 3.0% of sales compared to 8.0% in 1996. Interest charges from acquisition debt along with amortization of goodwill totaled $6,945,000, after taxes ($.53 per share). Income before these charges and insurance settlements was 4.9% of sales. For the year ended January 31, 1998, net losses at our Australian subsidiary totaled $2,406,000. The Company has made substantial changes at this subsidiary and looks forward to improved performance in Australia during 1998. Net income for 1996 was 8% of sales compared to 4.5% in 1995. In 1995 the Company recorded a charge of $12,000,000 ($7,800,000 after taxes) for future environmental costs. Before the effect of the environmental charge, 1995 net income was 7.8% of sales. LIQUIDITY AND CAPITAL RESOURCES For the year ended January 31, 1998, capital expenditures totaled $15,453,000 compared to $16,624,000 for 1996 and $11,825,000 for 1995. Planned capital expenditures for 1998 of $16,336,000 include $5,815,000 for implementation of an enterprise-wide software system to link all of the Company's core business systems. Implementation will be phased-in throughout the operating units with final completion scheduled for fiscal 2000. The estimated total cost for this project is approximately $9,000,000. Other capital expenditures have been scaled back from previous year's 9 level to redirect cash flow. Goodwill increased significantly in 1997 due to the Company's business acquisitions. Dividends for 1997 totaled $.40 per share as compared to $.45 per share in 1996 and 1995, both of which included a special $.09 year end dividend. In 1997 the Company increased the quarterly dividend rate from $.09 to $.10 per share but chose not to declare a special year-end dividend. The Company's financial condition remains strong. The balance sheet shows $12,966,000 in cash and cash equivalents. Together with established lines of credit totaling $132,541,000, management believes these resources are more than sufficient to meet planned short-term needs and provide for working capital requirements associated with projected growth. Net cash provided by operations was $15,701,000 in 1997 compared to $22,374,000 in 1996 and $21,765,000 in 1995. The decrease in 1997 was primarily due to increases in inventories and deferred taxes and decreases in accounts payable and accrued expenses, partially offset by increases in net income and depreciation and amortization. Borrowings to finance the 1997 and 1996 business acquisitions have caused the ratio of short and long-term debt to shareholders' equity to rise to 1.45 to 1.00; however, all of the short-term borrowings associated with these acquisitions have been replaced by very manageable long-term financings through $75,000,000 private placements of senior unsecured notes at a very favorable interest rate of 6.92% and a new $100,000,000 revolving credit agreement. The U.S. Dollar strengthened significantly when compared to most foreign currencies where the Company has substantial operations. As a result, foreign currency translation adjustments decreased shareholders' equity by $6,874,000 ($.52 per share) in 1997. Translation adjustments resulted in decrease of $2,095,000 ($.18 per share) and $120,000 ($.01 per share) in 1996 and 1995, respectively. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. Some of the Company's computer programs that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, ship product or engage in any number of similar business activities. Based on a recent assessment, the Company determined that it will need to modify or replace portions of its software so that its computer systems will properly handle dates beyond December 31, 1999. The Company presently believes that with modifications to existing software and conversions to new software, the Year 2000 Issue can be mitigated. However, if such modifications and conversions are not made, or not timely completed, the Year 2000 issue could have a material impact on the operations of the Company. The Company has initiated formal communications with all of its significant suppliers and large customers to determine the extent to which the Company is vulnerable to those third parties' failure to remediate their own Year 2000 Issue. There can be no guarantee that the systems of other companies on which the Company's systems rely will be timely converted, or that a failure to convert by another company, or a conversion that is incompatible with the Company's systems, would not have a material adverse effect on the Company. The Company has determined that it has no 10 exposure to contingencies related to the Year 2000 Issue for the products it has sold. The Company has initiated the implementation of an enterprise-wide resource planning (ERP) software system to link all of its core business systems throughout the Company. This project was the result of a normal business migration to improved and expanded software systems to increase the Company's ability to improve its operational efficiency, reduce costs and enhance overall quality. As part of this implementation, the Company will also replace those software systems that will encounter the Year 2000 Issue. The Company plans to complete the ERP project in the year 2000 and will complete those portions of the project that will address the Year 2000 Issue in 1999. The total remaining cost of the ERP project is estimated at $9,000,000 and is being funded through operating cash flows and through leasing portions of the system. Of the project cost, approximately $7,900,000 will be capitalized. The remaining $1,100,000 will be expensed or placed under operating leases. The costs of the project and the date on which the Company plans to complete the Year 2000 modifications are based on management's best estimates which were derived using numerous assumptions of future events including the continued availability of certain resources, third party modifications, plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those plans. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes and similar uncertainties. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pages 4 through 19 to the 1997 Annual Report to Shareholders are incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The definitive Proxy Statement dated April 14, 1998 is incorporated by reference. The term of office of all officers is one year. Names, ages and positions of all executive officers of Cascade Corporation follow.
