**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 July 31, 2007**                                                                                                  |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **OR**                                                                                                                                             |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **o**                                                                                                                                              | ** ** | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **For the  transition period  from         to         ** |
| ** **                                                                                                                                         | ** ** | ** **                                                                                               |
| **Commission  file number 1-12557**                                                                                                                |

 

**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’stelephone number, including area code: **(503)669-6300**

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act. (Check one):
| Large accelerated  filer o | Accelerated  filer x | Non-accelerated  filer o |
|---------------------------------|----------------------|--------------------------|

 

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

The number of sharesoutstanding of the registrant’s common stock as of August 23, 2007 was12,105,210.

 

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**CASCADE CORPORATION**

**FORM 10-Q**

**Quarter Ended July31, 2007**

**TABLEOF CONTENTS**
|                                                                                                      | **Page**                                                        |
|------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|
| **Part I – Financial  Information:**                                                            | ** **                                                      |
|                                                                                                 |                                                            |
| Item 1. Financial  Statements (unaudited):                                                           |                                                            |
|                                                                                                 | 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                                  | 30                                                              |
|                                                                                                 |                                                            |
| Item 4. Controls  and Procedures                                                                     | 31                                                              |
|                                                                                                 |                                                            |
| **Part II – Other Information**                                                                 | 32                                                              |
|                                                                                                 |                                                            |
| **Signatures**                                                                                       | 34                                                              |
|                                                                                                 |                                                            |
| **Exhibit  Index**                                                                                   | 35                                                              |

 

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:

·                  Competitivefactors in, and the cyclical nature of, the materials handling and constructionequipment industries;

·                  Fluctuationsin lift truck and construction equipment orders or deliveries;

·                  Availabilityand cost of raw materials;

·                  Generalbusiness and economic conditions in North America, Europe, Asia Pacific andChina;

·                  Foreigncurrency fluctuations;

·                  Pendinglitigation;

·                  Environmentalmatters;

·                  Levelsof public and non-residential construction activity;

·                  Effectivenessof our capital expenditures and cost reduction initiatives;

·                  Fluctuations ininterest rates;

·                  Actionsby foreign governments;

·                  Assumptionsrelating to pension and other postretirement costs.

We undertake noobligation to publicly revise or update forward-looking statements to reflectevents or circumstances that arise after the date of this report.

3

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**PART I—FINANCIAL INFORMATION**

**Item1. Financial Statements**

**CASCADE CORPORATION**

**CONSOLIDATEDSTATEMENTS OF INCOME**

**(Unaudited— in thousands, except per share amounts)**
| ** **                                   | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                   | ** ** | **July 31**                 | ** ** | **July 31**               | ** ** |
| ** **                                   | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net sales                                    |       | $                                | 143,183    |                           | $          | 119,376 |   | $ | 278,683 |   | $ | 237,150 |   |
| Cost of goods  sold                          |       | 97,897                           |       | 81,023                         |       | 190,168 |   | 162,108 |   |
| Gross profit                                 |       | 45,286                           |       | 38,353                         |       | 88,515 |   | 75,042 |   |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Selling and administrative  expenses         |       | 22,054                           |       | 19,897                         |       | 43,186 |   | 39,749 |   |
| Loss (gain) on  disposition of assets, net   |       | (1,137                           | )          | 45                             |       | (1,172 | ) | (617 | ) |
| Amortization                                 |       | 844                              |       | 305                            |       | 1,642 |   | 607 |   |
| Insurance  litigation recovery, net          |       | —                           |       | —                         |       | (15,977 | ) | — |   |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Operating income                             |       | 23,525                           |       | 18,106                         |       | 60,836 |   | 35,303 |   |
| Interest expense                             |       | 922                              |       | 493                            |       | 1,917 |   | 1,025 |   |
| Interest income                              |       | (225                             | )          | (527                           | )          | (382 | ) | (882 | ) |
| Other expense  (income), net                 |       | 224                              |       | (287                           | )          | 302 |   | (321 | ) |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Income before  provision for income taxes    |       | 22,604                           |       | 18,427                         |       | 58,999 |   | 35,481 |   |
| Provision for  income taxes                  |       | 7,460                            |       | 6,504                          |       | 20,059 |   | 12,524 |   |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Net income                                   |       | $                                | 15,144     |                           | $          | 11,923 |   | $ | 38,940 |   | $ | 22,957 |   |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Basic earnings  per share                    |       | $                                | 1.27       |                           | $          | 0.95 |   | $ | 3.26 |   | $ | 1.83 |   |
| Diluted earnings  per share                  |       | $                                | 1.21       |                           | $          | 0.91 |   | $ | 3.11 |   | $ | 1.75 |   |
|                                         |       |                             |       |                           |       |   |   |   |   |
| Basic weighted  average shares outstanding   |       | 11,930                           |       | 12,569                         |       | 11,948 |   | 12,555 |   |
| Diluted weighted  average shares outstanding |       | 12,479                           |       | 13,074                         |       | 12,513 |   | 13,133 |   |

 

