**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 

| **(Mark  One)**                                                                                                                                    | ** ** | ** **                                                                                               |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **x**                                                                                                                                              | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **For the  Quarterly Period Ended April 30, 2008**                                                                                            |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **OR**                                                                                                                                             |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **o**                                                                                                                                              | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **For the  transition period  from         to         ** |
|                                                                                                                                                    |            |                                                                                                          |  |  |

 

**Commissionfile number 1-12557**

 

**CASCADECORPORATION**

(Exact name of registrant as specified in its charter)

 

| **Oregon**                                                      | ** ** | **93-0136592**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  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**

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days. Yes x  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See definitions of“large accelerated filer,” “accelerated filer,” and “smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer o                      |   | Accelerated filer x          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated filer o                        |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).Yes o  No x

 

Thenumber of shares outstanding of the registrant’s common stock as of May 20,2008 was 10,826,064.

 

 

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** **

**CASCADE CORPORATION**

**FORM 10-Q**

**Quarter Ended April 30, 2008**

** **

**TABLE OF CONTENTS**

** **
|                                                                                                     | **Page** |
|-----------------------------------------------------------------------------------------------------|----------|
| **Part I – Financial Information:**                                                       | 4        |
|                                                                                                |     |
| Item 1.  Financial Statements (unaudited):                                                          | 4        |
| Consolidated Statements of Income                                                                   | 4        |
| Consolidated Balance Sheets                                                                         | 5        |
| Consolidated  Statement of Changes in Shareholders’ Equity                                     | 6        |
| Consolidated Statements of Cash Flows                                                               | 7        |
| Notes to Consolidated Financial Statements                                                          | 8        |
|                                                                                                |     |
| Item 2. Management’s Discussion and Analysis of  Financial Condition and Results of Operations | 18       |
|                                                                                                |     |
| Item 3. Quantitative and Qualitative Disclosures About  Market Risk                                 | 29       |
|                                                                                                |     |
| Item 4. Controls and Procedures                                                                     | 30       |
|                                                                                                |     |
| **Part II  – Other Information**                                                          | 31       |
|                                                                                                |     |
| **Signatures**                                                                                      | 33       |
|                                                                                                |     |
| **Exhibit Index**                                                                              | 34       |

 

2

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**Forward-LookingStatements**

** **

This Form 10-Q,including “Management’s Discussion and Analysis of Financial Condition andResults of Operations” (Item 2) contains forward-looking statements thatinvolve risks and uncertainties, as well as assumptions that, if they nevermaterialize or prove incorrect, could cause our results to differ materiallyfrom those expressed or implied by such forward-looking statements. Allstatements other than statements of historical fact are statements that couldbe deemed forward-looking statements, including any projections of revenue,gross profit, expenses, earnings or losses from operations, synergies or otherfinancial items; any statements of plans, strategies, and objectives ofmanagement for future operations; any statements regarding future economicconditions or performance; any statements of expectation or belief; and anystatements of assumptions underlying any of the foregoing. The risks,uncertainties, and assumptions referred to above include, but are not limitedto:

 

·                  Fluctuations in lift truck orders ordeliveries;

 

·                  Competitive factors in, and the cyclicalnature of, the materials handling and construction equipment industries;

 

·                  Cost and availability of raw materials;

 

·                  General business and economic conditions inNorth America, Europe, Asia Pacific and China;

 

·                  Risks associated with international operations;

 

·                  Effectiveness of our capital expenditures andcost reduction initiatives;

 

·                  Foreign currency fluctuations;

 

·                  Levels of construction;

 

·                  Environmental matters;

 

·                  Assumptions relating to pension and otherpostretirement costs;

 

·                  Fluctuations in interest rates;

 

·                  Impact of acquisitions.

 

Weundertake no obligation to publicly revise or update forward-looking statementsto reflect events or circumstances that arise after the date of thisreport.  See “Risk Factors” (Item 1A) foradditional information on risk factors with the potential to impact ourbusiness.

 

3

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**PART I—FINANCIALINFORMATION**

** **

**Item 1. FinancialStatements**

 

**CASCADECORPORATION**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(Unaudited— in thousands, except per share amounts)**

 
| ** **                                  | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------|------------|----------------------------------|------------|
| ** **                                  | ** ** | **April 30**                | ** ** |
| ** **                                  | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| Net sales                                   |       | $                                | 149,867    |   | $ | 135,500 |   |
| Cost of goods sold                          |       | 107,519                          |       | 92,271 |   |
| Gross profit                                |       | 42,348                           |       | 43,229 |   |
|                                        |       |                             |       |   |   |
| Selling and administrative expenses         |       | 23,806                           |       | 21,132 |   |
| Loss (gain) on disposition of assets, net   |       | 115                              |       | (35 | ) |
| Amortization                                |       | 675                              |       | 798 |   |
| Insurance litigation recovery, net          |       | —                           |       | (15,977 | ) |
|                                        |       |                             |       |   |   |
| Operating income                            |       | 17,752                           |       | 37,311 |   |
| Interest expense                            |       | 1,131                            |       | 995 |   |
| Interest income                             |       | (107                             | )          | (157 | ) |
| Other expense, net                          |       | 121                              |       | 78 |   |
|                                        |       |                             |       |   |   |
| Income before provision for income taxes    |       | 16,607                           |       | 36,395 |   |
| Provision for income taxes                  |       | 5,749                            |       | 12,599 |   |
|                                        |       |                             |       |   |   |
| Net income                                  |       | $                                | 10,858     |   | $ | 23,796 |   |
|                                        |       |                             |       |   |   |
| Basic earnings per share                    |       | $                                | 1.01       |   | $ | 1.99 |   |
| Diluted earnings per share                  |       | $                                | 0.98       |   | $ | 1.90 |   |
|                                        |       |                             |       |   |   |
| Basic weighted average shares outstanding   |       | 10,782                           |       | 11,966 |   |
| Diluted weighted average shares outstanding |       | 11,098                           |       | 12,545 |   |

 

The accompanying notesare an integral part of the consolidated financial statements.

 

4

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**CASCADE CORPORATION**

**CONSOLIDATEDBALANCE SHEETS**

**(Unaudited - in thousands, except pershare amounts)**

 
| ** **                                                                                               | ** ** | **April 30** | ** ** | **January 31** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|-------------------|------------|---------------------|------------|
| ** **                                                                                               | ** ** | **2008**          | ** ** | **2008**            | ** ** |
|                                                                                                     |       |              |       |                |       |
| **ASSETS**                                                                                               |       |              |       |                |       |
| Current assets:                                                                                          |       |              |       |                |       |
| Cash and cash equivalents                                                                                |       | $                 | 23,879     |                | $          | 21,223 |   |
| Accounts receivable, less allowance for doubtful accounts of $1,636  and $1,623                          |       | 101,208           |       | 93,117              |       |
| Inventories                                                                                              |       | 90,445            |       | 85,049              |       |
| Deferred income taxes                                                                                    |       | 5,549             |       | 6,213               |       |
| Prepaid expenses and other                                                                               |       | 8,720             |       | 10,887              |       |
| Total current assets                                                                                     |       | 229,801           |       | 216,489             |       |
| Property, plant and equipment, net                                                                       |       | 100,809           |       | 98,350              |       |
| Goodwill                                                                                                 |       | 119,097           |       | 118,826             |       |
| Deferred income taxes                                                                                    |       | 6,594             |       | 5,948               |       |
| Intangible assets, net                                                                                   |       | 20,277            |       | 20,916              |       |
| Other assets                                                                                             |       | 1,963             |       | 1,971               |       |
| Total assets                                                                                             |       | $                 | 478,541    |                | $          | 462,500 |   |
|                                                                                                     |       |              |       |                |       |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                           |       |              |       |                |       |
| Current liabilities:                                                                                     |       |              |       |                |       |
| Notes payable to banks                                                                                   |       | $                 | 6,001      |                | $          | 2,484 |   |
| Current portion of long-term debt                                                                        |       | 433               |       | 423                 |       |
| Accounts payable                                                                                         |       | 38,218            |       | 32,727              |       |
| Accrued payroll and payroll taxes                                                                        |       | 11,061            |       | 10,148              |       |
| Other accrued expenses                                                                                   |       | 18,262            |       | 18,736              |       |
| Total current liabilities                                                                                |       | 73,975            |       | 64,518              |       |
| Long-term debt, net of current portion                                                                   |       | 101,786           |       | 107,809             |       |
| Accrued environmental expenses                                                                           |       | 4,072             |       | 4,314               |       |
| Deferred income taxes                                                                                    |       | 5,622             |       | 5,710               |       |
| Employee benefit obligations                                                                             |       | 8,576             |       | 8,824               |       |
| Other liabilities                                                                                        |       | 4,195             |       | 3,300               |       |
| Total liabilities                                                                                        |       | 198,226           |       | 194,475             |       |
|                                                                                                     |       |              |       |                |       |
| Commitments and contingencies (Note 7)                                                                   |       |              |       |                |       |
|                                                                                                     |       |              |       |                |       |
| Shareholders’ equity:                                                                               |       |              |       |                |       |
| Common stock, $.50 par value, 20,000 authorized shares; 10,826 and  10,840 shares issued and outstanding |       | 5,413             |       | 5,420               |       |
| Additional paid-in capital                                                                               |       | 474               |       | —              |       |
| Retained earnings                                                                                        |       | 235,841           |       | 226,932             |       |
| Accumulated other comprehensive income                                                                   |       | 38,587            |       | 35,673              |       |
| Total shareholders’ equity                                                                          |       | 280,315           |       | 268,025             |       |
| Total liabilities and shareholders’ equity                                                          |       | $                 | 478,541    |                | $          | 462,500 |   |

 

The accompanying notesare an integral part of the consolidated financial statements.