- --------------------------------------------------------------------------------------------------------------- Year First Elected Name Age Officer Present Position - --------------------------------------------------------------------------------------------------------------- Robert C. Warren, Jr. 49 1984 President, Chief Executive Officer and Director James P. Miller 50 1992 Executive Vice President, Secretary and Chief Financial Officer William J. Harrison 59 1997 Executive Vice President Gregory S. Anderson 49 1991 Vice President-Human Resources Richard S. Anderson 50 1996 Vice President-Material Handling Product Group Terry H. Cathey 50 1993 Vice President-Material Handling Operations Robert L. Mott 56 1996 Vice President-OEM Product Group Kurt G. Wollenberg 48 1997 Treasurer - ---------------------------------------------------------------------------------------------------------------
11 ITEM 11. EXECUTIVE COMPENSATION The definitive Proxy Statement dated April 14, 1998 is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The definitive Proxy Statement dated April 14, 1998 is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K INDEX TO FINANCIAL STATEMENTS (a) 1. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements, together with the report thereon of Price Waterhouse LLP dated March 20, 1998, appearing on pages 4 to 19 of the accompanying 1997 Annual Report are incorporated by reference in this Form 10-K Annual Report. With the exception of the aforementioned information and information incorporated in Items 1, 5, 6 and 8, the 1997 Annual Report is not to be deemed filed as part of this report. 2. FINANCIAL STATEMENT SCHEDULES-1997, 1996 AND 1995 Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or not required. The individual financial statements of the registrant and its subsidiaries have been omitted since the registrant is primarily an operating company and all subsidiaries included in the consolidated financial statements, in the aggregate, do not have minority equity interests and/or indebtedness to any person other than the registrant or its consolidated subsidiaries in amounts which together exceed 5% of the total consolidated assets at January 31, 1998, except indebtedness incurred in the ordinary course of business which is not overdue and which matures within one year from the year of its creation. 3. EXHIBITS 1. Copy of Notice of Annual Meeting dated April 14, 1998. 2. Copy of Form of Proxy for Annual Meeting. 3. Basic documents incorporated by reference: - Articles of Incorporation filed with the Commission May 28, 1965. - Amendment to Articles of Incorporation filed in Proxy Statement for annual meeting of shareholders May 12, 1987, filed with the Commission April 14, 1988. - Amendment to Articles of Incorporation filed in Proxy Statement for annual meeting of shareholders May 9, 1989, filed with the Commission April 27, 1990. - By-Laws, as amended to February 8, 1989, filed with the Commission April 27, 1990. - Specimen copy of stock certificate, filed as Exhibit 4-1 to Form S-1, filed with the Commission May 28, 1965. - Amendment to Articles of Incorporation included in the Proxy Statement for Annual 12 Meeting of Shareholders May 13, 1997, filed with the Commission April 13, 1997. 4. Documents required by Item 14(c), all of which are exhibits to Form 8-K filed with the Commission March 27, 1997, and are incorporated by reference: - Share Purchase Agreement dated March 11, 1997, among the Company, Cascade (Canada) Holdings, Inc., and the shareholders of Kenhar Corporation, Exhibit 2.1. - Employment agreement dated March 11, 1997, among Cascade Corporation, Couphar Ltd., and William J. Harrison, Exhibit 10.1. - Refusal Agreement dated March 11, 1997, among Cascade Corporation, Couphar Ltd., and William J. Harrison, Exhibit 10.2. - Registration Rights Agreement dated March 11, 1997, between Cascade Corporation and Couphar Ltd., Exhibit 10.3. - Shareholders' Agreement dated March 11, 1997, between the Trustees of the Robert C. and Nani S. Warren Revocable Trust and Couphar Ltd., Exhibit 10.4. (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the last quarter of fiscal 1997. 13 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the registrant, CASCADE CORPORATION has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized. CASCADE CORPORATION /s/ James P. Miller ------------------------------------ By: James P. Miller EXECUTIVE VICE PRESIDENT, SECRETARY AND CHIEF FINANCIAL OFFICER Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in the capacities on the dates indicated. /s/ Joseph J. Barclay 4/10/98 /s/ Robert C. Warren, Jr. 4/10/98 - ------------------------------------- ------------------------------------- Joseph J. Barclay Date Robert C. Warren, Jr. Date CHAIRMAN, DIRECTOR PRESIDENT AND CHIEF EXECUTIVE OFFICER, DIRECTOR /s/ William J. Harrison 4/10/98 /s/ Richard C. Hire 4/10/98 - ------------------------------------- ------------------------------------- William J. Harrison Date Richard C. Hire, DIRECTOR Date EXECUTIVE VICE PRESIDENT, DIRECTOR /s/ Eric Hoffman 4/10/98 /s/ C. Calvert Knudsen 4/10/98 - ------------------------------------- ------------------------------------- Eric Hoffman, DIRECTOR Date C. Calvert Knudsen, DIRECTOR Date /s/ Nicholas R. Lardy 4/10/98 /s/ Ernest C. Mercier 4/10/98 - ------------------------------------- ------------------------------------- Nicholas R. Lardy, DIRECTOR Date Ernest C. Mercier, DIRECTOR Date /s/ James S. Osterman 4/10/98 /s/ Jack B. Schwartz 4/10/98 - ------------------------------------- ------------------------------------- James S. Osterman, DIRECTOR Date Jack B. Schwartz, Date ASSISTANT SECRETARY, DIRECTOR /s/ Nancy Wilgenbusch 4/10/98 - ------------------------------------- Nancy Wilgenbusch, DIRECTOR Date 14 EX-13.1 2 EXHIBIT 13.1 FINANCIAL SUMMARY (IN THOUSANDS) FINANCIAL HIGHLIGHTS (IN THOUSANDS EXCEPT WHERE NOTED*)