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

4

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**CASCADE CORPORATION**

**CONSOLIDATED BALANCESHEETS**

**(Unaudited - inthousands, except per share amounts)**
| ** **                                                                                               | ** ** | **July 31** | ** ** | **January 31** | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|------------------|------------|---------------------|------------|
| ** **                                                                                               | ** ** | **2007**         | ** ** | **2007**            | ** ** |
|                                                                                                     |       |             |       |                |       |
| **ASSETS**                                                                                               | ** ** | ** **       | ** ** | ** **          | ** ** |
| Current assets:                                                                                          |       |             |       |                |       |
| Cash and cash equivalents                                                                                |       | $                | 22,501     |                | $          | 36,593 |   |
| Accounts receivable, less allowance for doubtful  accounts of $1,465 and $1,515                          |       | 92,065           |       | 74,992              |       |
| Inventories                                                                                              |       | 71,437           |       | 58,280              |       |
| Deferred income taxes                                                                                    |       | 3,771            |       | 4,481               |       |
| Prepaid expenses and other                                                                               |       | 8,741            |       | 8,609               |       |
| Total current assets                                                                                     |       | 198,515          |       | 182,955             |       |
| Property, plant  and equipment, net                                                                      |       | 87,970           |       | 84,151              |       |
| Goodwill                                                                                                 |       | 114,090          |       | 99,498              |       |
| Deferred income  taxes                                                                                   |       | 8,016            |       | 11,817              |       |
| Intangible  assets, net                                                                                  |       | 21,982           |       | 17,026              |       |
| Other assets                                                                                             |       | 1,920            |       | 1,985               |       |
| Total assets                                                                                             |       | $                | 432,493    |                | $          | 397,432 |   |
|                                                                                                     |       |             |       |                |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                            | ** ** | ** **       | ** ** | ** **          | ** ** |
| Current  liabilities:                                                                                    |       |             |       |                |       |
| Notes payable to banks                                                                                   |       | $                | 2,125      |                | $          | 4,546 |   |
| Current portion of long-term debt                                                                        |       | 12,500           |       | 12,573              |       |
| Accounts payable                                                                                         |       | 31,880           |       | 26,008              |       |
| Accrued payroll and payroll taxes                                                                        |       | 10,157           |       | 9,391               |       |
| Other accrued expenses                                                                                   |       | 13,189           |       | 17,307              |       |
| Total current liabilities                                                                                |       | 69,851           |       | 69,825              |       |
| Long-term debt,  net of current portion                                                                  |       | 36,500           |       | 34,000              |       |
| Accrued  environmental expenses                                                                          |       | 5,215            |       | 5,838               |       |
| Deferred income  taxes                                                                                   |       | 3,736            |       | 2,798               |       |
| Employee benefit  obligations                                                                            |       | 9,717            |       | 9,719               |       |
| Other  liabilities                                                                                       |       | 2,718            |       | 3,616               |       |
| Total liabilities                                                                                        |       | 127,737          |       | 125,796             |       |
|                                                                                                     |       |             |       |                |       |
| Commitments and  contingencies (Note 7)                                                                  |       |             |       |                |       |
|                                                                                                     |       |             |       |                |       |
| Shareholders’  equity:                                                                              |       |             |       |                |       |
| Common stock, $.50 par value, 20,000 authorized  shares; 12,105 and 12,070 shares issued and outstanding |       | 6,053            |       | 6,035               |       |
| Retained earnings                                                                                        |       | 274,230          |       | 253,307             |       |
| Accumulated other comprehensive income                                                                   |       | 24,473           |       | 12,294              |       |
| Total shareholders’ equity                                                                          |       | 304,756          |       | 271,636             |       |
| Total  liabilities and shareholders’ equity                                                         |       | $                | 432,493    |                | $          | 397,432 |   |

** **

The accompanying notes are an integral part of the consolidated financialstatements.

5

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**CASCADECORPORATION**

**CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’EQUITY**

**(Unaudited — in thousands, except per shareamounts)**
| ** **                                                           | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **        | ** ** | **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, 2007**                                     |       | 12,070                |       | $           | 6,035      |           | $          | —            |       | $                      | 253,307    |              | $          | 12,294                 |       | $ | 271,636 |   |   |   |
|                                                                 |       |                  |       |        |       |           |       |              |       |                   |       |              |       |                   |       |
| Net income                                                           |       | —                |       | —      |       | —         |       | 38,940            |       | —                 |       | 38,940            |       | $                      | 38,940     |   |
| Dividends ($ 0.34 per share)                                    |       | —                |       | —      |       | —         |       | (4,062            | )          | —                 |       | (4,062            | )          | —                 |       |
| Common stock  issued                                                 |       | 424                   |       | 212         |       | 3,632          |       | —            |       | —                 |       | 3,844             |       | —                 |       |
| Excess tax  benefit from exercise of share-based compensation awards |       | —                |       | —      |       | 2,509          |       | —            |       | —                 |       | 2,509             |       | —                 |       |
| Common stock  repurchased                                            |       | (389                  | )          | (194        | )          | (8,069         | )          | (13,955           | )          | —                 |       | (22,218           | )          | —                 |       |
| Share-based  compensation                                            |       | —                |       | —      |       | 1,928          |       | —            |       | —                 |       | 1,928             |       | —                 |       |
| Minimum  pension/post-retirement adjustment                          |       | —                |       | —      |       | —         |       | —            |       | 52                     |       | 52                |       | 52                     |       |
| Translation  adjustment                                              |       | —                |       | —      |       | —         |       | —            |       | 12,127                 |       | 12,127            |       | 12,127                 |       |
|                                                                 |       |                  |       |        |       |           |       |              |       |                   |       |              |       |                   |       |
| **Balance  at July 31, 2007**                                        |       | 12,105                |       | $           | 6,053      |           | $          | —            |       | $                      | 274,230    |              | $          | 24,473                 |       | $ | 304,756 |   | $ | 51,119 |   |