** **

**5**

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** **

**CASCADECORPORATION**

**CONSOLIDATEDSTATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY**

**(Unaudited — in thousands, except pershare amounts)**

 
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** **        | ** ** | ** **             | ** ** |
|--------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|-------------------|------------|------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                           | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **        | ** ** | **Other**              | ** ** | **Total**         | ** ** | **Year-To-Date**       | ** ** |
| ** **                           | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | **Shareholders’** | ** ** | **Comprehensive** | ** ** |
| ** **                           | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Earnings**      | ** ** | **Income (Loss)** | ** ** | **Equity**        | ** ** | **Income (Loss)** | ** ** |
| **Balance at January 31, 2008** |       | 10,840                |       | $           | 5,420      |           | $          | —            |       | $                      | 226,932    |              | $          | 35,673                 |       | $ | 268,025 |   |   |   |
|                                 |       |                  |       |        |       |           |       |              |       |                   |       |              |       |                   |       |
| Net income                           |       | —                |       | —      |       | —         |       | 10,858            |       | —                 |       | 10,858            |       | $                      | 10,858     |   |
| Dividends ($0.18 per share)          |       | —                |       | —      |       | —         |       | (1,949            | )          | —                 |       | (1,949            | )          | —                 |       |
| Common stock issued                  |       | 4                     |       | 2           |       | 60             |       | —            |       | —                 |       | 62                |       | —                 |       |
| Common stock repurchased             |       | (18                   | )          | (9          | )          | (901           | )          | —            |       | —                 |       | (910              | )          | —                 |       |
| Share-based compensation             |       | —                |       | —      |       | 1,315          |       | —            |       | —                 |       | 1,315             |       | —                 |       |
| Translation adjustment               |       | —                |       | —      |       | —         |       | —            |       | 2,914                  |       | 2,914             |       | 2,914                  |       |
|                                 |       |                  |       |        |       |           |       |              |       |                   |       |              |       |                   |       |
| **Balance at April 30, 2008**   |       | 10,826                |       | $           | 5,413      |           | $          | 474               |       | $                      | 235,841    |              | $          | 38,587                 |       | $ | 280,315 |   | $ | 13,772 |   |
|                                      |            |                       |            |             |            |                |            |                   |            |                        |            |                   |            |                        |            |  |  |  |  |  |  |  |

 

The accompanying notesare an integral part of the consolidated financial statements.

 

6

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**CASCADE CORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited - in thousands)**

 
| ** **                                                                         | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                         | ** ** | **April**                        | ** ** |
| ** **                                                                         | ** ** | **2008**                         | ** ** | **2007** | ** ** |
| **Cash flows from operating activities:**                                          |       |                             |       |   |   |
| Net income                                                                         |       | $                                | 10,858     |   | $ | 23,796 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities: |       |                             |       |   |   |
| Depreciation                                                                       |       | 3,600                            |       | 3,479 |   |
| Amortization                                                                       |       | 675                              |       | 798 |   |
| Share-based compensation                                                           |       | 1,315                            |       | 984 |   |
| Deferred income taxes                                                              |       | 30                               |       | 355 |   |
| Loss (gain) on disposition of assets, net                                          |       | 115                              |       | (35 | ) |
| Changes in operating assets and liabilities:                                       |       |                             |       |   |   |
| Accounts receivable                                                                |       | (6,017                           | )          | (12,713 | ) |
| Inventories                                                                        |       | (3,215                           | )          | (3,174 | ) |
| Prepaid expenses and other                                                         |       | (2                               | )          | 1,066 |   |
| Accounts payable and accrued expenses                                              |       | 4,751                            |       | 2,582 |   |
| Income taxes payable and receivable                                                |       | 3,029                            |       | 6,787 |   |
| Other assets and liabilities                                                       |       | 346                              |       | (858 | ) |
| Net cash provided by operating activities                                          |       | 15,485                           |       | 23,067 |   |
|                                                                               |       |                             |       |   |   |
| **Cash flows from investing activities:**                                          |       |                             |       |   |   |
| Capital expenditures                                                               |       | (3,903                           | )          | (5,249 | ) |
| Proceeds from disposition of assets                                                |       | 34                               |       | 176 |   |
| Net cash used in investing activities                                              |       | (3,869                           | )          | (5,073 | ) |
|                                                                               |       |                             |       |   |   |
| **Cash flows from financing activities:**                                          |       |                             |       |   |   |
| Payments on long-term debt                                                         |       | (16,608                          | )          | (31,073 | ) |
| Proceeds from long-term debt                                                       |       | 10,500                           |       | 37,000 |   |
| Notes payable to banks, net                                                        |       | 3,485                            |       | (2,413 | ) |
| Common stock repurchased                                                           |       | (3,220                           | )          | (24,496 | ) |
| Common stock issued under share-based compensation plans                           |       | 62                               |       | 1,404 |   |
| Excess tax benefit from exercise of share-based compensation awards                |       | —                           |       | 686 |   |
| Net cash used in financing activities                                              |       | (5,781                           | )          | (18,892 | ) |
|                                                                               |       |                             |       |   |   |
| Effect of exchange rate changes                                                    |       | (3,179                           | )          | (1,053 | ) |
|                                                                               |       |                             |       |   |   |
| Change in cash and cash equivalents                                                |       | 2,656                            |       | (1,951 | ) |
| Cash and cash equivalents at beginning of period                                   |       | 21,223                           |       | 36,593 |   |
| Cash and cash equivalents at end of period                                         |       | $                                | 23,879     |   | $ | 34,642 |   |
|                                                                               |       |                             |       |   |   |
| **Supplemental disclosure of cash flow  information:**                             |       |                             |       |   |   |
| See Note 9 to the consolidated financial statements                                |       |                             |       |   |   |

 

The accompanying notes are an integral part of the consolidatedfinancial statements.

 

7

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**CASCADECORPORATIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**Note 1—Descriptionof Business**

** **

Cascade Corporation is an international companyengaged in the manufacture of materials handling products that are widely usedon industrial fork lift trucks and, to a lesser extent, construction, miningand agricultural vehicles. Accordingly, our sales are largely dependent onsales of lift trucks and replacement parts. Our sales are made throughout theworld. We are headquartered in Fairview, Oregon, employing approximately 2,500people and maintaining operations in 15 countries outside the United States.

 

**Note 2—InterimFinancial Information**

** **

The accompanying consolidated financial statements forthe interim periods ended April 30, 2008 and 2007 are unaudited. In theopinion of management, the accompanying consolidated financial statementsreflect normal recurring adjustments necessary for a fair statement of thefinancial position, results of operations and cash flows for those interimperiods. Results of operations for the interim periods are not necessarilyindicative of the results to be expected for the full year, and these financialstatements do not contain the detail or footnote disclosures concerningaccounting policies and other matters that would be included in full fiscalyear financial statements. Therefore, these statements should be read inconjunction with our audited financial statements included in our Annual Reporton Form 10-K for the fiscal year ended January 31, 2008.

 

**Note 3—SegmentInformation**

** **

Our operating units have several economiccharacteristics and attributes, including similar products, distributionpatterns and classes of customers.  As aresult, we aggregate our operating units into four geographic operatingsegments related to the manufacturing, distribution and servicing of materialhandling load engagement products.  Weevaluate the performance of each of our operating segments based on operatingincome, which consists of income before interest, miscellaneous income/expenseand income taxes.  The accountingpolicies of the operating segments are the same as those described in thesummary of significant accounting policies contained in Note 2 of ourconsolidated financial statements included in our Form 10-K for the fiscalyear ended January 31, 2008.

 

Revenues and operating results are classifiedaccording to the country of origin. Transfers represent sales between our geographic operatingsegments.  The costs of our corporateoffice are included in North America.  Identifiableassets are attributed to the geographic location in which they arelocated.  Net sales and transfers,operating results and identifiable assets by geographic operating segment wereas follows (in thousands):

 

8

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| ** **                                | ** ** | **Three Months Ended April 30** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|
| **2008**                                  | ** ** | **North America**                              | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                 |       | $                                                   | 69,320     |   | $ | 49,336 |   | $ | 19,180 |   | $ | 12,031 |   | $ | — |   | $ | 149,867 |   |
| Transfers between areas                   |       | 7,719                                               |       | 581 |   | 83 |   | 6,150 |   | (14,533 | ) | — |   |
| Net sales and transfers                   |       | $                                                   | 77,039     |   | $ | 49,917 |   | $ | 19,263 |   | $ | 18,181 |   | $ | (14,533 | ) | $ | 149,867 |   |
| Gross profit                              |       | $                                                   | 24,251     |   | $ | 7,392 |   | $ | 5,114 |   | $ | 5,591 |   |   |   | $ | 42,348 |   |
| Selling and administrative                |       | 12,749                                              |       | 7,631 |   | 2,339 |   | 1,087 |   |   |   | 23,806 |   |
| Loss (gain) on disposition of assets, net |       | 120                                                 |       | (1 | ) | (3 | ) | (1 | ) |   |   | 115 |   |
| Amortization                              |       | 597                                                 |       | 78 |   | — |   | — |   |   |   | 675 |   |
| Operating income (loss)                   |       | $                                                   | 10,785     |   | $ | (316 | ) | $ | 2,778 |   | $ | 4,505 |   |   |   | $ | 17,752 |   |
| Total assets                              |       | $                                                   | 237,152    |   | $ | 142,429 |   | $ | 48,522 |   | $ | 50,438 |   |   |   | $ | 478,541 |   |
| Property, plant and equipment, net        |       | $                                                   | 34,714     |   | $ | 40,410 |   | $ | 6,940 |   | $ | 18,745 |   |   |   | $ | 100,809 |   |
| Capital expenditures                      |       | $                                                   | 1,546      |   | $ | 1,252 |   | $ | 198 |   | $ | 907 |   |   |   | $ | 3,903 |   |
| Depreciation expense                      |       | $                                                   | 1,693      |   | $ | 1,348 |   | $ | 131 |   | $ | 428 |   |   |   | $ | 3,600 |   |