January 31 1998 1997 1996 1995 1994 Net sales $ 369,865 $ 218,485 $ 234,030 $ 183,365 $ 141,325 Operating income $ 40,770 $ 24,850 $ 16,415 $ 19,350 $ 9,735 Net income $ 21,040(1) $ 17,420 $ 10,550(2) $ 12,250 $ 3,885(3) Per common share* Net income: Basic $ 1.73(1) $ 1.48 $ .88(2) $ 1.02 $ .32(3) Diluted $ 1.60(1) $ 1.48 $ .88(2) $ 1.02 $ .32(3) Book value $ 9.32 $ 8.46 $ 7.74 $ 7.37 $ 6.47 Working capital $ 81,063 $ 32,750 $ 49,829 $ 40,821 $ 37,337 Expenditures for property, plant and equipment $ 15,453 $ 16,624 $ 11,825 $ 21,921 $ 8,126 Total assets $ 349,592 $ 199,493 $ 153,190 $ 137,109 $ 106,571 Long-term debt $ 144,785 $ 12,810 $ 9,531 $ 7,809 $ 682 Shareholders' equity $ 110,551 $ 98,757 $ 92,057 $ 88,538 $ 77,751 Number of employees* 2,322 1,293 1,103 993 838
(1) After $14,890 ($9,770 or $.74 per share, net of taxes) credit for environmental insurance settlements, net of certain expenses. See note 13 to consolidated financial statements. (2) After $12,000 ($7,800 or $.65 per share, net of taxes) charge for environmental expenses. See note 13 to consolidated financial statements. (3) After $1,980 or $.17 per share charge related to cumulative effect of accounting change. See note 9 to consolidated financial statements. 1 CASCADE CORPORATION & SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME
Year Ended January 31 1998 1997 1996 (Dollars in Thousands except Per Share) Net sales $ 369,865 $ 218,485 $ 234,030 ---------- --------- ---------- Operating expenses: Cost of goods sold 259,605 143,080 153,345 Depreciation and amortization 20,280 10,280 9,540 Selling and administrative expenses 64,100 40,275 39,935 Environmental expenses, net (Note 13) (14,890) - 14,795 ---------- --------- ---------- 329,095 193,635 217,615 ---------- --------- ---------- Operating income 40,770 24,850 16,415 Interest expense 9,440 876 1,085 Interest income (610) (1,076) (1,045) Other (income) expense, net (150) 65 315 ---------- --------- ---------- Income before income taxes 32,090 24,985 16,060 Income taxes (Note 2) 11,050 7,565 5,510 ---------- --------- ---------- Net income 21,040 17,420 10,550 Dividends paid on preferred shares of subsidiaries 570 60 - ---------- --------- ---------- Net income applicable to common shareholders $ 20,470 $ 17,360 $ 10,550 ---------- --------- ---------- ---------- --------- ---------- Basic earnings per share $ 1.73 $ 1.48 $ .88 ---------- --------- ---------- ---------- --------- ---------- Diluted earnings per share $ 1.60 $ 1.48 $ .88 ---------- --------- ---------- ---------- --------- ----------
The accompanying notes to consolidated financial statements are an integral part of this statement. 4 CASCADE CORPORATION & SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET
January 31 1998 1997 (Dollars in Thousands) ASSETS Current assets: Cash and cash equivalents $ 12,966 $ 15,642 Accounts receivable, less allowance for doubtful accounts of $743 and $227 62,271 43,469 Inventories, at average cost which is lower than market: Finished goods and components 42,280 26,701 Goods in process 3,965 4,634 Raw materials 12,035 4,667 --------- --------- 58,280 36,002 Deferred income taxes (Note 2) 1,165 1,496 Prepaid expenses 6,011 2,020 --------- --------- Total current assets 140,693 98,629 Property, plant and equipment, at cost less accumulated depreciation (Notes 3 and 7) 101,147 81,393 Deferred income taxes (Note 2) 4,044 1,139 Goodwill (Note 10) 94,982 16,804 Other Assets 8,726 1,528 --------- --------- Total assets $ 349,592 $ 199,493 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable to banks (Note 3) $ 13,193 $ 29,846 Current portion of long-term debt (Note 3) 2,501 2,264 Accounts payable 23,604 21,373 Accrued payroll and payroll taxes 7,331 4,222 Other accrued expenses 13,001 8,174 --------- --------- Total current liabilities 59,630 65,879 Long-term debt (Note 3) 144,785 12,810 Deferred income taxes (Note 2) - 5,151 Accrued environmental expenditures (Note 13) 10,316 8,913 Other liabilities 3,720 3,033 --------- --------- Total liabilities 218,451 95,786 --------- --------- Commitments and contingencies (Notes 12 and 13) Manditorily redeemable convertible preferred stock and minority interest (Note 10) 20,590 4,950 --------- --------- Shareholders' equity (Notes 4 and 5): Common stock, $.50 par value, authorized 20,000,000 shares; 11,988,208 and 12,048,208 shares issued 5,994 6,024 Additional paid-in capital 3,711 - Retained earnings 109,091 94,561 Cumulative foreign currency translation adjustments (8,016) (1,142) Treasury stock, at cost, 127,498 and 381,504 shares (229) (686) --------- --------- Total shareholders' equity 110,551 98,757 --------- --------- Total liabilities and shareholders' equity $ 349,592 $ 199,493 --------- --------- --------- ---------
The accompanying notes to consolidated financial statements are an integral part of this statement. 5 CASCADE CORPORATION & SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Year Ended January 31 1998 1997 1996 (Dollars in Thousands) Common stock Beginning balance $ 6,024 $ 6,139 $ 6,196 Common stock repurchased (30) (115) (57) -------- ------- -------- 5,994 6,024 6,139 -------- ------- -------- Additional paid-in capital Beginning balance - 568 2,045 Common stock repurchased - (568) (1,477) Treasury shares issued for acquisitions 3,711 - - -------- ------- -------- 3,711 - 568 -------- ------- -------- Retained earnings Beginning balance 94,561 85,083 79,910 Net income 21,040 17,420 10,550 Cash dividends (per share: 1997, $.40; 1996, $.45; 1995, $.45) (5,505) (5,340) (5,377) Common stock repurchased (1,005) (2,602) - -------- ------- -------- 109,091 94,561 85,083 -------- ------- -------- Cumulative foreign currency adjustments Beginning balance (1,142) 953 1,073 Translation adjustments (6,874) (2,095) (120) -------- ------- -------- (8,016) (1,142) 953 -------- ------- -------- Treasury stock Beginning balance (686) (686) (686) Treasury shares issued for acquisitions 457 - - -------- ------- -------- (229) (686) (686) -------- ------- -------- Total shareholders' equity $110,551 $ 98,757 $ 92,057 -------- ------- -------- -------- ------- --------
