Cascade Corporation Announces Financial Results for the Second Quarter Ended July 31, 2008

Cascade Corporation (NYSE:CAE) today reported its financial results for the second quarter ended July 31, 2008.

Overview

• Net sales of $150.1 million for the second quarter of fiscal 2009 were 5% higher than net sales of $143.2 million for the prior year second quarter.
• Net income of $10.5 million ($0.94 per diluted share) for the second quarter of fiscal 2009 was 31% lower than net income of $15.1 million ($1.21 per diluted share) for the second quarter of fiscal 2008.

Second Quarter Fiscal 2009 Summary

• Summary financial results are outlined below (in thousands, except earnings per share):

Quarter ended July 31,	ÂÂ	ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ	ÂÂ	% Change
Net sales	ÂÂ	$	150,103		ÂÂ	$	143,183			5	%
Gross profit			42,701				45,286			(6	%)
Gross profit %			28	%			32	%
SG&A			23,490				22,054			7	%
Operating income			18,514				23,525			(21	%)
Interest expense, net			950				697			36	%
Other expense, net			506				224
Income before taxes			17,058				22,604			(25	%)
Provision for income taxes			6,563				7,460			(12	%)
Effective tax rate			38	%			33	%
Net income		$	10,495			$	15,144			(31	%)
Diluted earnings per share		$	0.94			$	1.21			(22	%)

• Consolidated net sales decreased 1% during the second quarter of fiscal 2009, excluding the impact of foreign currency changes. This decrease was primarily the result of lower sales volumes in North America and Europe. Details of the change in net sales compared to the prior year second quarter follow (in millions):

Net sales decline	ÂÂ	$	(1.3	)	ÂÂ	(1	%)
Foreign currency changes		ÂÂ	8.2	ÂÂ		6	%
Total		$	6.9			5	%

• The consolidated gross profit percentage decreased 4% due primarily to material price increases in all geographic segments and lower sales volumes.
• Selling and administrative expenses increased 1%, excluding foreign currency changes, due to costs to support our expanded Chinese operations and higher marketing costs in Europe.
• The effective tax rate increased to 38% for the second quarter of fiscal 2009 from 33% for fiscal 2008. This increase was primarily related to an increase in valuation allowances for losses in Europe.

Market Conditions

• Percentage changes in lift truck industry shipments, by region, as compared to the prior year are outlined below. Although lift truck unit shipments are an indicator of the general health of the industry, they do not necessarily correlate directly with the demand for our products.

	ÂÂ	Second Quarter
North America		(13%)
Europe		14%
Asia Pacific		10%
China		19%

• The market in North America is expected to be down 10-15% compared to the prior year, which is consistent with the second quarter's shipments.
• Europe's shipment levels for the remainder of the year are expected to be similar or down slightly in comparison with the second quarter.
• We expect the growth rate in the Asia Pacific market will be consistent with the second quarter.
• The market in China is expected to grow at a rate similar to that experienced in the second quarter of fiscal 2009.

North America Summary

• Summary financial results are outlined below (in thousands):

Quarter ended July 31,	ÂÂ	ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ	ÂÂ	% Change
Net sales	ÂÂ	$	69,841		ÂÂ	$	74,569		ÂÂ	(6	%)
Transfers between areas		ÂÂ	9,467	ÂÂ		ÂÂ	8,594	ÂÂ		10	%
Net sales and transfers			79,308				83,163			(5	%)
Gross profit			24,542				29,041			(15	%)
Gross profit %			31	%			35	%
SG&A			11,646				12,556			(7	%)
Loss (gain) on disposition of assets, net			19				(1,120	)
Amortization		ÂÂ	587	ÂÂ		ÂÂ	639	ÂÂ		(8	%)
Operating income		$	12,290			$	16,966			(28	%)

• Net sales decreased 7%, excluding the impact of currency changes, primarily due to the downturn in the construction market. Details of the change in net sales over the prior year quarter follow (in millions):

Net sales decline	ÂÂ	$	(5.2	)	ÂÂ	(7	%)
Foreign currency changes		ÂÂ	0.5	ÂÂ		1	%
Total		$	(4.7	)		(6	%)

• The gross profit percentage was 4% lower than the prior year second quarter due to higher material costs, lower sales volumes and changes in product mix.
• The decrease in selling and administrative costs was due to a reduction in personnel, consulting and other general costs.
• During the second quarter of fiscal 2008, we realized a $1.1 million pre-tax gain on the sale of land in Fairview, Oregon.