 
| ** **                                | ** ** | **Three Months Ended April 30** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|
| **2007**                                  | ** ** | **North America**                              | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                 |       | $                                                   | 71,382     |   | $ | 41,604 |   | $ | 13,795 |   | $ | 8,719 |   | $ | — |   | $ | 135,500 |   |
| Transfers between areas                   |       | 8,309                                               |       | 324 |   | 70 |   | 2,669 |   | (11,372 | ) | — |   |
| Net sales and transfers                   |       | $                                                   | 79,691     |   | $ | 41,928 |   | $ | 13,865 |   | $ | 11,388 |   | $ | (11,372 | ) | $ | 135,500 |   |
| Gross profit                              |       | $                                                   | 28,156     |   | $ | 7,605 |   | $ | 3,597 |   | $ | 3,871 |   |   |   | $ | 43,229 |   |
| Selling and administrative                |       | 12,319                                              |       | 6,113 |   | 1,903 |   | 797 |   |   |   | 21,132 |   |
| Loss (gain) on disposition of assets, net |       | (74                                                 | )          | 8 |   | — |   | 31 |   |   |   | (35 | ) |
| Amortization                              |       | 588                                                 |       | 205 |   | — |   | 5 |   |   |   | 798 |   |
| Insurance litigation recovery, net        |       | (15,977                                             | )          | — |   | — |   | — |   |   |   | (15,977 | ) |
| Operating income                          |       | $                                                   | 31,300     |   | $ | 1,279 |   | $ | 1,694 |   | $ | 3,038 |   |   |   | $ | 37,311 |   |
| Total assets                              |       | $                                                   | 222,123    |   | $ | 122,363 |   | $ | 35,158 |   | $ | 41,047 |   |   |   | $ | 420,691 |   |
| Property, plant and equipment, net        |       | $                                                   | 33,187     |   | $ | 36,373 |   | $ | 1,794 |   | $ | 15,369 |   |   |   | $ | 86,723 |   |
| Capital expenditures                      |       | $                                                   | 1,554      |   | $ | 818 |   | $ | 187 |   | $ | 2,690 |   |   |   | $ | 5,249 |   |
| Depreciation expense                      |       | $                                                   | 1,910      |   | $ | 1,225 |   | $ | 99 |   | $ | 245 |   |   |   | $ | 3,479 |   |

 

9

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**Note 4—Inventories**

** **

Inventories stated at the lower of average cost ormarket are presented below by major class (in thousands).

** **
| ** **                   | ** ** | **April 30** | ** ** | **January 31** | ** ** |
|------------------------------|------------|-------------------|------------|---------------------|------------|
| ** **                   | ** ** | **2008**          | ** ** | **2008**            | ** ** |
| Finished goods               |       | $                 | 31,673     |                | $          | 31,618 |   |
| Raw materials and components |       | 58,772            |       | 53,431              |       |
|                         |       | $                 | 90,445     |                | $          | 85,049 |   |

 

**Note 5—Goodwill**

 

During the three months ended April 30, 2008,goodwill increased due to fluctuations in foreign currencies.  We have no goodwill recorded in China. Thefollowing table provides a breakdown of goodwill by geographic region (inthousands):

 
| ** **    | ** ** | **April 30** | ** ** | **January 31** | ** ** |
|---------------|------------|-------------------|------------|---------------------|------------|
| ** **    | ** ** | **2008**          | ** ** | **2008**            | ** ** |
| North America |       | $                 | 103,726    |                | $          | 103,965 |   |
| Europe        |       | 12,414            |       | 11,893              |       |
| Asia Pacific  |       | 2,957             |       | 2,968               |       |
|          |       | $                 | 119,097    |                | $          | 118,826 |   |

 

**Note 6—Share-BasedCompensation Plans**

** **

We have granted three types of share-based awards,stock appreciation rights (SARS), restricted stock and stock options under ourshare-based compensation plans to officers, key managers and directors.  The grant prices are established by our Boardof Directors’ Compensation Committee based on the end of day market price ofour common stock on the grant date.  Weissue new common shares upon the exercise of all awards.

 

SARS provide the holder the right to receive anamount, payable in our common shares, equal to the excess of the market valueof our common shares on the date of exercise (“intrinsic value”) over the baseprice at the time the right was granted. The base price may not be less thanthe market price of our common shares on the date of grant.  All SARS vest ratably over a four year periodand have a term of ten years.

 

 During thesecond quarter of fiscal 2008, our shareholders approved a proposal to amendthe SARS plan to permit the issuance of restricted shares of common stock.  Upon the granting of restricted stock, commonshares are issued to the recipient, but the shares may not be sold, assigned,transferred, pledged, or disposed of by the recipient until vested.  Regardless of vesting, restricted shares havefull voting rights and any dividends declared will be paid to the restrictedstock recipient.  Restricted shares vestratably over a period of three years for officers and four years for directors.  The number of restricted shares issued todirectors is based on the market value of our shares on the date of grant.

 

The amended SARS plan provides for the issuance of amaximum of 750,000 shares of common stock upon the exercise of SARS or issuanceof restricted stock.  As ofApril 30, 2008, a total of 223,000 shares of common stock have been issuedunder the SARS plan, which includes 42,000 shares of restricted stock with agrant date fair market value of $73.73 per share.

 

Stock options provide the holder the right to receiveour common shares at an established price. We have reserved 1,400,000 shares of common stock under our stock optionplan. As of April 30, 2008, a total of 1,087,000 shares have been issuedupon the exercise of stock options.  Noadditional stock options can be granted under the terms of the plan.  All outstanding stock options vest ratablyover a four year period and have a term of ten years.

 

10

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A summary of the plans’ status at April 30, 2008together with changes during the three months then ended are presented in thefollowing tables (in thousands, except per share amounts):

 
| ** **                       | ** ** | **Stock Options** | ** ** | **Stock Appreciation Rights** | ** ** |
|----------------------------------|------------|------------------------|------------|-----------------------------------------|------------|
| ** **                       | ** ** | ** **             | ** ** | **Weighted Average**               | ** ** | ** ** | ** ** | **Weighted Average** | ** ** |
| ** **                       | ** ** | **Outstanding**        | ** ** | **Exercise Price**                 | ** ** | **Outstanding** | ** ** | **Exercise Price** | ** ** |
| ** **                       | ** ** | **Awards**             | ** ** | **Per Share**                      | ** ** | **Awards** | ** ** | **Per Share** | ** ** |
|                             |       |                   |       |                                    |       |   |   |   |   |
| Balance at January 31, 2008 |       | 286                    |       | $                                       | 13.39      |   | 815 |   | $ | 34.84 |   |
| Granted                          |       | —                 |       | —                                  |       | — |   | — |   |
| Exercised                        |       | (4                     | )          | 16.56                                   |       | — |   | — |   |
| Forfeited                        |       | —                 |       | —                                  |       | — |   | — |   |
|                             |       |                   |       |                                    |       |   |   |   |   |
| Balance at April 30, 2008   |       | 282                    |       | $                                       | 13.35      |   | 815 |   | $ | 34.84 |   |

 

We calculate share-based compensation cost for stockoptions and SARS using the Black-Scholes option pricing model.  We calculate share-based compensation costfor restricted stock by multiplying the fair market value of our common shareson the grant date by the number of restricted shares expected to vest.  Share-based compensation is expensed ratablyover the applicable vesting period. Additional information regarding the assumptions used to calculate fairvalue of our share-based compensation plans is presented in Note 2 to ourconsolidated financial statements included in our Form 10-K for the yearended January 31, 2008.

 

As of April 30, 2008, there was $7.6 million oftotal unrecognized compensation cost related to nonvested share-basedcompensation awards granted under the plans, which is expected to be recognizedover a weighted average period of 2.1 years. The following table represents asof April 30, 2008 the share-based compensation costs to be recognized infuture periods (in thousands) for awards granted to date:

 
| **Fiscal Year** | ** ** | **Amount** | ** ** |
|----------------------|------------|------------|------------|
| 2009*                |       | 3,302      | ** ** |
| 2010                 |       | 3,017      |       |
| 2011                 |       | 1,119      |       |
| 2012                 |       | 198        |       |
|                 |       | $          | 7,636      |   |
|                      |            |            |            |  |

*** ***

----

****Represents last nine months of fiscal 2009.***

 

11

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*** ***

***Note 7—Commitments andContingencies***

 

**Environmental Matters**

** **

We are subject toenvironmental laws and regulations, which include obligations to remove ormitigate environmental effects of past disposal and release of certain wastesand substances at various sites. We record liabilities for affected sites whenenvironmental assessments indicate probable cleanup and the costs can bereasonably estimated. Other than for costs of assessments themselves, thetiming and amount of these liabilities is determined based on the estimatedcosts of remediation activities and our commitment to a formal plan of action,such as an approved remediation plan. The reliability and precision of the loss estimates are affected bynumerous factors, such as different stages of site evaluation and reevaluationof the degree of remediation required. We adjust our liabilities as newremediation requirements are defined, as information becomes availablepermitting reasonable estimates to be made and to reflect new and changing facts.

 

It is reasonably possible that changes in estimateswill occur in the near term and the related adjustments to environmentalliabilities may have a material impact on our net income. Unasserted claims arenot currently reflected in our environmental remediation liabilities. It isalso reasonably possible that these claims may also have a material impact onour net income if asserted. We cannot estimate at this time the amount of anyadditional loss or range of loss that is reasonably possible.

 

Our specific environmental matters consist of thefollowing:

 

*Fairview, Oregon*

 

In 1996, the Oregon Department of EnvironmentalQuality issued two Records of Decision affecting our Fairview, Oregonmanufacturing facility. The Records of Decision required us to initiateremedial activities related to the cleanup of groundwater contamination at andnear the facility. Remediation activities have been conducted since 1996 andcurrent estimates provide for some level of activity to continue through 2019.Costs of certain remediation activities at the facility are shared with TheBoeing Company, with Cascade paying 70% of these costs. The recorded liabilityfor ongoing remediation activities at our Fairview facility was$4.6 million and $4.8 million at April 30, 2008 and January 31,2008, respectively.