The accompanying notes to consolidated financial statements are an integral part of this statement. 6 CASCADE CORPORATION & SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended January 31 1998 1997 1996 (Dollars in Thousands) Cash flows from operating activities: Net income $ 21,040 $ 17,420 $ 10,550 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,280 10,280 9,540 Deferred income taxes (9,863) 613 (4,099) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (963) 535 (3,297) Inventories (6,626) (258) (4,148) Income taxes 2,904 (2,099) 1,133 Prepaid expenses (3,577) (1,073) 70 Accounts payable and accrued expenses (7,018) (1,523) 1,457 Accrued environmental expenditures 1,403 (1,587) 10,500 Other liabilities (1,879) 66 59 -------- -------- -------- Net cash provided by operating activities 15,701 22,374 21,765 -------- -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment (15,453) (16,624) (11,825) Business acquisitions (72,534) (22,849) Proceeds from sale of property, plant and equipment 5,036 Other assets (4,377) 64 (69) -------- -------- -------- Net cash used in investing activities (87,328) (39,409) (11,894) -------- -------- -------- Cash flows from financing activities: Payments on long-term debt (36,034) (2,742) (3,273) Proceeds from issuance of long-term debt 135,759 2,055 7,532 Notes payable to banks, net (20,264) 19,297 (797) Repurchase of common stock (1,035) (3,285) (1,534) Cash dividends paid (5,505) (5,340) (5,377) -------- -------- -------- Net cash provided (used) by financing activities 72,921 9,985 (3,449) -------- -------- -------- Effect of exchange rate changes (3,970) (634) (299) -------- -------- -------- Increase (decrease) in cash and cash equivalents (2,676) (7,684) 6,123 Cash and cash equivalents at beginning of year 15,642 23,326 17,203 -------- -------- -------- Cash and cash equivalents at end of year $ 12,966 $ 15,642 $ 23,326 -------- -------- -------- -------- -------- -------- Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 8,608 $ 804 $ 1,025 Income taxes $ 12,936 $ 8,864 $ 8,434 Manditorily redeemable convertible preferred stock issued for acquisition $ - $ 4,950 $ - Exchangeable preferred stock issued for acquisition $ 15,640 $ - $ -
The accompanying notes to consolidated financial statements are an integral part of this statement. 7 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES THE COMPANY Cascade Corporation (the Company) is an international company engaged in the business of designing, manufacturing and selling equipment used primarily in materials handling applications. The Company manufactures an extensive line of hydraulically actuated attachments designed for mounting on lift trucks. Other major products include forks for lift trucks and non-pneumatic (solid) tires used primarily in material handling operations. Accordingly, the Company's sales and the collection of accounts receivable are largely dependent on the sales of lift trucks and on the sales of replacement parts. In addition, the majority of the Company's sales are made in North America. Headquartered in Portland, Oregon, the Company employs more than 2,300 people and maintains operations in 15 countries outside the United States. The Company was founded in 1943. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly owned except for certain of its Canadian subsidiaries which have issued convertible preferred stock (Note 10). Intercompany balances and transactions have been eliminated. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on deposit and highly liquid investments with maturities of three months or less. DEPRECIATION AND AMORTIZATION Property, plant and equipment are stated at cost. Depreciation is generally provided on the straight-line basis over the estimated useful lives of the assets ranging from 15 to 35 years for buildings and 3 to 12 years for machinery and equipment. Goodwill consists of the cost of acquired businesses (Note 10) in excess of the fair value of net identifiable assets acquired. Generally, goodwill is amortized on the straight-line basis over 20 years. On a periodic basis the Company reviews the realizability of recorded goodwill based upon expectations of nondiscounted cash flows and operating income of the acquired businesses. As of January 31, 1998, the Company believes that there are no significantly impaired intangible assets. Accumulated amortization of goodwill and other assets was $4,706,000 and $75,000 at January 31, 1998 and 1997, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. Research and development expense is related to developing new products and to improving existing products or processes. INCOME TAXES Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109) "Accounting for Income Taxes." Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. FORWARD EXCHANGE CONTRACTS The Company enters into foreign exchange contracts to manage its exposure of foreign currency exchange risk. At January 31, 1998, the Company had approximately $16,444,000 in contracts to buy or sell foreign currency in the future. Gains or losses on such contracts are recognized in income and are measured over the period of the contract by reference to the forward rate 8 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF PRINCIPAL ACCOUNTING POLICIES CONTINUED for a contract to be consummated on the same future date as the original contract. For the year ended January 31, 1998, the Company recorded unrealized losses of $399,000 related to forward exchange contracts. Realized gains or losses are recognized upon settlement of each contract. STOCK-BASED COMPENSATION The Company adopted Statement of Financial Accounting Standards No. 123 (SFAS 123) "Accounting for Stock-Based Compensation" in 1996. This statement allows companies to choose whether to account for stock-based compensation under the current method as prescribed by APB 25 or use a fair value method described in SFAS 123. The Company continues to follow the provisions of APB 25. FOREIGN CURRENCY TRANSLATION The Company translated the balance sheets of its foreign subsidiaries using fiscal year end exchange rates. The statements of income are translated using the average exchange rates for the fiscal year. The effects of such translations are included in the shareholders' equity account "cumulative foreign currency translation adjustments" as decreases of $6,874,000, $2,095,000 and $120,000 for the years ended January 31, 1998, 1997 and 1996, respectively. ENVIRONMENTAL REMEDIATION The Company accrues environmental remediation costs if it is probable that an asset has been impaired or a liability incurred at the financial statement date and the amount can be reasonably estimated. Environmental compliance costs are expensed as incurred. Certain environmental costs are capitalized and depreciated over their estimated useful lives. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES The fair value of the Company's monetary assets and liabilities are based upon the existing interest rates related to such assets and liabilities compared to current market rates of interest. The carrying value of all of its monetary assets and liabilities approximates fair value as of January 31, 1998 and 1997. REVENUE RECOGNITION The Company recognizes revenue when products are shipped to customers. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Changes in such estimates may affect amounts reported in future periods. Significant estimates and judgements made by management of the Company include matters such as the collectibility of accounts receivable, realizability of deferred income tax assets, realizability of intangible assets and future costs of environmental matters. 9 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 2 - INCOME TAXES
Year Ended January 31 1998 1997 1996 (Dollars in Thousands) Income before taxes was as follows: United States $28,260 $15,990 $ 5,295 Foreign 3,830 8,995 10,765 ------- ------- ------- $32,090 $24,985 $16,060 ------- ------- ------- ------- ------- ------- Taxes charged (credited) against operations were as follows: Current Federal $9,105 $2,572 $ 5,507 State 925 819 889 Foreign 4,260 2,816 3,740 ------- ------- ------- Total 14,290 6,207 10,136 ------- ------- ------- Deferred Federal (430) 932 (4,038) State (80) 296 (651) Foreign (2,730) 130 63 ------- ------- ------- Total (3,240) 1,358 (4,626) ------- ------- ------- Total income taxes $11,050 $7,565 $ 5,510 ------- ------- ------- ------- ------- ------- The federal rate reconciles to the effective rate as follows: Federal statutory rate 35.0% 35.0% 35.0% State income taxes, net of federal tax benefits 1.7 2.9 1.0 Effect of foreign tax rates .6 (.8) .2 IRS settlement (1) - (5.7) - Tax credits and other (2.9) (1.1) (1.9) ------- ------- ------- Effective income tax rate 34.4% 30.3% 34.3% ------- ------- ------- ------- ------- ------- January 31 1998 1997 (Dollars in Thousands) The deferred tax liabilities (assets) recorded on the consolidated balance sheet are comprised of the following: Accruals not deductible until paid $(1,113) $(1,052) Other (52) (197) ------- ------- Current deferred income taxes $(1,165) $(1,249) ------- ------- ------- ------- Depreciation $ 4,651 $ 7,181 Employee benefits (1,151) (902) Accrued environmental expenditures (4,983) (3,302) Other (2,561) 1,035 ------- ------- Noncurrent deferred income taxes $(4,044) $ 4,012 ------- ------- ------- -------
(1) IRS settlement is the result of the resolution of prior years' deferred compensation deductions. 10 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - BORROWINGS
January 31 1998 1997 (Dollars in Thousands) $100 million revolving line of credit, interest payable currently at a variable rate (based on certain financial ratios of the Company) over prime or LIBOR (6.625% at January 31, 1998); principal payable in 2002 $ 60,000 $ - 6.7% mortgage note, due quarterly through 2008 secured by plant 7,127 10,650 6.92% series A and series B senior notes, interest payable currently, principal due annually 2002 through 2007 75,000 - 4.1% mortgage note, due semi-annually through 2001, secured by building 2,424 - 9.0% mortgage note, repaid in 1997 - 2,421 Other 2,735 2,003 -------- ------- 147,286 15,074 Less current maturities 2,501 2,264 -------- ------- Total long-term debt $144,785 $12,810 -------- ------- -------- -------
The revolving line of credit agreement and the series A and B senior notes contain dividend restrictions and certain covenants, including covenants related to subsidiary indebtedness, additional indebtedness, net worth, fixed charges, funded debt and leverage ratios. At January 31, 1998, the Company was in compliance with its loan covenants. Maturities of long-term debt for the years January 31, 1999 through January 31, 2003, and thereafter, respectively, are $2,501,000, $3,203,000, $1,412,000, $73,244,000, $13,195,000, and $53,731,000. Borrowing arrangements with commercial banks provided short-term lines of credit at January 31, 1998 totalling $32,541,000, of which $19,348,000 was unused. Average interest rates on short-term borrowings were 4.1% and 5.4% at January 31, 1998 and 1997, respectively. NOTE 4 - STOCK OPTION PLAN The Company has reserved 800,000 shares of common stock for the Cascade Corporation 1995 Senior Managers' Incentive Stock Option Plan (the Plan). The Plan permits the award of incentive stock options (ISO) to officers and key employees. Under the terms of the Plan, the purchase price of shares subject to each ISO granted must not be less than the fair market value on the date of grant. Accordingly, no compensation cost has been recognized for the stock option plan. Outstanding options vest after three years and are exercisable for ten years from the date of grant. The Company has determined that the pro forma effects of applying SFAS 123 would reduce earnings by $247,000, $100,000, and $45,000 for 1997, 1996, and 1995, respectively, using the following assumptions:
January 31 1998 1997 1996 Risk-free interest rate 6.5% 6.7% 6.1% Expected life 5 Years 5 Years 5 Years Expected volatility 30% 26% 26% Expected dividend yield 2.5% 3.0% 3.0%
11 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - STOCK OPTION PLAN CONTINUED A summary of the Plan's status at January 31, 1998, 1997 and 1996 together with changes during the periods then ended are presented in the following table:
WEIGHTED AVERAGE PRICE PER SHARES SHARE -------- --------- BALANCE JANUARY 31, 1995 - $ - Granted 77,355 16.37 Forfeited (2,102) 16.37 ------- ------ BALANCE JANUARY 31, 1996 75,253 16.37 Granted 93,341 16.00 Forfeited (23,162) 16.17 ------- ------ BALANCE JANUARY 31, 1997 145,432 16.17 Granted 136,262 15.25 Forfeited (1,971) 15.25 ------- ------ BALANCE JANUARY 31, 1998 279,723 $15.73 ------- -------
At January 31, 1998, 1997 and 1996 no options were exercisable. The following table summarizes information about fixed options outstanding at January 31, 1998.