 

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

6

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**CASCADECORPORATION**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited - in thousands)**
| ** **                                                                         | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **July 31**               | ** ** |
| ** **                                                                         | ** ** | **2007**                       | ** ** | **2006** | ** ** |
| **Cash  flows from operating activities:**                                         | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                              | 38,940     |   | $ | 22,957 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                           |       |   |   |
| Depreciation and amortization                                                      |       | 8,531                          |       | 7,494 |   |
| Share-based compensation                                                           |       | 1,928                          |       | 1,882 |   |
| Deferred income taxes                                                              |       | 1,543                          |       | (1,363 | ) |
| Gain on disposition of assets, net                                                 |       | (1,172                         | )          | (617 | ) |
| Changes in operating assets and liabilities:                                       |       |                           |       |   |   |
| Accounts receivable                                                                |       | (13,035                        | )          | (9,586 | ) |
| Inventories                                                                        |       | (9,850                         | )          | 3,557 |   |
| Prepaid expenses and other                                                         |       | 637                            |       | (802 | ) |
| Accounts payable and accrued expenses                                              |       | 2,724                          |       | (4,544 | ) |
| Income taxes payable and receivable                                                |       | (751                           | )          | (2,092 | ) |
| Other assets and liabilities                                                       |       | (1,349                         | )          | (491 | ) |
| Net cash provided by operating activities                                          |       | 28,146                         |       | 16,395 |   |
|                                                                               |       |                           |       |   |   |
| **Cash  flows from investing activities:**                                         | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Capital expenditures                                                               |       | (9,106                         | )          | (6,248 | ) |
| Proceeds from disposition of assets                                                |       | 2,497                          |       | 1,607 |   |
| Sales of marketable securities                                                     |       | —                         |       | 7,100 |   |
| Purchases of marketable securities                                                 |       | —                         |       | (6,100 | ) |
| Business acquisitions                                                              |       | (11,529                        | )          | — |   |
| Net cash used in investing activities                                              |       | (18,138                        | )          | (3,641 | ) |
|                                                                               |       |                           |       |   |   |
| **Cash  flows from financing activities:**                                         | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Cash dividends paid                                                                |       | (4,062                         | )          | (3,769 | ) |
| Payments on long-term debt                                                         |       | (57,442                        | )          | (88 | ) |
| Proceeds from long-term debt                                                       |       | 59,500                         |       | — |   |
| Notes payable to banks, net                                                        |       | (3,400                         | )          | (530 | ) |
| Common stock issued under share-based compensation  plans                          |       | 3,844                          |       | 724 |   |
| Common stock repurchased                                                           |       | (24,496                        | )          | — |   |
| Excess tax benefit from exercise of share-based  compensation awards               |       | 2,509                          |       | 118 |   |
| Net cash used in  financing activities                                             |       | (23,547                        | )          | (3,545 | ) |
| ** **                                                                         | ** ** | ** **                     | ** ** | ** ** | ** ** |
| Effect of  exchange rate changes                                                   |       | (553                           | )          | (853 | ) |
|                                                                               |       |                           |       |   |   |
| Change in cash  and cash equivalents                                               |       | (14,092                        | )          | 8,356 |   |
| Cash and cash  equivalents at beginning of period                                  |       | 36,593                         |       | 35,493 |   |
| Cash and cash  equivalents at end of period                                        |       | $                              | 22,501     |   | $ | 43,849 |   |

 

**Supplemental disclosure of cashflow 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—Description of 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, products that are usedon construction, mining and agricultural vehicles. Accordingly, our sales arelargely dependent on sales of lift trucks and on the sales of replacementparts. Our sales are made throughout the world. We are headquartered inFairview, Oregon, employing approximately 2,300 people and maintainingoperations in 15 countries outside the United States.

**Note 2—Interim Financial Information**

The accompanying consolidated financial statements forthe interim periods ended July 31, 2007 and 2006 are unaudited. In the opinionof management, the accompanying consolidated financial statements reflectnormal recurring adjustments necessary for a fair statement of the financialposition, results of operations and cash flows for those interim periods.Results of operations for the interim periods are not necessarily indicative ofthe results to be expected for the full year, and these financial statements donot contain the detail or footnote disclosures concerning accounting policiesand other matters that would be included in full fiscal year financialstatements. Therefore, these statements should be read in conjunction with ouraudited financial statements included in our Annual Report on Form 10-K for thefiscal year ended January 31, 2007.

**Note 3—Segment Information**

Our operating units have largely similar economiccharacteristics and attributes, including similar products, distributionpatterns and classes of customers. As a result, we aggregate our operatingunits into four geographic operating segments related to the manufacturing,distribution and servicing of material handling load engagement products. Weevaluate performance of each of our operating segments based on operatingincome, which is income before interest, miscellaneous income/expense andincome taxes. The accounting policies of the operating segments are the same asthose described in the summary of significant accounting policies contained inNote 2 of our consolidated financial statements included in our Form 10-K forthe fiscal year ended January 31, 2007.