 

*Springfield, Ohio*

 

In 1994, we entered into a consent order with the OhioEnvironmental Protection Agency, which required the installation of remediationsystems for the cleanup of groundwater contamination at our Springfield, Ohiofacility. The current estimate is that the remediation activities will continuethrough 2013. The recorded liability for ongoing remediation activities inSpringfield was $855,000 at April 30, 2008 and $900,000 at January 31,2008.

 

*Insurance Litigation*

 

On April 9, 2007, we entered into a settlementagreement with Employers Reinsurance Corporation with respect to litigation torecover various expenses incurred in connection with environmental and relatedproceedings.  The recovery from thesettlement, recorded during the three months ended April 30, 2007, was$16.0 million, net of expenses.  Inconnection with the settlement, we released all rights we might have underinsurance policies issued by Employers Reinsurance Corporation and certainrelated entities.  This concluded alllitigation against our insurance companies with regard to environmentalmatters.

 

**LegalProceedings**

 

We are subject to legal proceedings, claims andlitigation, in addition to the environmental matters previously discussed, arisingin the ordinary course of business. While the outcome of these matters iscurrently not determinable, management does not expect the ultimate costs to bematerial to our consolidated financial position, result of operations, or cashflows.

 

12

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**Note 8—Earnings PerShare**

** **

The following table presents the calculation of basicand diluted earnings per share (in thousands, except per share amounts):

 
| ** **                                                   | ** ** | **Three Months Ended April 30** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                   | ** ** | **2008**                                            | ** ** | **2007** | ** ** |
| Basic earnings per share:                                    |       |                                                |       |   |   |
| Net income                                                   |       | $                                                   | 10,858     |   | $ | 23,796 |   |
| Weighted average shares of common stock  outstanding         |       | 10,782                                              |       | 11,966 |   |
|                                                         |       | $                                                   | 1.01       |   | $ | 1.99 |   |
|                                                         |       |                                                |       |   |   |
| Diluted earnings per share:                                  |       |                                                |       |   |   |
| Net income                                                   |       | $                                                   | 10,858     |   | $ | 23,796 |   |
| Weighted average shares of common stock  outstanding         |       | 10,782                                              |       | 11,966 |   |
| Dilutive effect of stock awards                              |       | 316                                                 |       | 579 |   |
| Diluted weighted average shares of common  stock outstanding |       | 11,098                                              |       | 12,545 |   |
|                                                         |       | $                                                   | 0.98       |   | $ | 1.90 |   |

 

Basic earnings per share is based on the weighted average number ofcommon shares outstanding for the period. Diluted weighted average commonshares includes the incremental shares that would be issued upon the assumedexercise of stock options and stock appreciation rights and the amount ofunvested restricted stock.  UnexercisedSARS totaling 64,000 awards and unvested restricted stock totaling 4,070 shareswere excluded from the fiscal 2009 calculation of diluted earnings per sharebecause they were antidilutive.  Theremaining SARS and restricted stock and all stock options were included in ourcalculation of incremental shares because they are dilutive.

 

13

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**Note 9—Supplemental Cash Flow Information**

 

The following table presents information thatsupplements the consolidated statements of cash flow (in thousands):

 
| ** **                                      | ** ** | **For the Three Months Ended April 30** | ** ** |
|-------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                      | ** ** | **2008**                                                              | ** ** | **2007** | ** ** |
| Cash paid during the period for:                |       |                                                                  |       |   |   |
| Interest                                        |       | $                                                                     | 1,097      |   | $ | 775 |   |
| Income taxes                                    |       | $                                                                     | 3,097      |   | $ | 4,716 |   |
|                                            |       |                                                                  |       |   |   |
| Supplemental disclosure of noncash information: |       |                                                                  |       |   |   |
| Dividends declared                              |       | $                                                                     | 1,949      |   | $ | 1,886 |   |

 

14

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**Note 10—BenefitPlans**

** **

The following tablerepresents the net periodic cost related to our defined benefit plans inEngland and France and our postretirement health benefit plan in the UnitedStates (in thousands):

 
| ** **                     | ** ** | **Defined Benefit**                    | ** ** | **Postretirement Benefit**             | ** ** |
|--------------------------------|------------|---------------------------------------------|------------|---------------------------------------------|------------|
| ** **                     | ** ** | **Three Months Ended April** | ** ** | **Three Months Ended April** | ** ** |
| ** **                     | ** ** | **2008**                                    | ** ** | **2007**                                    | ** ** | **2008** | ** ** | **2007** | ** ** |
| Net periodic benefit cost:     |       |                                        |       |                                        |       |   |   |   |   |
| Service cost                   |       | $                                           | 6          |                                        | $          | 14 |   | $ | 26 |   | $ | 30 |   |
| Interest cost                  |       | 147                                         |       | 129                                         |       | 108 |   | 105 |   |
| Expected return on plan assets |       | (131                                        | )          | (125                                        | )          | — |   | — |   |
| Recognized prior service cost  |       | —                                      |       | —                                      |       | (19 | ) | (19 | ) |
| Recognized net actuarial loss  |       | 23                                          |       | 22                                          |       | 1 |   | 48 |   |
|                           |       | $                                           | 45         |                                        | $          | 40 |   | $ | 116 |   | $ | 164 |   |

** **

**Note 11—Recent Accounting Pronouncements**

** **

****SFAS 157 -****In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards (“SFAS”) No. 157 (SFAS157), “Fair Value Measurements.” SFAS 157 provides a common definition of fairvalue, establishes a framework for measuring fair value and expands the relateddisclosure requirements.  In February 2008,the FASB issued final Staff Positions that will (1) defer the effectivedate of this statement for one year for certain nonfinancial assets andnonfinancial liabilities and (2) remove certain leasing transactions fromthe scope of the statement.  We appliedSFAS 157 to all other fair value measurements effective February 1,2008.  The adoption of SFAS 157 did not havea material impact on our financial statements.

 

**FSP 157-2** -** **In February 2008, the FASBissued FASB Staff Position on Statement 157, “Effective Date of FASB Statement No. 157”(FSP 157-2).  FSP 157-2 delays the effective date of SFAS 157 fornonfinancial assets and nonfinancial liabilities, except those that arerecognized or disclosed on a recurring basis, to fiscal years beginning after November 15,2008.  Our significant nonfinancial assets and liabilities that couldbe impacted by this deferral include assets and liabilities initially measuredat fair value in a business combination and goodwill tested annually forimpairment.  FSP 157-2 will become effective for the fiscal yearbeginning February 1, 2009.  We arecurrently evaluating the impact of the adoption of FSP 157-2 on our financialstatements.

 

****SFAS 158****- In September 2006, the FASB issued SFAS No. 158 (SFAS 158), “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans – anamendment of FASB Statements No. 87, 88, 106, and 132(R).”  This statement requires balance sheetrecognition of the overfunded or underfunded status of pension andpostretirement benefit plans. Under SFAS 158, actuarial gains and losses, priorservice costs or credits, and any remaining transition assets or obligationsthat have not been recognized under previous accounting standards must berecognized in other comprehensive income, net of tax effects, until they areamortized as a component of net periodic benefit cost.  In addition, the measurement date, the dateat which plan assets and the benefit obligation are measured, is required to bethe company’s fiscal year end. Presently, we use a December 31 measurementdate for the postretirement benefit plan, which will change to coincide withour January 31 fiscal year-end date. As required by SFAS 158, we adopted the balance sheet recognitionprovision as of January 31, 2007 and the measurement date provisioneffective February 1, 2008.  Theadoption of the measurement date provision did not have a material impact onour financial statements.

 

****SFAS 159 -****In February 2007, the FASB issued SFAS No. 159 (SFAS 159), “The FairValue Option for Financial Assets and Financial Liabilities - Including anAmendment of FASB Statement No. 115.” SFAS 159 allows companies the choiceto measure many financial instruments and certain other items at fair value.Application of SFAS 159 was required for our financial statements beginning February 1,2008.  We did not elect to measure anyfinancial instruments or any other items at fair value as permitted by SFAS159.  Therefore, the adoption of SFAS 159did not have a material impact on our financial statements.

 

15

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****SFAS 141(R) &SFAS 160 –**** In December 2007, the FASBissued SFAS No. 141(R) (SFAS 141(R)), “Business Combinations,” andSFAS No. 160 (SFAS 160), “Noncontrolling Interests in ConsolidatedFinancial Statements, an amendment of ARB No. 51”. SFAS 141(R) requiresthe acquiring entity in a business combination to recognize the assets acquiredand liabilities assumed. Further, SFAS 141(R) also changes the accountingfor acquired in-process research and development assets, contingentconsideration, partial acquisitions and transaction costs.  UnderSFAS 160, all entities are required to report noncontrolling (minority)interests in subsidiaries as equity in the consolidated financial statements.In addition, transactions between an entity and noncontrolling interests willbe treated as equity transactions.  SFAS141(R) and SFAS 160 will become effective for business combinations forwhich the acquisition date is on or after February 1, 2009.  We are currently evaluating the impact of theadoption of these standards on our financial statements.

 

**SFAS 161** – In March 2008,the FASB issued SFAS No. 161 (SFAS 161), “Disclosures about DerivativeInstruments and Hedging Activities – an amendment of FASB Statement No. 133.”SFAS 161 expands disclosures for derivative instruments by requiring entitiesto disclose the fair value of derivative instruments and their gains or lossesin tabular format.  SFAS 161 also requires disclosure of informationabout credit risk-related contingent features in derivative agreements,counterparty credit risk, and strategies and objectives for using derivativeinstruments.   SFAS 161 will become effective for fiscal yearsbeginning after November 15, 2008.  We will adopt this newaccounting standard on February 1, 2009.  We are currently evaluatingthe impact of the adoption of this standard on our financial statements.