WEIGHTED AVERAGE EXERCISE NUMBER OF WEIGHTED CONTRACTUAL PRICE SHARES AVERAGE PRICE LIFE -------- --------- ------------- ----------- $16.37 64,455 $16.37 7 $16.00 80,977 $16.00 8 $15.25 134,291 $15.25 9
NOTE 5 - CAPITAL STOCK There are 200,000 shares authorized of no par value preferred stock; none are outstanding. 12 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - EARNINGS PER SHARE The Company calculates earnings per share in accordance with Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share." Accordingly, basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects potential dilution that could occur if convertible securities or stock options were exercised or converted into common stock.
Year Ended January 31, 1998 PER SHARE INCOME SHARES AMOUNT (Numerator) (Denominator) Net income $21,040 Less: preferred stock dividends 572 ------- BASIC EPS Income available to common shareholders 20,468 11,858 $1.73 ----- ----- Effect of dilutive securities Manditorily redeemable convertible preferred stock 440 985 Exchangeable preferred stock 132 330 Incentive stock options - 17 ------- ------ DILUTED EPS Income available to common shareholders plus assumed conversions $21,040 13,190 $1.60 ------- ------ ----- ------- ------ -----
Options to purchase 145,000 and 75,000 shares of common stock were outstanding at January 31, 1997 and 1996. These options were not dilutive. The weighted average common shares outstanding for calculating diluted EPS for the years ended January 31, 1997 and 1996 was 11,797,000 and 11,990,000, respectively. For the year ended January 31, 1997, 16,000 weighted average shares of mandatorily redeemable convertible stock were included in the computation of diluted EPS. There were no dilutive securities during fiscal 1995. 13 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - PROPERTY, PLANT AND EQUIPMENT
January 31 1998 1997 (Dollars in Thousands) Land $ 5,555 $ 4,229 Construction in progress 592 4,493 Buildings 43,675 31,437 Machinery and equipment 150,603 115,642 -------- -------- 200,425 155,801 Accumulated depreciation (99,278) (74,408) -------- -------- $101,147 $ 81,393 -------- -------- -------- --------
NOTE 8 - BENEFIT PLANS The Company has defined benefit plans covering certain U.S. and Canadian employees. In December 1988, the Company amended the plan covering its U.S. employees to limit benefits to those accrued through December 31, 1988. During 1997, the Company settled the pension obligation under this plan by funding lump sum distributions or non-participating annuity contracts. The Company's funding policy is to make annual contributions based on actuarially determined funding requirements. The benefits are based on years of service and average earnings over a specified five-year period of time. The net pension cost, the plans' funded status and significant assumptions include the following:
Year Ended January 31 1998 1997 1996 (Dollars in Thousands) Interest cost on projected benefit obligation $ 467 $ 248 $ 314 Actual return on assets (468) (257) (517) Net amortization and deferral 12 268 432 ------- ------- ------- Net periodic pension cost $11 $259 $229 ------- ------- ------- ------- ------- ------- Projected and accumulated vested benefit obligation $(5,987) $(6,106) $(4,261) Plan assets at fair value 6,239 6,147 3,866 ------- ------- ------- Plan assets in excess of (less than) projected benefit obligation 252 41 (395) Unrecognized prior service cost - 120 133 Unrecognized net loss - 1,208 1,231 ------- ------- ------- Prepaid pension expense $ 252 $ 1,369 $ 969 ------- ------- ------- ------- ------- ------- Discount rate 7.5% 7.25% 6.75% Expected long-term rate of return 8.0% 7.25% 8.00%
The Company sponsors a number of defined contribution plans covering substantially all North American employees. Employees may contribute to these plans and the Company matches these contributions in varying degrees. The Company also makes contributions to certain plans based on a percentage of wages. Defined contribution pension expense for the Company was $1,901,000, $1,488,000 and $1,318,000 for 1997, 1996 and 1995, respectively. 14 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS The Company provides health care benefits for eligible retirees. The Company accounts for such costs under Statement of Financial Accounting Standards No.106 (SFAS 106) "Employers' Accounting for Postretirement Benefits Other Than Pensions". Therefore, the Company is accruing the future costs of providing such benefits to eligible active employees during the years they render service. The following table sets forth the plan's status reconciled with the amount included in the Consolidated Balance Sheets:
January 31 1998 1997 1996 (Dollars in Thousands) Accumulated postretirement benefit obligation: Retirees $(2,694) $(2,342) $(2,551) Fully eligible active plan participants (578) (416) (350) Other active plan participants (1,618) (1,249) (1,502) ------- ------- ------- (4,890) (4,007) (4,403) Plan assets at fair value - - - ------- ------- ------- Accumulated postretirement benefit obligation in excess of plan assets (4,890) (4,007) (4,403) Unrecognized net loss 1,860 974 1,436 ------- ------- ------- $(3,030) $(3,033) $(2,967) ------- ------- ------- ------- ------- -------
The net periodic postretirement benefit costs are as follows:
January 31 1998 1997 1996 (Dollars in Thousands) Service cost $ 68 $ 83 $ 56 Interest cost 281 288 295 Net amortization and deferral 50 84 23 ---- ---- ---- Net periodic postretirement benefit cost $399 $455 $374 ---- ---- ---- ---- ---- ----