Revenues and operating results are classifiedaccording to the country of origin. Identifiable assets are attributed to the geographic location in whichthey are located. Net sales, operating results and identifiable assets bygeographic region were as follows (in thousands):

8

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| ** **                                 | ** ** | **Three Months Ended July 31** | ** ** |
|--------------------------------------------|------------|----------------------------------------------------|------------|
| **2007**                                   | ** ** | **North America**                             | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                  |       | $                                                  | 74,569     |   | $ | 43,418 |   | $ | 15,091 |   | $ | 10,105 |   | $ | — |   | $ | 143,183 |   |
| Transfers between areas                    |       | 8,594                                              |       | 373 |   | 28 |   | 3,890 |   | (12,885 | ) | — |   |
| Net sales and transfers                    |       | $                                                  | 83,163     |   | $ | 43,791 |   | $ | 15,119 |   | $ | 13,995 |   | $ | (12,885 | ) | $ | 143,183 |   |
| Gross profit                               |       | $                                                  | 29,041     |   | $ | 7,924 |   | $ | 3,582 |   | $ | 4,739 |   |   |   | $ | 45,286 |   |
| Selling and  administrative                |       | 12,402                                             |       | 6,523 |   | 2,144 |   | 985 |   |   |   | 22,054 |   |
| Loss (gain) on  disposition of assets, net |       | (1,120                                             | )          | — |   | (17 | ) | — |   |   |   | (1,137 | ) |
| Amortization                               |       | 639                                                |       | 209 |   | — |   | (4 | ) |   |   | 844 |   |
| Operating income                           |       | $                                                  | 17,120     |   | $ | 1,192 |   | $ | 1,455 |   | $ | 3,758 |   |   |   | $ | 23,525 |   |
| Total assets                               |       | $                                                  | 231,601    |   | $ | 122,083 |   | $ | 36,753 |   | $ | 42,056 |   |   |   | $ | 432,493 |   |
| Property, plant and  equipment, net        |       | $                                                  | 33,752     |   | $ | 35,848 |   | $ | 1,953 |   | $ | 16,417 |   |   |   | $ | 87,970 |   |
| Capital expenditures                       |       | $                                                  | 1,947      |   | $ | 543 |   | $ | 262 |   | $ | 1,105 |   |   |   | $ | 3,857 |   |
| Depreciation expense                       |       | $                                                  | 1,740      |   | $ | 1,235 |   | $ | 98 |   | $ | 337 |   |   |   | $ | 3,410 |   |

 
| ** **                                 | ** ** | **Three Months Ended July 31** | ** ** |
|--------------------------------------------|------------|----------------------------------------------------|------------|
| **2006**                                   | ** ** | **North America**                             | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                  |       | $                                                  | 65,847     |   | $ | 33,827 |   | $ | 12,319 |   | $ | 7,383 |   | $ | — |   | $ | 119,376 |   |
| Transfers between areas                    |       | 6,510                                              |       | 432 |   | 76 |   | 1,704 |   | (8,722 | ) | — |   |
| Net sales and transfers                    |       | $                                                  | 72,357     |   | $ | 34,259 |   | $ | 12,395 |   | $ | 9,087 |   | $ | (8,722 | ) | $ | 119,376 |   |
| Gross profit                               |       | $                                                  | 26,081     |   | $ | 6,273 |   | $ | 2,979 |   | $ | 3,020 |   |   |   | $ | 38,353 |   |
| Selling and  administrative                |       | 11,503                                             |       | 5,548 |   | 2,130 |   | 716 |   |   |   | 19,897 |   |
| Loss (gain) on  disposition of assets, net |       | 5                                                  |       | 45 |   | (6 | ) | 1 |   |   |   | 45 |   |
| Amortization                               |       | 89                                                 |       | 208 |   | — |   | 8 |   |   |   | 305 |   |
| Operating income (loss)                    |       | $                                                  | 14,484     |   | $ | 472 |   | $ | 855 |   | $ | 2,295 |   |   |   | $ | 18,106 |   |
| Total assets                               |       | $                                                  | 208,021    |   | $ | 112,687 |   | $ | 32,326 |   | $ | 28,140 |   |   |   | $ | 381,174 |   |
| Property, plant and  equipment, net        |       | $                                                  | 33,951     |   | $ | 35,586 |   | $ | 1,501 |   | $ | 5,414 |   |   |   | $ | 76,452 |   |
| Capital expenditures                       |       | $                                                  | 1,724      |   | $ | 645 |   | $ | 73 |   | $ | 555 |   |   |   | $ | 2,997 |   |
| Depreciation expense                       |       | $                                                  | 2,065      |   | $ | 1,162 |   | $ | 108 |   | $ | 70 |   |   |   | $ | 3,405 |   |