 

16

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**Note 12—Warranty Obligations**

 

We record a liability onour consolidated balance sheet for costs related to warranties with the salesof our products. This liability is estimated through historical customerclaims, product failure rates, material usage and service delivery costsincurred in correcting a product failure. Our warranty obligations, which arerecorded in other accrued expenses on the consolidated balance sheets, were asfollows (in thousands):

 
| ** **                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Balance at January 31                        |       | $        | 1,900      |     | $          | 1,755 |   |
| Accruals for warranties issued during the  period |       | 438      |       | 645      |       |
| Settlements during the period                     |       | (568     | )          | (589     | )          |
| Balance at April 30                          |       | $        | 1,770      |     | $          | 1,811 |   |

** **

**Note 13—AccumulatedOther Comprehensive Income**

** **

The following table presents the changes in and thecomponents of accumulated other comprehensive income (in thousands):

 
| ** **                       | ** ** | **Accumulated Other Comprehensive Income (Loss)** | ** ** |
|----------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                       | ** ** | **Translation Adjustment**                                       | ** ** | **Minimum Pension Liability  Adjustment** | ** ** | **Total** | ** ** |
| Balance at January 31, 2008 |       | $                                                                     | 37,492     |   | $ | (1,819 | ) | $ | 35,673 |   |
| Translation adjustment           |       | 2,914                                                                 |       | — |   | 2,914 |   |
| Balance at April 30, 2008   |       | $                                                                     | 40,406     |   | $ | (1,819 | ) | $ | 38,587 |   |

 

**Note 14—Income Taxes**

 

As of April 30, 2008 our liability for uncertaintax positions under FASB Interpretation No. 48 (FIN 48) was $1.1million.  There were no material changesin unrecognized tax benefits during the current period.  The reserve for unrecognized tax benefits asof April 30, 2008 included an accrual for interest and penalties of$122,000.

 

We are subject to taxation primarily in the U.S.,Canada and China, as well as various state and other foreignjurisdictions.  The Internal RevenueService (IRS) is currently reviewing our U.S. income tax returns for fiscalyears 2004 - 2007. The IRS has proposed an adjustment of $5 million related tointerest deductions reported on tax returns for the 2004 and 2005 taxyears.  These adjustments would result inan additional federal and state tax liability of approximately $1.8 million.  We are in the process of appealing the issuewith the IRS and have determined that we will more-likely-than-not prevail onthe issue.  No amount has been recordedin our financial statements as of April 30, 2008 related to thismatter.  As of April 30, 2008, weremain subject to examination in various state and foreign jurisdictions forthe 1997-2006 tax years.

 

17

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** **

**Item 2. Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

** **

Our businesses globally manufacture and distributematerial handling load engagement products primarily for the lift truckindustry and to a lesser extent the construction industry.  We operate in four geographic segments:  North America, Europe, Asia Pacific andChina.  All references to fiscal periodsare defined as the period ended April 30, 2007 (fiscal 2008) and theperiod ended April 30, 2008 (fiscal 2009).

 

**RECENT TRENDS ANDDEVELOPMENTS AFFECTING OUR RESULTS**

 

**European Business**

 

Our European businesscontinues to provide both the biggest opportunity for improvement and thebiggest challenge facing our company. Europe’s lift truck industry continued to be strong during the firstquarter of fiscal 2009 with shipments increasing 16%.  We captured some of this growth with a 5%increase in sales, excluding currency changes. However, our sales growth and profitability continue to fall short ofour expectations.  Below is an update onpreviously reported trends and activities impacting our European business:

 

·                  We arecontinuing with an operational review of our entire European business, whichincludes among other things a rationalization of production capacity.  We had previously announced steps we weretaking to reduce our workforce in Almere, The Netherlands and to transfer theproduction of certain products to Verona, Italy.  This plan was formally announced in May 2008and we expect to incur severance and other costs of approximately $600,000 inthe second quarter of fiscal 2009.  Thesecosts are in addition to costs of $375,000 incurred in the first quarter.  We anticipate incurring additional coststhrough the remainder of fiscal 2009 related to operational and reorganizationchanges now under development.

 

·                  In fiscal 2008we commenced operation of a facility in Xiamen, China to begin manufacturingfork products to supply OEM customers and secondary markets.  While we have been importing Chinese-madeproducts into Europe over the last six months, the distribution of theseproducts has been limited, pending product approval from key European OEMs. We are currently working to obtain additional OEM approvals.

 

·                  We areaggressively working to lower our material costs through global sourcing fromboth internal and external suppliers and particularly from our own factories inNorth America.

 

·                  While thestrategies related to available production capacity, product sourcing andpricing are important steps in improving our European business results, the keycomponent in our reorganization is the transition of our European factories toour North American operating model and the full implementation of “LeanPrinciples” throughout the organization. We have begun this transformation.

 

We believe we will seegradual improvements over time as a result of the reorganization that is inprocess.  Improving operationalperformance in Europe, the world’s largest lift truck market, remains our toppriority.

 

**Material Cost Increases**

 

We continue to feel thepressures of increasing material costs globally.  The following are some of the activities andinitiatives underway to mitigate the cost increases:

 

·                  We continue ourefforts to lower our material costs by sourcing from alternative suppliers orpurchasing larger volumes ahead of scheduled price increases.  In the short-term, these strategies willresult in maintaining or adding to inventory levels at certain locations.  Over the long-term we expect inventory levelsto decrease as material costs stabilize.

 

18

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·                  We are workingto create efficiencies by improving our internal processes in manufacturing andadministration which we believe will ultimately result in lower operationcosts.

 

·                  We implementedsales price increases in all markets globally in the first quarter of fiscal2009 and we anticipate additional sales price increases or surcharges will benecessary during the remainder of the year.

 

19

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**COMPARISON OF FIRSTQUARTER OF FISCAL 2009 AND FISCAL 2008**

 

**Executive Summary**

 
| ** **       | ** ** | **Three Months Ended April 30**                  | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------|------------|----------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **       | ** ** | **2008**                                                             | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change %** | ** ** |
|             |       | **(In thousands except per share amounts)** |       |       |       |
|             |       |                                                                 |       |       |       |       |       |   |   |
| Net sales        |       | $                                                                    | 149,867    |       | $          | 135,500    |       | $ | 14,367 |   | 11 | % |
| Operating income |       | $                                                                    | 17,752     |       | $          | 37,311     |       | $ | (19,559 | ) | (52 | )% |
| Net income       |       | $                                                                    | 10,858     |       | $          | 23,796     |       | $ | (12,938 | ) | (54 | )% |

 

Duringfiscal 2008 we settled an insurance litigation matter which accounted for a $16million increase to operating income and a $10 million after tax increase tonet income.  We believe the exclusion ofthe insurance litigation recovery provides a more appropriate comparison withthe current year results:

 
|                                       | ** ** | **Three Months Ended April 30**                  | ** ** | ** ** | ** ** | ** ** | ** ** |
|---------------------------------------|------------|----------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                            | ** ** | **2008**                                                             | ** ** | **2007**   | ** ** | **Change** | ** ** | **Change %** | ** ** |
|                                  |       | **(In thousands except per share amounts)** |       |       |       |
| Net of insurance litigation recovery: |       |                                                                 |       |       |       |       |       |   |   |
| Operating income                      |       | $                                                                    | 17,752     |       | $          | 21,334     |       | $ | (3,582 | ) | (17 | )% |
| Net income                            |       | $                                                                    | 10,858     |       | $          | 13,770     |       | $ | (2,912 | ) | (21 | )% |
| Diluted earnings per share            |       | $                                                                    | 0.98       |       | $          | 1.10       |       | $ | (0.12 | ) | (11 | )% |

 

The calculation of operatingincome, net income and diluted earnings per share, excluding the insurancerecovery, is as follows (in thousands, except per share amounts):

 
| ** **                                                          | ** ** | **Three months ended** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **April 30, 2007**     | ** ** |
|                                                                |       |                             |       |
| Operating income as reported                                        |       | $                                | 37,311     |   |
| Less: insurance litigation recovery                                 |       | (15,977                          | )          |
| Adjusted operating income, excluding insurance litigation recovery  |       | $                                | 21,334     |   |
|                                                                |       |                             |       |
| Net income as reported                                              |       | $                                | 23,796     |   |
| Less: insurance litigation recovery, net of income taxes of $5,951  |       | (10,026                          | )          |
| Adjusted net income, excluding insurance litigation recovery        |       | $                                | 13,770     |   |
|                                                                |       |                             |       |
| Diluted weighted average shares outstanding                         |       | 12,545                           |       |
|                                                                |       |                             |       |
| Diluted earnings per share, excluding insurance litigation recovery |       | $                                | 1.10       |   |

 

Thefollowing are financial highlights for the first quarter of fiscal 2009:

 

·                  During thecurrent year we posted higher levels of consolidated net sales primarily as aresult of the strength of lift truck markets in China, Asia Pacific andEurope.  Excluding the impact of foreigncurrency and an acquisition, net sales increased 4% during fiscal 2009.  Global lift truck shipments increased 15%compared to the first quarter of the prior year.

·                  Ourconsolidated gross profit percentage decreased to 28% in fiscal 2009 from 32%in fiscal 2008 primarily as a result of significant material price increasesexperienced in all geographic segments.