To estimate these costs, health care costs were assumed to increase at an annual rate of 9% after 1996 with the rate of increase declining ratably to 4% by 2003 and thereafter. The weighted average discount rate was assumed to be 6.75%, 7.25% and 6.75% for 1997, 1996 and 1995, respectively. If the cost trend rates were increased by one percentage point, the accumulated postretirement benefit obligation as of January 31, 1998 would increase by $544,000 and net periodic postretirement benefit cost would increase by $53,000. 15 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - ACQUISITIONS 1997 ACQUISITIONS In February 1997, the Company purchased all of the outstanding capital stock of Hyco-Cascade Pty., Ltd., an Australian manufacturer and distributor of lift truck attachments and accessories. The amount paid in connection with this purchase was $12,603,000, which consisted of $7,447,000 in debt, $3,656,000 in common stock and $1,500,000 in cash. On March 11, 1997 the Company acquired all of the outstanding capital stock of Kenhar Corporation. Kenhar Corporation is the world's leading manufacturer of forks for lift trucks with sales and manufacturing locations in North America, Europe and Asia. The aggregate purchase price for this acquisition was approximately $71,944,000 and included $56,304,000 in debt and 1,100,000 exchangeable preferred shares of Cascade (Canada) Holdings, Inc. (Exchangeable Shares) valued at approximately $15,640,000. The Exchangeable Shares are convertible share for share into Cascade Corporation common stock. Holders of Exchangeable Shares are entitled to voting rights of an equivalent number of Company common shares and are entitled to dividends equivalent to those declared and paid on like numbers of Cascade common shares. Cascade (Canada) Holdings Inc. is a wholly owned subsidiary of Cascade Corporation. Therefore, although the Exchangeable Shares have rights comparable with the Company's common stock, the Exchangeable Shares have been accounted for, based on their form, as minority interest on the Company's balance sheet. The Company also made other acquisitions during 1997 totaling $10,377,000. When the Company purchased Kenhar Corporation, a number of Kenhar's subsidiaries had minority interest holders. The Company has now acquired all of these minority interests. In addition, during 1997, the Company purchased a U.S. manufacturer of hydraulic cylinders and a European fork manufacturer. 1996 ACQUISITIONS In January 1997, the Company purchased all of the outstanding capital stock of Industrial Tires Limited, a Canadian corporation that manufactures solid rubber tires for the material handling industry. The total purchase price, including direct costs of acquisition and 330,000 shares of Cascade (Canada), Inc. Preferred Stock (the Preferred Stock) was $23,660,000. Each share of the Preferred Stock is convertible into one share of the Company's common stock at the holder's option. In addition, the Preferred Stock gives the holder the ability to require the Company to repurchase the shares on or after January 13, 2002 at the original issuance price of approximately $15 per share, for a maximum repurchase obligation of ap- proximately $4,950,000. Consequently, the Preferred Stock is classified as "Mandatorily Redeemable Convertible Preferred Stock." The provisions of the Preferred Stock also entitle the holder to cumulative dividends paid on the common shares of Cascade Corporation and to a liquidation preference equal to approximately $15 per share in priority to any payment on any shares ranking junior to the Preferred Stock. In addition to the acquisitions discussed above, during 1996 the Company acquired two other manufacturers in related businesses. The purchase price for these acquisitions was $4,063,000. All of the above acquisitions were accounted for under the purchase method of accounting. The acquired businesses have been included in the Company's results of operations since each respective acquisition date. 16 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - ACQUISITIONS CONTINUED PRO FORMA INFORMATION The following unaudited combined pro forma information shows the company's results of operations as though the 1996 and 1997 acquisitions had occurred on February 1, 1995 and 1996 respectively.
Year ended January 31 1998 1997 1996 (Dollars in Thousands except per share) UNAUDITED Total revenue $377,565 $358,268 $286,229 Net income 21,516 13,616 7,995 Net income per share: Basic $1.77 $1.16 $.65 Diluted $1.62 $1.01 $.65
The pro forma results of operations have been adjusted to include the additional costs of depreciation, goodwill amortization and interest expense based on the actual purchase price and related borrowings. Expenses have not been reduced to reflect any operational efficiencies that may result from the combination of these entities. The pro forma results are not necessarily indicative of the actual results of operations that would have occurred had the purchases been made at the beginning of the respective periods or of results that may occur in the future. 17 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - INFORMATION ABOUT OPERATIONS The Company designs, manufactures and markets equipment and supplies used in materials handling applications. Sales to the largest single customer were 7.7%, 9.2% and 9.7% of consolidated sales during the years ended January 31, 1998, 1997 and 1996, respectively. Information about the Company's operations in different geographic areas is shown below:
Year ended January 31 (Dollars in Thousands) NORTH ELIMIN- CONSOLI- AMERICA EUROPE OTHER ATIONS DATED -------- -------- ------- -------- --------- 1998 Sales to unaffiliated customers $230,140 $102,570 $37,155 $ $369,865 Transfers between areas 17,500 1,020 310 (18,830) -------- -------- ------- -------- --------- Total revenue $247,640 $103,590 $37,465 $(18,830) $369,865 -------- -------- ------- -------- --------- -------- -------- ------- -------- --------- Net income $ 19,125 $ 2,895 $ (980) $ 21,040 -------- -------- ------- --------- -------- -------- ------- --------- Identifiable assets $220,194 $95,894 $33,504 $349,592 -------- -------- ------- --------- -------- -------- ------- --------- 1997 Sales to unaffiliated customers $130,145 $67,925 $20,415 $ $218,485 Transfers between areas 16,971 305 334 (17,610) -------- -------- ------- -------- --------- Total revenue $147,116 $68,230 $20,749 $(17,610) $218,485 -------- -------- ------- -------- --------- -------- -------- ------- -------- --------- Net income $ 12,845 $ 2,815 $ 1,760 $ 17,420 -------- -------- ------- --------- -------- -------- ------- --------- Identifiable assets $114,873 $65,932 $18,688 $199,493 -------- -------- ------- --------- -------- -------- ------- --------- 1996 Sales to unaffiliated customers $139,950 $75,375 $18,705 $ $234,030 Transfers between areas 14,607 587 747 (15,941) -------- -------- ------- -------- --------- Total revenue $154,557 $75,962 $19,452 $(15,941) $234,030 -------- -------- ------- -------- --------- -------- -------- ------- -------- --------- Net income $ 5,809 $ 4,078 $ 663 $ 10,550 -------- -------- ------- --------- -------- -------- ------- --------- Identifiable assets $ 72,847 $64,367 $15,976 $153,190 -------- -------- ------- --------- -------- -------- ------- ---------