 
| ** **                                 | ** ** | **Six Months Ended July 31** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|
| **2007**                                   | ** ** | **North America**                           | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                  |       | $                                                | 145,951    |   | $ | 85,022 |   | $ | 28,886 |   | $ | 18,824 |   | $ | — |   | $ | 278,683 |   |
| Transfers  between areas                   |       | 16,903                                           |       | 697 |   | 98 |   | 6,559 |   | (24,257 | ) | — |   |
| Net sales and  transfers                   |       | $                                                | 162,854    |   | $ | 85,719 |   | $ | 28,984 |   | $ | 25,383 |   | $ | (24,257 | ) | $ | 278,683 |   |
| Gross profit                               |       | $                                                | 57,197     |   | $ | 15,529 |   | $ | 7,179 |   | $ | 8,610 |   |   |   | $ | 88,515 |   |
| Selling and  administrative                |       | 24,541                                           |       | 12,749 |   | 4,101 |   | 1,795 |   |   |   | 43,186 |   |
| Loss (gain) on  disposition of assets, net |       | (1,194                                           | )          | 8 |   | (17 | ) | 31 |   |   |   | (1,172 | ) |
| Amortization                               |       | 1,227                                            |       | 414 |   | — |   | 1 |   |   |   | 1,642 |   |
| Insurance  litigation recovery, net        |       | (15,977                                          | )          | — |   | — |   | — |   |   |   | (15,977 | ) |
| Operating income                           |       | $                                                | 48,600     |   | $ | 2,358 |   | $ | 3,095 |   | $ | 6,783 |   |   |   | $ | 60,836 |   |
| Capital  expenditures                      |       | $                                                | 3,501      |   | $ | 1,361 |   | $ | 449 |   | $ | 3,795 |   |   |   | $ | 9,106 |   |
| Depreciation  expense                      |       | $                                                | 3,650      |   | $ | 2,460 |   | $ | 197 |   | $ | 582 |   |   |   | $ | 6,889 |   |

 
| ** **                                 | ** ** | **Six Months Ended July 31** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|
| **2006**                                   | ** ** | **North America**                           | ** ** | **Europe** | ** ** | **Asia Pacific** | ** ** | **China** | ** ** | **Eliminations** | ** ** | **Consolidation** | ** ** |
| Net sales                                  |       | $                                                | 132,462    |   | $ | 67,048 |   | $ | 23,456 |   | $ | 14,184 |   | $ | — |   | $ | 237,150 |   |
| Transfers  between areas                   |       | 12,504                                           |       | 837 |   | 168 |   | 3,371 |   | (16,880 | ) | — |   |
| Net sales and  transfers                   |       | $                                                | 144,966    |   | $ | 67,885 |   | $ | 23,624 |   | $ | 17,555 |   | $ | (16,880 | ) | $ | 237,150 |   |
| Gross profit                               |       | $                                                | 52,039     |   | $ | 11,617 |   | $ | 5,728 |   | $ | 5,658 |   |   |   | $ | 75,042 |   |
| Selling and  administrative                |       | 22,971                                           |       | 11,400 |   | 4,078 |   | 1,300 |   |   |   | 39,749 |   |
| Loss (gain) on  disposition of assets, net |       | 9                                                |       | (617 | ) | (10 | ) | 1 |   |   |   | (617 | ) |
| Amortization                               |       | 178                                              |       | 415 |   | — |   | 14 |   |   |   | 607 |   |
| Operating income                           |       | $                                                | 28,881     |   | $ | 419 |   | $ | 1,660 |   | $ | 4,343 |   |   |   | $ | 35,303 |   |
| Capital  expenditures                      |       | $                                                | 3,727      |   | $ | 992 |   | $ | 144 |   | $ | 1,385 |   |   |   | $ | 6,248 |   |
| Depreciation expense                       |       | $                                                | 4,106      |   | $ | 2,433 |   | $ | 212 |   | $ | 136 |   |   |   | $ | 6,887 |   |

** **

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).
|                                | ** ** | **July 31** | ** ** | **January 31** | ** ** |
|--------------------------------|------------|------------------|------------|---------------------|------------|
| ** **                     | ** ** | **2007**         | ** ** | **2007**            | ** ** |
| Finished goods  and components |       | $                | 43,806     |                | $          | 36,716 |   |
| Work in process                |       | 739              |       | 399                 |       |
| Raw materials                  |       | 26,892           |       | 21,165              |       |
|                           |       | $                | 71,437     |                | $          | 58,280 |   |

 

**Note 5—Goodwill**

During the six months ended July 31, 2007, goodwillincreased $7.6 million due to acquisitions. The remaining difference in the amount of goodwill between July 31, 2007and January 31, 2007 related to fluctuations in foreign currencies. Wehave no goodwill recorded in China. The following table provides a breakdown ofgoodwill by geographic region (in thousands):
|               | ** ** | **July 31** | ** ** | **January 31** | ** ** |
|---------------|------------|------------------|------------|---------------------|------------|
| ** **    | ** ** | **2007**         | ** ** | **2007**            | ** ** |
| North America |       | $                | 100,011    |                | $          | 85,903 |   |
| Europe        |       | 11,100           |       | 10,598              |       |
| Asia Pacific  |       | 2,979            |       | 2,997               |       |
|          |       | $                | 114,090    |                | $          | 99,498 |   |

 