 

20

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**North America**

 
| ** **                                | ** ** | **Three Months Ended April 30** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **2008**                                            | ** ** | **%**      | ** ** | **2007**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                | ** ** | **(In thousands)**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                 |       | $                                                   | 69,320     |       | 90         | %          | $          | 71,382 |   | 90 | % | $ | (2,062 | ) | (3 | )% |
| Transfers between areas                   |       | 7,719                                               |       | 10         | %          | 8,309      |       | 10 | % | (590 | ) | (7 | )% |
| Net sales and transfers                   |       | 77,039                                              |       | 100        | %          | 79,691     |       | 100 | % | (2,652 | ) | (3 | )% |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods sold                        |       | 52,788                                              |       | 69         | %          | 51,535     |       | 65 | % | 1,253 |   | 2 | % |
| Gross profit                              |       | 24,251                                              |       | 31         | %          | 28,156     |       | 35 | % | (3,905 | ) | (14 | )% |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Selling and administrative                |       | 12,749                                              |       | 16         | %          | 12,319     |       | 15 | % | 430 |   | 3 | % |
| Loss (gain) on disposition of assets, net |       | 120                                                 |       | —     |       | (74        | )          | — |   | 194 |   | — |   |
| Amortization                              |       | 597                                                 |       | 1          | %          | 588        |       | 1 | % | 9 |   | — |   |
| Insurance litigation recovery, net        |       | —                                              |       | —     |       | (15,977    | )          | (20 | )% | 15,977 |   | — |   |
| Operating income                          |       | $                                                   | 10,785     |       | 14         | %          | $          | 31,300 |   | 39 | % | $ | (20,515 | ) | (66 | )% |

 

Thefollowing are financial highlights for North America for the first quarter offiscal 2009:

 

·                  Excluding netsales from a prior year acquisition and the impact of currency changes, netsales decreased 5%.  Lower sales infiscal 2009 are primarily the result of the general downturn in the UnitedStates economy, which is reflected in both the lift truck and constructionmarkets.  We were able to partiallyoffset the effect of lower sales volumes with sales price increases.  First quarter North America lift truckindustry shipments from 2008 to 2009 decreased 6%.  We have found that lift truck industrystatistics provide an indication of the direction of our businessactivity.  However, changes in our netsales do not correspond directly to the percentage changes in lift truckindustry shipments, because certain industry sectors of the economy use our productsmore than others.

·                  Our grossprofit percentage decreased 4% during fiscal 2009, due to higher materialcosts, changes in product mix, lower sales volumes and other cost increases.

·                  Selling andadministrative costs increased during the current year due to an acquisition(1%) and currency changes (2%).

·                  During thefirst quarter of fiscal 2008, we entered into a settlement agreement withEmployers Reinsurance Corporation with respect to litigation to recover variousexpenses incurred in connection with environmental and relatedproceedings.  The recovery from thissettlement was $16.0 million, net of expenses.

 

**Europe**

 
| ** **                                | ** ** | **Three Months Ended April 30** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **2008**                                            | ** ** | **%**      | ** ** | **2007**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                | ** ** | **(In thousands)**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                 |       | $                                                   | 49,336     |       | 99         | %          | $          | 41,604 |   | 99 | % | $ | 7,732 |   | 19 | % |
| Transfers between areas                   |       | 581                                                 |       | 1          | %          | 324        |       | 1 | % | 257 |   | 79 | % |
| Net sales and transfers                   |       | 49,917                                              |       | 100        | %          | 41,928     |       | 100 | % | 7,989 |   | 19 | % |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods sold                        |       | 42,525                                              |       | 85         | %          | 34,323     |       | 82 | % | 8,202 |   | 24 | % |
| Gross profit                              |       | 7,392                                               |       | 15         | %          | 7,605      |       | 18 | % | (213 | ) | (3 | )% |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Selling and administrative                |       | 7,631                                               |       | 16         | %          | 6,113      |       | 15 | % | 1,518 |   | 25 | % |
| Loss (gain) on disposition of assets, net |       | (1                                                  | )          | —     |       | 8          |       | — |   | (9 | ) | — |   |
| Amortization                              |       | 78                                                  |       | —     |       | 205        |       | — |   | (127 | ) | (62 | )% |
| Operating income (loss)                   |       | $                                                   | (316       | )          | (1         | )%         | $          | 1,279 |   | 3 | % | $ | (1,595 | ) | (125 | )% |

 

Thefollowing are financial highlights for Europe for the first quarter of fiscal2009:

 

·                  Net salesincreased 5%, excluding currency changes, due to increased shipment volumes,which reflect a strong European lift truck market.  Lift truck industry shipments for the sameperiod increased 16%.  While

 

21

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we have kept pace with the expanding lift truck market in certain partsof Europe and in certain product categories, overall our sales increase fellshort of market increases.  The marketsin Eastern Europe and the Middle East are expanding rapidly and to date we havenot been able to capitalize on this market growth.  This is due in part to lower applicationrates of lift truck attachments in these developing markets.  We are taking steps to expand our presence inthese markets.

·                  The 3% decreasein current year gross profit percentage is primarily due to material priceincreases and operational inefficiencies. The gross margin was also negatively affected by delays in approval ofChinese-made products by European OEMs.  These delays required us tocontinue supplying OEMs with European-made products at lower margins.

·                  Excluding theimpact of currency changes, selling and administrative expenses increased 11%,because of higher personnel and other general costs.   Included in this increase is approximately$375,000 of initial costs related to our European reorganization.

 

**Asia Pacific**

 
| ** **                         | ** ** | **Three Months Ended April 30** | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                         | ** ** | **2008**                                            | ** ** | **%**      | ** ** | **2007**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                         | ** ** | **(In thousands)**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                          |       | $                                                   | 19,180     |       | 100        | %          | $          | 13,795 |   | 99 | % | $ | 5,385 |   | 39 | % |
| Transfers between areas            |       | 83                                                  |       | —     |       | 70         |       | 1 | % | 13 |   | 19 | % |
| Net sales and transfers            |       | 19,263                                              |       | 100        | %          | 13,865     |       | 100 | % | 5,398 |   | 39 | % |
|                               |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods sold                 |       | 14,149                                              |       | 74         | %          | 10,268     |       | 74 | % | 3,881 |   | 38 | % |
| Gross profit                       |       | 5,114                                               |       | 26         | %          | 3,597      |       | 26 | % | 1,517 |   | 42 | % |
|                               |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Selling and administrative         |       | 2,339                                               |       | 12         | %          | 1,903      |       | 14 | % | 436 |   | 23 | % |
| Gain on disposition of assets, net |       | (3                                                  | )          | —     |       | —     |       | — |   | (3 | ) | — |   |
| Operating income                   |       | $                                                   | 2,778      |       | 14         | %          | $          | 1,694 |   | 12 | % | $ | 1,084 |   | 64 | % |

 

Thefollowing are financial highlights for Asia Pacific for the first quarter offiscal 2009:

 

·                  Excludingcurrency changes, net sales increased 29%. This increase occurred in all locations throughout the region due toincreased shipping volumes as a result of strong lift truck markets and ourinitiative to produce a wider selection of products in China for sale in thisregion.  Lift truck industry shipments inAsia Pacific increased 19% in fiscal 2009 compared to fiscal 2008.

·                  Our grossprofit percentage in Asia Pacific remained consistent at 26%.  The benefits of sourcing lower cost productfrom China were offset by increased sales of lower margin products.

·                  Selling andadministrative costs increased 11%, excluding currency changes, due to higherpersonnel and selling costs.  However, asa percentage of net sales and transfers, selling and administrative costsdecreased from 14% in fiscal 2008 to 12% in fiscal 2009.

 

22

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**China**

 
| ** **                                | ** ** | **Three Months Ended April 30** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|-----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                | ** ** | **2008**                                            | ** ** | **%**      | ** ** | **2007**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                | ** ** | **(In thousands)**                             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                 |       | $                                                   | 12,031     |       | 66         | %          | $          | 8,719 |   | 77 | % | $ | 3,312 |   | 38 | % |
| Transfers between areas                   |       | 6,150                                               |       | 34         | %          | 2,669      |       | 23 | % | 3,481 |   | 130 | % |
| Net sales and transfers                   |       | 18,181                                              |       | 100        | %          | 11,388     |       | 100 | % | 6,793 |   | 60 | % |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods sold                        |       | 12,590                                              |       | 69         | %          | 7,517      |       | 66 | % | 5,073 |   | 67 | % |
| Gross profit                              |       | 5,591                                               |       | 31         | %          | 3,871      |       | 34 | % | 1,720 |   | 44 | % |
|                                      |       |                                                |       |       |       |       |       |   |   |   |   |   |   |
| Selling and administrative                |       | 1,087                                               |       | 6          | %          | 797        |       | 7 | % | 290 |   | 36 | % |
| Loss (gain) on disposition of assets, net |       | (1                                                  | )          | —     |       | 31         |       | — |   | (32 | ) | — |   |
| Amortization                              |       | —                                              |       | —     |       | 5          |       | — |   | (5 | ) | — |   |
| Operating income                          |       | $                                                   | 4,505      |       | 25         | %          | $          | 3,038 |   | 27 | % | $ | 1,467 |   | 48 | % |

 

The following are financial highlights for China for the first quarterof fiscal 2009:

 

·                  Net salesincreased 29%, excluding the impact of currency changes.  This increase is a result of our priorcapital expansion in China which increased our capabilities to manufacture alarger volume of products and the growth in the lift truck industry.  Lift truck shipments in China increased 30%in the current year.

·                  Transfers toother Cascade geographic areas increased 130% during fiscal 2009, due to theexport of Chinese-made products to Europe and Asia-Pacific.

·                  The gross profitpercentage decreased 3% due to material price increases, changes in product mixand higher intercompany transfers, which carry lower gross margins.

·                  Selling andadministrative costs increased 27%, excluding currency changes, due toadditional costs to support our expanded operations in China.  As a percentage of net sales and transfers,selling and administrative costs decreased from 7% in fiscal 2008 to 6% infiscal 2009.

 

**Non-Operating Items**

 

The following are financial highlights for non-operating items duringthe first quarter of fiscal 2009:

 

·                  Interest expenseincreased $136,000 during fiscal 2009 due to additional borrowings in 2008 tofund various initiatives, primarily our share repurchase program.  This was offset by a lower effective interestrate during the current year.

·                  Our effective taxrate remained consistent at 35%.

 

**Lift Truck Market Outlook**

 

Based on our review of preliminary industrydata we believe the general lift truck market outlook for the remainder offiscal 2009 is as follows:

 

·                  Themarket in North America will continue to be down 5-10% compared to the prioryear.