NOTE 12 - COMMITMENTS AND CONTINGENCIES The Company leases certain of its facilities and equipment under noncancelable operating leases. The minimum rental commitments under these leases for the years ended January 31, 1999 through January 31, 2003, respectively, are $3,130,000, $2,735,000, $2,058,000, $1,715,000 and $1,052,000. For the years ended January 31, 1998, 1997 and 1996 total rentals charged to expense amounted to $2,042,000, $789,000 and $705,000. NOTE 13 - ENVIRONMENTAL MATTERS The Company is engaged in environmental investigations and remediation efforts in its ordinary course of business. The Company has sued a number of its insurers to enforce policies it contends provide coverage for expenses associated with these efforts. Earnings for the year ended January 31, 1998 include the effect of settlements with several of these insurers totaling $23,750,000. The impact of these settlements on net income, after adjusting for certain litigation and environmental expenses and income taxes, was approximately $9,770,000. Litigation against two remaining insurers resulted in a jury verdict in the Company's favor. As issues involving damages, prejudgment interest, attorneys fees, and declaratory relief are pending before the trial court, the financial statements have not been adjusted to account for the jury verdict. 18 CASCADE CORPORATION & SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 - ENVIRONMENTAL MATTERS CONTINUED During the year ended January 31, 1996, the Company accrued a charge of $12,000,000 ($7,800,000 after tax) to provide for probable future environmental costs related to its Portland, Oregon manufacturing facility. The Company has reviewed the remaining accrued liability of $13,335,000 at January 31, 1998, and determined it fairly approximates future known remediation costs. However, since future remediation costs are subject to many uncertainties, actual expenses may vary from the amount recorded at January 31,1998. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(Dollars in Thousands except per share figures) 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER YEAR ENDED JANUARY 31, 1998 Net sales $84,725 $90,340 $97,525 $97,275 Gross profit before depreciation 26,485 27,895 29,230 26,650 Net income 2,900 9,705 6,480 1,955 Net income per share: Basic $.23 $.80 $.54 $.15 Diluted $.23 $.73 $.49 $.15 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER YEAR ENDED JANUARY 31, 1997 Net sales $57,010 $54,805 $54,870 $51,800 Gross profit before depreciation 19,665 19,040 19,160 17,540 Net income 4,390 4,335 4,365 4,330 Net income per share: Basic $.37 $.37 $.37 $.37 Diluted $.37 $.37 $.37 $.37
REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS & SHAREHOLDERS OF CASCADE CORPORATION In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of changes in shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Cascade Corporation and its subsidiaries at January 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PRICE WATERHOUSE LLP Portland, Oregon March 20, 1998 19 INVESTOR INFORMATION TRANSFER AGENT & REGISTRAR Chase Mellon Shareholder Services L.L.C. Shareholder Relations P.O. Box 3315 South Hackensack, N. J. 07606 (800) 522-6645 www.chasemellon.com STOCK EXCHANGE LISTING The Company's stock is traded on the New York Stock Exchange under the symbol CAE INVESTOR RELATIONS COUNSEL Gerald A. Parsons (503) 228-2909 SHAREHOLDER INFORMATION Cascade's Form 10-K Report to the Securities and Exchange Commission for 1997 is available to shareholders and others who request it. To obtain copies, please write to Cascade Corporation, P.O. Box 20187, Portland, Oregon 97294-0187. ANNUAL MEETING The Annual Meeting of the shareholders of Cascade Corporation will be held at The Governor Hotel, 611 S.W. 10th Avenue, Portland, Oregon at 10:00 a.m. on Thursday, May 14, 1998. A formal notice of the meeting, together with a proxy statement and proxy form, will be mailed to shareholders. MARKET INFORMATION The high and low sales prices of the common stock of Cascade Corporation during 1997 and 1996 were as follows:
Year ended January 31 1998 1997 --------------------- --------------------- High Low High Low Market price range First quarter $16.63 $14.50 $14.50 $11.75 Second quarter 19.75 14.50 16.50 12.75 Third quarter 20.44 16.19 14.50 11.50 Fourth quarter 19.00 14.88 16.50 11.50
COMMON STOCK DIVIDENDS
Year Ended January 31 1998 1997 ------ ------ First quarter $.10 $.09 Second quarter .10 .09 Third quarter .10 .09 Fourth quarter .10 .18 ------ ------ $.40 $.45 ------ ------ ------ ------
FORWARD-LOOKING STATEMENTS Forward-looking statements throughout this report are based upon assumptions involving a number of risks and uncertainties. Factors which could cause actual results to differ materially from these forward-looking statements include, but are not limited to competitive factors in, and the cyclical nature of, the materials handling industry; fluctuations in lift truck orders or deliveries, availability and cost of raw materials; general business and economic conditions in North America, Europe and Asia; foreign currency fluctuations; effectiveness of the Company's cost reduction initiatives; and the Company's success in organizationally and operationally integrating recently acquired businesses. 20 EX-27 3 EXHIBIT 27
5 1,000 YEAR JAN-31-1998 FEB-01-1997 JAN-31-1998 12,966 0 63,014 747 58,280 140,693 200,425 99,278 349,592 59,630 0 5,994 20,590 0 104,557 349,592 369,865 369,865 259,605 259,605 (150) 0 8,830 32,090 11,050 0 0 0 0 21,040 1.73 1.60
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