**Note 6—Share-Based Compensation 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 for SARS and in the paststock options are established by our Board of Directors’ Compensation Committeeat the time the awards are granted.  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, shareholders approved a proposal to amend theSARS 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 of July 31,2007, a total of 217,000 shares of common stock have been issued under the SARSplan, which includes 42,000 shares of restricted stock, with a grant date fairmarket 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 July 31, 2007, a total of 1,083,000 shares have been issued uponthe 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 July 31, 2007together with changes during the six months then ended are presented in thefollowing tables (in thousands, except per share amounts):
| ** **                   | ** ** | **Stock Options**  | ** ** | **Stock Appreciation Rights**                        | ** ** |
|------------------------------|------------|-------------------------|------------|----------------------------------------------------------------|------------|
| ** **                   | ** ** | **Outstanding  Awards** | ** ** | **Weighted Average  Exercise Price  Per Share** | ** ** | **Outstanding  Awards** | ** ** | **Weighted Average  Exercise Price  Per Share** | ** ** |
|                         |       |                    |       |                                                           |       |   |   |   |   |
| Balance at  January 31, 2007 |       | 570                     |       | $                                                              | 13.79      |   | 1,031 |   | $ | 31.56 |   |
| Granted                      |       | —                  |       | —                                                         |       | 66 |   | 73.73 |   |
| Exercised                    |       | (276                    | )          | 14.02                                                          |       | (170 | ) | 29.87 |   |
| Forfeited                    |       | (6                      | )          | 19.86                                                          |       | (79 | ) | 33.93 |   |
|                         |       |                    |       |                                                           |       |   |   |   |   |
| Balance at July  31, 2007    |       | 288                     |       | $                                                              | 13.43      |   | 848 |   | $ | 34.96 |   |

 

We calculate share-based compensation cost for SARSand stock options using the Black-Scholes option pricing model.  The range of assumptions used to computeshare-based compensation are as follows:
|                                               | ** ** | **Granted in**  | ** ** | **Granted Prior to** | ** ** |
|-----------------------------------------------|------------|----------------------|------------|--------------------------------|------------|
| ** **                                    | ** ** | **Fiscal 2008** | ** ** | **Fiscal 2008**           | ** ** |
|                                          |       |                 |       |                           |       |
| Risk-free  interest rate                      |       | 5.1                  | %          | 2.3  - 5.0%                    |       |
| Expected  volatility                          |       | 41                   | %          | 40  - 42%                      |       |
| Expected  dividend yield                      |       | 1.0                  | %          | 1.1  - 2.8%                    |       |
| Expected life  (in years)                     |       | 7                    |       | 5 -  6                         |       |
| Weighted average fair  value at date of grant |       | $                    | 33.31      |                           | $          | 4.16 - 17.86 |   |
|                                               |            |                      |            |                                |            |  |  |

 

We calculate share-based compensation cost forrestricted stock by multiplying the fair market value of our common shares onthe grant date by the number of restricted shares expected to vest.  The restricted stock share-based compensationis expensed ratably over the applicable vesting period.

As of July 31, 2007, there was $11.6 million of totalunrecognized compensation cost related to nonvested share-based compensationawards granted under the Plans, which is expected to be recognized over aweighted average period of 2.7 years. The following table represents as of July31, 2007 the share-based compensation costs to be recognized in future periods(in thousands) for awards granted to date:
| Fiscal Year | ** ** | **Amount** | ** ** |
|------------------|------------|------------|------------|
| 2008*            |       | $          | 2,602      |   |
| 2009             |       | 4,563      |       |
| 2010             |       | 3,057      |       |
| 2011             |       | 1,157      |       |
| 2012             |       | 198        |       |
|             |       | $          | 11,577     |   |

** **

----

***Representslast six months of fiscal 2008.**

11

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**Note 7—Commitments and Contingencies**

**Environmental Matters**

We are subject to environmental laws and regulations,which include obligations to remove or mitigate environmental effects of pastdisposal and release of certain wastes and substances at various sites. Werecord liabilities for affected sites when environmental assessments indicateprobable cleanup and the costs can be reasonably estimated. Other than forcosts of assessments themselves, the timing and amount of these liabilities isdetermined based on the estimated costs of remediation activities and ourcommitment to a formal plan of action, such as an approved remediationplan.  The reliability and precision of theloss estimates are affected by numerous factors, such as different stages ofsite evaluation and reevaluation of the degree of remediation required. Weadjust our liabilities as new remediation requirements are defined, asinformation becomes available permitting reasonable estimates to be made and toreflect 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$5.3 million and $5.9 million at July 31, 2007 and January 31,2007, 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 $909,000 at July 31, 2007 and $1.0 million at January 31,2007.

*InsuranceLitigation*

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 $16.0million, net of expenses.  In connectionwith the settlement, we released all rights we might have under insurancepolicies issued by Employers Reinsurance Corporation and certain relatedentities.  This concluded all litigationagainst our insurance companies with regard to environmental matters.

**LegalProceedings**

We are subject to legal proceedings, claims and litigation,in addition to the environmental matters previously discussed, arising in theordinary course of business. While the outcome of these matters is currentlynot determinable, management does not expect the ultimate costs to be materialto our consolidated financial position, result of operations, or cash flows.