·                  Europewill continue to experience growth compared to the prior year.

·                  Thegrowth rate in the Asia Pacific market will remain at current levels throughthe remainder of the year.

·                  Themarket in China will continue to experience its current rate of growth throughthe remainder of the year.

 

Additional information on lift truck industrytrends can be found at www.cascorp.com/investor/industrytrends.  This website address is intended to providean inactive, textual reference only.  Theinformation at this website is not a part of this Form 10-Q and is notincorporated by reference.

 

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**CASH FLOWS**

 

The statements of cash flows reflect thechanges in cash and cash equivalents for the three months ended April 30,2008 and April 30, 2007 by classifying transactions into three majorcategories of activities: operating, investing and financing.

 

**Operating**

 

Our primary source of liquidity is cash generated from operatingactivities. The major operating activity is net income adjusted for changes inworking capital and non-cash operating items such as depreciation, amortizationand share-based compensation.

 

Net cash provided by operating activities decreased $7.6 million duringthe first quarter of fiscal 2009 compared to the prior year.  The following are the major differencesbetween the current and prior year operating activities:

 

·                  During fiscal2008, net income was significantly higher due to the insurance litigationsettlement.

·                  Accountsreceivable increased at a slower rate during the current year with ourincreased focus on collections.

 

**Investing**

 

Our primary investing activity is capital expenditures, which areprimarily for equipment and tooling related to product improvements, moreefficient production methods and replacement for normal wear and tear. Capitalexpenditures by geographic segments were as follows (in thousands):

 
| ** **    | ** ** | **Three Months Ended** | ** ** |
|---------------|------------|----------------------------------|------------|
| ** **    | ** ** | **April 30**                | ** ** |
| ** **    | ** ** | **2008**                         | ** ** | **2007** | ** ** |
|          |       |                             |       |   |   |
| North America |       | $                                | 1,546      |   | $ | 1,554 |   |
| Europe        |       | 1,252                            |       | 818 |   |
| Asia Pacific  |       | 198                              |       | 187 |   |
| China         |       | 907                              |       | 2,690 |   |
|          |       | $                                | 3,903      |   | $ | 5,249 |   |

 

The following are capital expenditure highlights during the firstquarter of fiscal 2009 and 2008:

 

·                  China’s capitalexpenditures in fiscal 2008 relate primarily to the completion of two newmanufacturing facilities.  China’scapital expenditures in fiscal 2009 relate to equipment upgrades and theinitial work on a building to manufacture construction attachments.

·                  The increase incapital expenditures in Europe during the current year relates primarily tocosts associated with the future introduction of new products.

·                  We expectcapital expenditures for the remainder of fiscal 2009 to be approximately $15million.  We believe this level ofcapital expenditures is sufficient to meet operational requirements.

 

**Financing**

 

The following are major financing activities during the first quarterof fiscal 2009 and fiscal 2008:

 

·                  During fiscal2009, net payments made against our long-term debt and notes payable were $2.6million, compared to net borrowings of $3.5 million during fiscal 2008.  In the prior year, we utilized borrowingsagainst our line of credit and cash received from the insurance litigationsettlement to fund our share repurchase program.

 

24

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·                  We concluded ourshare repurchase program at the beginning of the first quarter of fiscal2009.  In total, we repurchased 2,435,000shares of common stock for $130 million over 18 months.

·                  We declareddividends of $0.18 and $0.16 per share during the first three months of fiscal2009 and 2008, respectively.

·                  The issuance ofcommon stock related to the exercise of share-based awards generated $62,000and $1.4 million of cash for the first three months of fiscal 2009 and 2008,respectively.

 

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**FINANCIALCONDITION AND LIQUIDITY**

 

The following are highlights regarding our financial condition andliquidity for the first quarter of fiscal 2009:

 

·                  Our workingcapital, defined as current assets less current liabilities, increased from$152.0 million at January 31, 2008 to $155.8 million at April 30,2008, primarily due to increases in accounts receivable and inventory.

·                  Our currentratio decreased slightly from 3.4 to 1 at January 31, 2008 to 3.1 to 1 at April 30,2008.  On a percentage basis, currentliabilities increased at a higher rate than current assets, primarily due toincreases in notes payable to banks and accounts payable.

·                  Totaloutstanding debt, including notes payable to banks, decreased slightly from$110.7 million at January 31, 2008 to $108.2 million at April 30,2008.

·                  Borrowingarrangements currently in place with commercial banks provide lines of credittotaling $148.8 million, of which $98.0 million was outstanding and anadditional $3.7 million was used to issue letters of credit at April 30,2008.  The borrowings available under theline of credit decreases $1.25 million quarterly through the debt expirationdate of December 7, 2011.  Theinterest rate on the lines of credit, which is based on LIBOR plus a margin of0.75%, was 3.60% and 4.66% at April 30, 2008 and January 31, 2008,respectively. The lines of credit contain certain covenants relating to networth and leverage ratios.  We were incompliance with these covenants at April 30, 2008.

·                  Borrowings undernotes payable to banks, which includes bank overdrafts and short-term lines ofcredit, increased $3.5 million from January 31, 2008 to April 30,2008.  The average interest rate on thesenotes was 4.9% and 4.3% at April 30, 2008 and January 31, 2008,respectively.

·                  Our currentplans are to fund our existing postretirement obligation as costs areincurred.  Any defined benefitobligations will be funded to meet minimum statutory funding requirements orany additional funding requirements which we have committed to in specific planagreements.  Currently, these additionalfunding requirements are limited to annual contributions of $400,000 throughfiscal year 2011 to a defined benefit plan in England.

·                  We believe ourcash and cash equivalents, existing credit facilities and cash flows fromoperations will be sufficient to satisfy our expected working capital, capitalexpenditure and debt retirement requirements for the next twelve months.

 

**OTHERMATTERS**

 

The U.S. dollar weakened in the first threemonths of fiscal 2009 in comparison to some foreign currencies used by oursignificant foreign operations, including the Euro and Chinese Yuan.  The U.S. dollar strengthened slightly in thefirst three months of fiscal 2009 compared to the Canadian Dollar and BritishPound.  As a result, foreign currencytranslation adjustments increased shareholders’ equity by $2.9 million in thefirst three months of fiscal 2009.

 

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

 

Management’sdiscussion and analysis of financial condition and results of operations isbased on our consolidated financial statements which have been prepared inaccordance with generally accepted accounting principles in the United Statesof America (GAAP).  The preparation ofthese financial statements requires us to make estimates and judgments thataffect the reported amounts of assets, liabilities, revenues and expenses andthe disclosure of contingent assets and liabilities.  We evaluate our estimates and judgments on anon-going basis, including those related to uncollectible receivables,inventories, impairment of goodwill, warranty obligations, environmentalliabilities, benefit plans, share-based compensation and deferred taxes.  We base our estimates on historicalexperience and various other assumptions that we believe to be reasonable underthe circumstances.  Actual results maydiffer from these estimates under different assumptions or conditions.  A description of our critical accountingpolicies and related judgments and estimates that affect the preparation of ourconsolidated financial statements is set forth in our Annual Report on Form 10-Kfor the year ended January 31, 2008.

 

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**OFFBALANCE SHEET ARRANGEMENTS**

 

At April 30, 2008, we did not have anyrelationships with unconsolidated entities or financial partnerships, such asentities often referred to as structured finance or special purpose entities,which would have been established for the purpose of facilitating off-balancesheet arrangements or for other contractually narrow or limited purposes. Assuch, we are not materially exposed to any financing, liquidity market orcredit risk that could arise if we had engaged in such relationships.

 

**RECENT ACCOUNTING PRONOUNCEMENTS**

** **

****SFAS 157****-In September 2006, the Financial Accounting Standards Board (“FASB”)issued Statement of Financial Accounting Standards (“SFAS”) No. 157 (SFAS157), “Fair Value Measurements.” SFAS 157 provides a common definition of fairvalue, establishes a framework for measuring fair value and expands the relateddisclosure requirements.  In February 2008,the FASB issued final Staff Positions that will (1) defer the effectivedate of this statement for one year for certain nonfinancial assets andnonfinancial liabilities and (2) remove certain leasing transactions fromthe scope of the statement.  We appliedSFAS 157 to all other fair value measurements effective February 1,2008.  The adoption of SFAS 157 did nothave a material impact on our financial statements.

 

**FSP 157-2** –** **In February 2008, the FASBissued FASB Staff Position on Statement 157, “Effective Date of FASB Statement No. 157”(FSP 157-2).  FSP 157-2 delays the effective date of SFAS 157 fornonfinancial assets and nonfinancial liabilities, except those that arerecognized or disclosed on a recurring basis, to fiscal years beginning after November 15,2008.  Our significant nonfinancial assets and liabilities that couldbe impacted by this deferral include assets and liabilities initially measuredat fair value in a business combination and goodwill tested annually forimpairment.  FSP 157-2 will become effective for the fiscal yearbeginning February 1, 2009.  We arecurrently evaluating the impact of the adoption of FSP 157-2 on our financialstatements.

 

****SFAS 158****- In September 2006, the FASB issued SFAS No. 158 (SFAS 158), “Employers’Accounting for Defined Benefit Pension and Other Postretirement Plans – anamendment of FASB Statements No. 87, 88, 106, and 132(R).”  This statement requires balance sheetrecognition of the overfunded or underfunded status of pension andpostretirement benefit plans. Under SFAS 158, actuarial gains and losses, priorservice costs or credits, and any remaining transition assets or obligationsthat have not been recognized under previous accounting standards must berecognized in other comprehensive income, net of tax effects, until they areamortized as a component of net periodic benefit cost.  In addition, the measurement date, the dateat which plan assets and the benefit obligation are measured, is required to bethe company’s fiscal year end. Presently, we use a December 31 measurementdate for the postretirement benefit plan, which will change to coincide withour January 31 fiscal year-end date. As required by SFAS 158, we adopted the balance sheet recognitionprovision as of January 31, 2007 and the measurement date provisioneffective February 1, 2008.  Theadoption of the measurement date provision did not have a material impact onour financial statements.