Europe Summary

• Summary financial results are outlined below (in thousands):

Quarter ended July 31,	ÂÂ	ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ	ÂÂ	% Change
Net sales	ÂÂ	$	48,424		ÂÂ	$	43,418		ÂÂ	12	%
Transfers between areas		ÂÂ	443	ÂÂ		ÂÂ	373	ÂÂ		19	%
Net sales and transfers			48,867				43,791			12	%
Gross profit			7,614				7,924			(4	%)
Gross profit %			16	%			18	%
SG&A			7,994				6,428			24	%
Gain on disposition of assets, net			(14	)			-
Amortization		ÂÂ	80	ÂÂ		ÂÂ	209	ÂÂ		(62	%)
Operating income (loss)		$	(446	)		$	1,287			(135	%)

• Net sales decreased 1% excluding the impact of currency changes. Given the current industry statistics, we may have lost some market share in Europe. Delivery delays also factored into our lower sales. Details of the change in net sales over the prior year quarter follow (in millions):

Net sales decline	ÂÂ	$	(0.7	)	ÂÂ	(1	%)
Foreign currency changes		ÂÂ	5.7	ÂÂ		13	%
Total		$	5.0			12	%

• The gross profit percentage was 2% lower than the prior year second quarter. The decrease is primarily due to material price increases, higher personnel costs and other general costs.

• Excluding the impact of currency changes, selling and administrative expenses increased 10% in Europe due to higher marketing and reorganization costs.

Asia Pacific Summary

• Summary financial results are outlined below (in thousands):

Quarter ended July 31,	ÂÂ	ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ	ÂÂ	% Change
Net sales	ÂÂ	$	18,860		ÂÂ	$	15,091		ÂÂ	25	%
Transfers between areas		ÂÂ	63	ÂÂ		ÂÂ	28	ÂÂ		125	%
Net sales and transfers			18,923				15,119			25	%
Gross profit			4,491				3,582			25	%
Gross profit %			24	%			24	%
SG&A			2,459				2,100			17	%
Gain on disposition of assets, net		ÂÂ	(11	)		ÂÂ	(17	)
Operating income		$	2,043			$	1,499			36	%

• Net sales increase is primarily a result of strong lift truck markets in Australia and Japan and our initiative to produce a wider selection of products in China for sale in the region. Details of the change in net sales over the prior year quarter follow (in millions):

Net sales growth	ÂÂ	$	2.7	ÂÂ	18	%
Foreign currency changes		ÂÂ	1.0		7	%
Total		$	3.7		25	%

• The gross profit percentage in Asia Pacific remained unchanged at 24%. Although increasing material costs have impacted this region, we have been able to mitigate the increase with sourcing of product from within Asia Pacific and China.
• Selling and administrative costs increased 8% in the current year, excluding the impact of currency changes, due to higher personnel and selling expenses.

China Summary

• Summary financial results are outlined below (in thousands):

Quarter ended July 31,	ÂÂ	ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ	ÂÂ	% Change
Net sales	ÂÂ	$	12,978		ÂÂ	$	10,105		ÂÂ	28	%
Transfers between areas		ÂÂ	6,681	ÂÂ		ÂÂ	3,890	ÂÂ		72	%
Net sales and transfers			19,659				13,995			40	%
Gross profit			6,054				4,739			28	%
Gross profit %			31	%			34	%
SG&A			1,391				970			43	%
Loss on disposition of assets, net			36				-
Amortization		ÂÂ	-	ÂÂ	ÂÂ	ÂÂ	(4	)
Operating income		$	4,627			$	3,773			23	%

• The net sales increase in China is due to a strong Chinese lift truck market and our expansion in China. Details of the change in net sales over the prior year quarter follow (in millions):

Net sales growth	ÂÂ	$	1.9	ÂÂ	18	%
Foreign currency changes		ÂÂ	1.0		10	%
Total		$	2.9		28	%

• Gross margin percentages in China decreased to 31% from 34% in the prior year. This decrease is primarily the result of material price increases, changes in product mix and higher intercompany transfers, which carry lower gross margins. We are also continuing to see increased competition from Chinese companies.
• Selling and administrative costs increased 33%, excluding currency changes. This increase is due to additional costs to support our expanded Chinese operations.