12

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**Note 8—Earnings Per Share**

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

|                                                                 | ** ** | **Three Months Ended July 31** | ** ** | **Six Months Ended July 31** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                      | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
| Basic earnings  per share:                                      |       |                                               |       |                                             |       |   |   |   |   |
| Net income                                                      |       | $                                                  | 15,144     |                                             | $          | 11,923 |   | $ | 38,940 |   | $ | 22,957 |   |
| Weighted average shares of common stock outstanding             |       | 11,930                                             |       | 12,569                                           |       | 11,948 |   | 12,555 |   |
|                                                            |       | $                                                  | 1.27       |                                             | $          | 0.95 |   | $ | 3.26 |   | $ | 1.83 |   |
|                                                            |       |                                               |       |                                             |       |   |   |   |   |
| Diluted earnings  per share:                                    |       |                                               |       |                                             |       |   |   |   |   |
| Net income                                                      |       | $                                                  | 15,144     |                                             | $          | 11,923 |   | $ | 38,940 |   | $ | 22,957 |   |
| Weighted average shares of common stock outstanding             |       | 11,930                                             |       | 12,569                                           |       | 11,948 |   | 12,555 |   |
| Dilutive effect of stock options and stock appreciation  rights |       | 549                                                |       | 505                                              |       | 565 |   | 578 |   |
| Diluted weighted average shares of common stock  outstanding    |       | 12,479                                             |       | 13,074                                           |       | 12,513 |   | 13,133 |   |
|                                                            |       | $                                                  | 1.21       |                                             | $          | 0.91 |   | $ | 3.11 |   | $ | 1.75 |   |

 

Basic earnings per share is based on the weightedaverage number of common shares outstanding for the period. Diluted weightedaverage common shares includes the incremental shares that would be issued uponthe assumed exercise of stock options and stock appreciation rights and theamount of unvested restricted stock. Unexercised SARs totaling 66,000 awards were excluded from the fiscal2008 three months and six months calculations of diluted earnings per sharebecause they were antidilutive.  Unvestedrestricted stock totaling 42,000 shares was excluded from the fiscal 2008 sixmonths calculation of diluted earnings per share because they wereantidilutive.  All stock options areincluded in our calculation of incremental shares because they are dilutive.

13

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**Note 9—SupplementalCash Flow Information**

The following table presents information thatsupplements the consolidated statements of cash flow (in thousands):
|                                                    | ** ** | **For the Six Months Ended July 31** | ** ** |
|----------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                         | ** ** | **2007**                                                           | ** ** | **2006** | ** ** |
| Cash paid during  the period for:                  |       |                                                               |       |   |   |
| Interest                                           |       | $                                                                  | 1,915      |   | $ | 1,016 |   |
| Income taxes                                       |       | $                                                                  | 16,664     |   | $ | 15,862 |   |
|                                               |       |                                                               |       |   |   |
| Supplemental  disclosure of investing activities:  |       |                                                               |       |   |   |
| Business acquisitions:                             |       |                                                               |       |   |   |
| Accounts receivable and other assets               |       | $                                                                  | 871        |   | $ | — |   |
| Inventories                                        |       | 818                                                                |       | — |   |
| Property, plant and equipment                      |       | 296                                                                |       | — |   |
| Intangible asset - customer relationships          |       | 5,400                                                              |       | — |   |
| Intangible asset - intellectual property and other |       | 1,900                                                              |       | — |   |
| Goodwill                                           |       | 6,478                                                              |       | — |   |
| Accounts payable and other liabilities assumed     |       | (708                                                               | )          | — |   |
| Notes payable assumed                              |       | (931                                                               | )          | — |   |
| Deferred income tax liability                      |       | (2,659                                                             | )          | — |   |
| Net cash paid for acquisitions                     |       | $                                                                  | 11,465     |   | $ | — |   |

 

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 July 31** | ** ** | **Three Months Ended July 31** | ** ** |
| ** **                      | ** ** | **2007**                                           | ** ** | **2006**                                           | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net periodic benefit  cost:     |       |                                               |       |                                               |       |   |   |   |   |
| Service cost                    |       | $                                                  | 15         |                                               | $          | 22 |   | $ | 30 |   | $ | 34 |   |
| Interest cost                   |       | 131                                                |       | 128                                                |       | 106 |   | 114 |   |
| Expected return  on plan assets |       | (127                                               | )          | (125                                               | )          | — |   | — |   |
| Recognized prior  service cost  |       | —                                             |       | —                                             |       | (19 | ) | (19 | ) |
| Recognized net  actuarial loss  |       | 22                                                 |       | 36                                                 |       | 48 |   | 111 |   |
|                            |       | $                                                  | 41         |                                               | $          | 61 |   | $ | 165 |   | $ | 240 |   |

 
| ** **                      | ** ** | **Defined Benefit**                         | ** ** | **Postretirement Benefit**                  | ** ** |
|---------------------------------|------------|--------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                      | ** ** | **Six Months Ended July 31** | ** ** | **Six Months Ended July 31** | ** ** |
| ** **                      | ** ** | **2007**                                         | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
|                            |       |                                             |       |                                             |       |   |   |   |   |
| Net periodic benefit  cost:     |       |                                             |       |                                             |       |   |   |   |   |
| Service cost                    |       | $                                                | 29         |                                             | $          | 43 |   | $ | 60 |   | $ | 68 |   |
| Interest cost                   |       | 260                                              |       | 253                                              |       | 211 |   | 228 |   |
| Expected return  on plan assets |       | (252                                             | )          | (248                                             | )          | — |   | — |   |
| Recognized prior  service cost  |       | —                                           |       | —                                           |       | (38 | ) | (38 | ) |
| Recognized net  actuarial loss  |       | 44                                               |       | 71                                               |       | 96 |   | 222 |   |
|                            |       | $                                                | 81         |                                             | $          | 119 |   | $ | 329 |   | $ | 480 |   |

 

**Note 11—Recent Accounting Pronouncements**

**FIN 48**- In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (FIN 48). This interpretation clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements in accordance withFASB Statement No. 109, “Accounting for Income Taxes.”