 

****SFAS 159****-In February 2007, the FASB issued SFAS No. 159 (SFAS 159), “The FairValue Option for Financial Assets and Financial Liabilities - Including anAmendment of FASB Statement No. 115.” SFAS 159 allows companies the choiceto measure many financial instruments and certain other items at fair value.Application of SFAS 159 was required for our financial statements beginning February 1,2008.  We did not elect to measure anyfinancial instruments or any other items at fair value as permitted by SFAS159.  Therefore, the adoption of SFAS 159did not have a material impact on our financial statements.

 

****SFAS 141(R) &SFAS 160****– In December 2007, the FASBissued SFAS No. 141(R) (SFAS 141(R)), “Business Combinations,” and SFASNo. 160 (SFAS 160), “Noncontrolling Interests in Consolidated FinancialStatements, an amendment of ARB No. 51”. SFAS 141(R) requires theacquiring entity in a business combination to recognize the assets acquired andliabilities assumed. Further, SFAS 141(R) also changes the accounting foracquired in-process research and development assets, contingent consideration,partial acquisitions and transaction costs.  Under SFAS 160, allentities are required to report noncontrolling (minority) interests in subsidiariesas equity in the consolidated financial statements. In addition, transactionsbetween an entity and noncontrolling interests will be treated as equitytransactions.  SFAS 141(R) and SFAS160 will become effective for business combinations for which the acquisitiondate is on or after February 1, 2009. We are currently evaluating the impact of the adoption of thesestandards on our financial statements.

 

27

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**SFAS 161** – In March 2008,the FASB issued SFAS No. 161 (SFAS 161), “Disclosures about DerivativeInstruments and Hedging Activities – an amendment of FASB Statement No. 133.”SFAS 161 expands disclosures for derivative instruments by requiring entitiesto disclose the fair value of derivative instruments and their gains or lossesin tabular format.  SFAS 161 also requires disclosure of informationabout credit risk-related contingent features in derivative agreements,counterparty credit risk, and strategies and objectives for using derivative instruments.   SFAS161 will become effective for fiscal years beginning after November 15,2008.  We will adopt this new accounting standard on February 1,2009.  We are currently evaluating the impact of the adoption of thisstandard on our financial statements.

 

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**Item 3.Quantitative and Qualitative Disclosures About Market Risk**

 

Market risk is thepotential loss arising from adverse changes in market rates and prices, such asforeign currency exchange rate and interest rate fluctuations. A significantportion of our net sales and expenses are denominated in foreign currencies. Asa result, our operating results could become subject to significantfluctuations based upon changes in the exchange rates of the foreign currenciesin relation to the U.S. dollar.

 

The table belowillustrates the hypothetical increase in net sales for the first quarter offiscal 2009 resulting from a 10% weaker U.S. dollar during the quarter,measured against foreign currencies that affect our operations (in millions):

 
| Euro                                                          |   | $   | 3.8    |   |
|---------------------------------------------------------------|--------|-----|--------|--------|
| Chinese yuan                                                  |   | 1.2 |   |
| British pound                                                 |   | 1.0 |   |
| Japanese yen                                                  |   | 0.8 |   |
| Canadian dollar                                               |   | 0.7 |   |
| Other currencies (representing 9% of  consolidated net sales) |   | 1.3 |   |

 

A 10% weaker U.S. dollar during the quarter, measuredagainst foreign currencies that affect our operations, would have an immaterialimpact on our operating income.

 

We enter into foreign currency forward exchangecontracts to offset the impact of currency fluctuations on certainnonfunctional currency assets and liabilities. The principal currencies hedgedare denominated in Japanese yen, Canadian dollars, Euros, Chinese yuan, Swedishkrona and British pounds. Our foreign currency forward exchange contracts haveterms lasting up to six months, but generally less than one month. We do notenter into derivatives or other financial instruments for trading orspeculative purposes.

 

A majority of our products are manufactured usingsteel as the primary raw material and steel based components as purchasedparts. As such, our cost of goods sold is sensitive to fluctuations in steelprices, either directly through the purchase of steel as raw material orindirectly through the purchase of steel based components.

 

Presuming that the full impact of commodity steel costincreases is reflected in all steel and steel based component purchases, weestimate our gross profit percentage sensitivity to be approximately 0.3% foreach 1.0% increase in commodity steel cost without offsetting sales priceincreases.  Based on our statement ofincome for the quarter ended April 30, 2008, a 1% increase in commoditysteel costs would have decreased consolidated gross profit by approximately$430,000.

 

During the first quarter of fiscal 2009, we continuedto experience increases in prices for steel and steel components, whichcomprise 35-40% of our total product cost. We have continued to move aggressively to offset these increases througha variety of means, including sales price increases, cost reduction activitiesand alternative sourcing arrangements. Unfortunately, we have been unable to mitigate the full impact of thematerial cost increases, thus resulting in some erosion of gross profit.

 

Manufacturing of our products includes the purchase ofvarious raw materials and components. Certain of these items are providedworldwide by a limited number of suppliers. We are not currently experiencingshortages in obtaining the raw materials and components.

 

29

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Item 4. Controls andProcedures

 

*Evaluation of Disclosure Controls and Procedures*

 

Our management has evaluated, under the supervisionand with the participation of our chief executive officer and chief financialofficer, the effectiveness of our disclosure controls and procedures as of theend of the period covered by this report pursuant to Rule 13a-15(b) underthe Securities Exchange Act of 1934 (the “Exchange Act”). Based on thatevaluation, our chief executive officer and chief financial officer haveconcluded that, as of the end of the period covered by this report, our disclosurecontrols and procedures are effective in ensuring that information required tobe disclosed in our Exchange Act reports is (1) recorded, processed,summarized and reported in a timely manner, and (2) accumulated andcommunicated to our management, including our chief executive officer and chieffinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

 

*Changes in Internal Control Over Financial Reporting*

 

There has been no change in the internal control overfinancial reporting that occurred during the three months ended April 30,2008 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

30

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**PART II—OTHERINFORMATION**

 

**Item 1. LegalProceedings**

 

None

 

**Item 1A. RiskFactors**

 

There are no material changes from risk factorspreviously disclosed in our Form 10-K for the year ended January 31,2008.

 

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

 
| ** **                        | ** ** | ** **                    | ** ** | ** **                       | ** ** | **Total Number of**                 | ** ** | **Maximum Dollar Value**             | ** ** |
|-----------------------------------|------------|-------------------------------|------------|----------------------------------|------------|-----------------------------------------------|------------|------------------------------------------------|------------|
| ** **                        | ** ** | ** **                    | ** ** | ** **                       | ** ** | **Shares Purchased as**             | ** ** | **of Shares that May Yet** | ** ** |
| ** **                        | ** ** | **Total Number of** | ** ** | **Average Price Paid** | ** ** | **Part of Publicly Announced** | ** ** | **be Purchased Under the**      | ** ** |
| **Period**                        | ** ** | **Shares Purchased**     | ** ** | **Per Share**               | ** ** | **Plans or Programs**               | ** ** | **Plans or Programs (1)**       | ** ** |
| February 1 - 29, 2008        |       | 18,301                        |       | $                                | 49.74      |                                          | 18,301     |                                           | $          | — |   |
| March 1 - 31, 2008           |       | —                        |       | —                           |       | —                                        |       | —                                         |       |
| April 1 - 30, 2008           |       | —                        |       | —                           |       | —                                        |       | —                                         |       |
|                              |       |                          |       |                             |       |                                          |       |                                           |       |
| Quarter Ended April 30, 2008 |       | 18,301                        |       | $                                | 49.74      |                                          | 18,301     |                                           |       |   |
|                                   |            |                               |            |                                  |            |                                               |            |                                                |            |  |  |

 

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(1)           On September 7,2006, we announced that our Board of Directors had authorized a sharerepurchase program of up to $80 million over a two-year period.  We completed this share repurchase program inOctober 2007.  During the sharerepurchase program, we purchased a total of 1,448,235 shares of stock at anaverage price per share of $55.24.  On September 24,2007, we announced that our Board of Directors had authorized a new sharerepurchase program of up to $50 million over a two-year period.  We completed this share repurchase program inFebruary 2008.  During this sharerepurchase program, we purchased a total of 986,801 shares of stock at anaverage price per share of $50.67.

 

**Item 3. Defaults UponSenior Securities**

 

None

 

**Item 4. Submissionof Matters to a Vote of Security Holders**

 

None

 

**Item 5.Other Information**

 

None

 

31

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**Item 6. Exhibits**

 

The following exhibits are included with this report:

 
| **Exhibit No.** | ** ** | **Description**                                                                                                |
|----------------------|------------|----------------------------------------------------------------------------------------------------------------|
| 31.1                 |       | Certification of Chief Executive Officer of Cascade  Corporation.                                              |
| 31.2                 |       | Certification of Chief Financial Officer of Cascade  Corporation.                                              |
| 32                   |       | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C. Section 1350. |

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                   | CASCADE CORPORATION                                                      |
|-------------------|--------------------------------------------------------------------------|
| June 6, 2008 |                                                                     |
|              |                                                                     |
|              | /s/ JOSEPH G.  POINTER                                                   |
|              | Joseph G.  Pointer                                                       |
| * *          | *Chief  Financial Officer  (Principal Financial and Accounting Officer)* |

 

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**EXHIBIT INDEX**

 
| Exhibit No. | ** ** | **Description**                                                                                               |
|------------------|------------|---------------------------------------------------------------------------------------------------------------|
| 31.1             |       | Certification of Chief Executive Officer                                                                      |
| 31.2             |       | Certification of Chief Financial Officer                                                                      |
| 32               |       | Certification of Chief Executive Officer and Chief  Financial Officer pursuant to 18 U.S.C. Section 1350 |

 

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