Other Matters:

• On September 3, 2008, our Board of Directors declared a quarterly dividend of $0.20 per share, payable on October 17, 2008 to shareholders of record as of October 2, 2008.
• During the first quarter of the prior year we settled an insurance litigation matter which resulted in a $16 million increase in operating income and a $10 million increase in net income ($0.80 per diluted share).

Forward Looking Statements:

This press release contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that a number of factors could cause our actual results to differ materially from any results indicated in this release or in any other forward-looking statements made by us, or on our behalf. These include among others, factors related to general economic conditions, interest rates, demand for materials handling products and construction equipment, performance of our manufacturing facilities and the cyclical nature of the materials handling and construction equipment industries. Further, historical information should not be considered an indicator of future performance. Additional considerations and important risk factors are described in our reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission.

Earnings Call Information:

We will discuss our results in a conference call on Thursday, September 4, 2008 at 2:00 p.m. PDT. Robert C. Warren, Jr., President and Chief Executive Officer will host the call. The conference call can be accessed in the U.S. and Canada by dialing [phone], International callers can access the call by dialing [phone]. Participants are encouraged to dial-in 15 minutes prior to the beginning of the call. A replay will be available for 48 hours after the live broadcast and can be accessed by dialing [phone] and entering passcode 11117819#, or internationally, by dialing [phone] and entering passcode 11117819#.

The call will be simultaneously webcast and can be accessed on the Investor Relations page of the company's website, www.cascorp.com. Listeners should go to the website at least 15 minutes early to register, download and install any necessary audio software.

About Cascade Corporation:

Cascade Corporation, headquartered in Fairview, Oregon, is a leading international manufacturer of materials handling products used primarily on lift trucks. Additional information on Cascade is available on its website, www.cascorp.com.

CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited -- in thousands, except per share amounts)
	ÂÂ				ÂÂ				ÂÂ				ÂÂ
		Three Months Ended								Six Months Ended
		July 31								July 31
		ÂÂ	2008	ÂÂ		ÂÂ	2007	ÂÂ		ÂÂ	2008	ÂÂ		ÂÂ	2007	ÂÂ
Net sales		$	150,103			$	143,183			$	299,970			$	278,683
Cost of goods sold		ÂÂ	107,402	ÂÂ		ÂÂ	97,897	ÂÂ		ÂÂ	214,921	ÂÂ		ÂÂ	190,168	ÂÂ
Gross profit			42,701				45,286				85,049				88,515
														ÂÂ
Selling and administrative expenses			23,490				22,054				47,296				43,186
Loss (gain) on disposition of assets, net			30				(1,137	)			145				(1,172	)
Amortization			667				844				1,342				1,642
Insurance litigation recovery, net		ÂÂ	-	ÂÂ		ÂÂ	-	ÂÂ		ÂÂ	-	ÂÂ		ÂÂ	(15,977	)
														ÂÂ
Operating income			18,514				23,525				36,266				60,836
Interest expense			1,110				922				2,241				1,917
Interest income			(160	)			(225	)			(267	)			(382	)
Other expense, net		ÂÂ	506	ÂÂ		ÂÂ	224	ÂÂ		ÂÂ	627	ÂÂ		ÂÂ	302	ÂÂ
														ÂÂ
Income before provision for income taxes			17,058				22,604				33,665				58,999
Provision for income taxes		ÂÂ	6,563	ÂÂ		ÂÂ	7,460	ÂÂ		ÂÂ	12,312	ÂÂ		ÂÂ	20,059	ÂÂ
														ÂÂ
Net income		$	10,495	ÂÂ		$	15,144	ÂÂ		$	21,353	ÂÂ		$	38,940	ÂÂ
														ÂÂ
Basic earnings per share		$	0.97			$	1.27			$	1.98			$	3.26
Diluted earnings per share		$	0.94			$	1.21			$	1.92			$	3.11
														ÂÂ
Basic weighted average shares outstanding			10,793				11,930				10,788				11,948
Diluted weighted average shares outstanding			11,109				12,479				11,109				12,513

CASCADE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except per share amounts)
	ÂÂ			ÂÂ
		July 31			January 31
		2008			2008
					ÂÂ
ASSETS
Current assets:
Cash and cash equivalents		$	27,911		$	21,223
Accounts receivable, less allowance for doubtful accounts of $1,474 and $1,623			97,651			93,117
Inventories			100,587			85,049
Deferred income taxes			5,882			6,213
Prepaid expenses and other		ÂÂ	12,936		ÂÂ	10,887
Total current assets			244,967			216,489
Property, plant and equipment, net			103,078			98,350
Goodwill			117,864			118,826
Deferred income taxes			4,904			5,948
Intangible assets, net			19,611			20,916
Other assets		ÂÂ	1,981		ÂÂ	1,971
Total assets		$	492,405		$	462,500
					ÂÂ
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks		$	2,025		$	2,484
Current portion of long-term debt			417			423
Accounts payable			36,458			32,727
Accrued payroll and payroll taxes			10,397			10,148
Other accrued expenses		ÂÂ	15,482		ÂÂ	18,736
Total current liabilities			64,779			64,518
Long-term debt, net of current portion			117,045			107,809
Accrued environmental expenses			3,831			4,314
Deferred income taxes			5,195			5,710
Employee benefit obligations			8,695			8,824
Other liabilities		ÂÂ	4,234		ÂÂ	3,300
Total liabilities		ÂÂ	203,779		ÂÂ	194,475
					ÂÂ
Shareholders' equity:
Common stock, $.50 par value, 40,000 authorized shares; 10,852 and 10,840 shares issued and outstanding			5,426			5,420
Additional paid-in capital			1,263			-
Retained earnings			244,166			226,932
Accumulated other comprehensive income		ÂÂ	37,771		ÂÂ	35,673
Total shareholders' equity		ÂÂ	288,626		ÂÂ	268,025
Total liabilities and shareholders' equity		$	492,405		$	462,500

CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
ÂÂ
	ÂÂ	Six Months Ended
		July 31
		ÂÂ	2008	ÂÂ	ÂÂ	ÂÂ	2007	ÂÂ
Cash flows from operating activities:
Net income		$	21,353			$	38,940
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			7,209				6,889
Amortization			1,342				1,642
Share-based compensation			2,122				1,928
Deferred income taxes			1,096				1,543
Loss (gain) on disposition of assets, net			145				(1,172	)
Changes in operating assets and liabilities:
Accounts receivable			(2,924	)			(13,035	)
Inventories			(13,386	)			(9,850	)
Prepaid expenses and other			(1,168	)			637
Accounts payable and accrued expenses			1,648				2,724
Income taxes payable and receivable			(673	)			(751	)
Other assets and liabilities		ÂÂ	242	ÂÂ		ÂÂ	(1,349	)
Net cash provided by operating activities		ÂÂ	17,006	ÂÂ		ÂÂ	28,146	ÂÂ
						ÂÂ
Cash flows from investing activities:
Capital expenditures			(10,039	)			(9,106	)
Proceeds from disposition of assets			388				2,497
Business acquisitions			-				(11,529	)
		ÂÂ				ÂÂ
Net cash used in investing activities		ÂÂ	(9,651	)		ÂÂ	(18,138	)
						ÂÂ
Cash flows from financing activities:
Cash dividends paid			(4,119	)			(4,062	)
Payments on long-term debt			(27,708	)			(57,442	)
Proceeds from long-term debt			37,000				59,500
Notes payable to banks, net			(451	)			(3,400	)
Common stock issued under share-based compensation plans			130				3,844
Common stock repurchased			(3,220	)			(24,496	)
Tax effect from share-based compensation awards		ÂÂ	(73	)		ÂÂ	2,509	ÂÂ
Net cash provided by (used in) financing activities		ÂÂ	1,559	ÂÂ		ÂÂ	(23,547	)
						ÂÂ
Effect of exchange rate changes		ÂÂ	(2,226	)		ÂÂ	(553	)
						ÂÂ
Change in cash and cash equivalents			6,688				(14,092	)
Cash and cash equivalents at beginning of period		ÂÂ	21,223	ÂÂ		ÂÂ	36,593	ÂÂ
Cash and cash equivalents at end of period		$	27,911	ÂÂ		$	22,501	ÂÂ