On February 1,2007, we adopted the provisions of FIN 48 which prescribes amore-likely-than-not threshold for financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn.  This interpretation alsoprovides guidance on derecognition of income tax assets and liabilities,classification of current and deferred income tax assets and liabilities,accounting for interest and penalties associated with tax positions, accountingfor income taxes in interim periods and income tax disclosures.

As of February 1,2007, our liability for uncertain tax positions was $325,000.  As a result of the implementation of FIN 48,we recognized no material adjustment in the liability for uncertain taxpositions.  Our policy is to classifytax-related interest and penalties as income tax expense.

15

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We file income taxreturns in the U.S. federal jurisdiction and various state and foreignjurisdictions. The Internal Revenue Service is currently examining our U.S.income tax return for fiscal year 2006. As of February 1, 2007, we remained subject to examination in thefollowing major tax jurisdictions for the tax years as indicated below:
| Jurisdiction                 | ** ** | **Open Fiscal Tax Years** |
|------------------------------|------------|---------------------------|
| United States -  federal     |       | 2003-2006                 |
| United States —  states |       | 2002-2006                 |
| Canada                       |       | 1999-2006                 |
| China                        |       | 1996-2006                 |
| Germany                      |       | 2002-2006                 |
| Italy                        |       | 2001-2006                 |
| The Netherlands              |       | 2001-2006                 |
| United Kingdom               |       | 1999-2006                 |

 

****SFAS 157****- In September2006, the FASB issued SFAS No. 157 (SFAS 157), “Fair Value Measurements.” SFAS157 provides a common definition of fair value, establishes a framework formeasuring fair value and expands the related disclosure requirements.Application of SFAS 157 is required for our financial statements for the fiscalyear beginning February 1, 2008.  We arecurrently evaluating the impact of SFAS 157 on our financial statements.

****SFAS 158**** - In September2006, the FASB issued SFAS No. 158 (SFAS 158), “Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans – an amendment of FASBStatements No. 87, 88, 106, and 132(R).” This statement requires balance sheet recognition of the overfunded orunderfunded status of pension and postretirement benefit plans. Under SFAS 158,actuarial gains and losses, prior service costs or credits, and any remainingtransition assets or obligations that have not been recognized under previousaccounting standards must be recognized in other comprehensive income, net oftax effects, until they are amortized as a component of net periodic benefitcost.  In addition, the measurement date,the date at which plan assets and the benefit obligation are measured, isrequired to be the company’s fiscal year end. Presently, we use aDecember 31 measurement date for the postretirement benefit plan, whichwill change to coincide with our January 31 fiscal year-end date.  As required by SFAS 158, we adopted thebalance sheet recognition provision as of January 31, 2007.  The measurement date provision is effectivefor the fiscal year beginning February 1, 2008. We are currently evaluating the impact of the measurement date provisionof SFAS 158 on our consolidated financial statements.

**SFAS 159**– In February 2007, the FASB issued SFAS No. 159 (SFAS 159), “The Fair ValueOption for Financial Assets and Financial Liabilities – Including an Amendmentof FASB Statement No. 115.”  SFAS 159allows companies the choice to measure many financial instruments and certainother items at fair value.  Applicationof SFAS 159 is required for our financial statements beginning February 1,2008.  We are currently reviewing theimpact of this pronouncement on our consolidated financial statements.

16

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**Note 12—Warranty Obligations**

We record a liability on our consolidated balancesheet for costs related to warranties with the sales of our products. Thisliability is estimated through historical customer claims, product failurerates, material usage and service delivery costs incurred in correcting aproduct failure. Our warranty obligations, which are recorded in other accruedexpenses on the consolidated balance sheets, were as follows (in thousands):
|                                                   | ** ** | **2007** | ** ** | **2006** | ** ** |
|---------------------------------------------------|------------|----------|------------|----------|------------|
| Balance at  January 31                            |       | $        | 1,754      |     | $          | 1,665 |   |
| Accruals for  warranties issued during the period |       | 1,179    |       | 1,385    |       |
| Accruals for  pre-existing warranties             |       | —   |       | (29      | )          |
| Settlements  during the period                    |       | (1,214   | )          | (1,285   | )          |
| Balance at July 31                                |       | $        | 1,719      |     | $          | 1,736 |   |

 

**Note 13—Accumulated Other Comprehensive Income(Loss)**

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, 2007               |       | $                                                                     | 14,675     |   | $ | (2,381 | ) | $ | 12,294 |   |
| Translation  adjustment                    |       | 12,127                                                                |       | $ | — |   | 12,127 |   |
| Minimum  pension/postretirement adjustment |       | —                                                                |       | 52 |   | 52 |   |
| Balance at July 31,  2007                  |       | $                                                                     | 26,802     |   | $ | (2,329 | ) | $ | 24,473 |   |

 

**Note 14—Gainon Sale of Assets**

During the second quarter of fiscal 2008, werecognized a $1.1 million gain on the sale of land in Fairview, Oregon.

During the first quarter of fiscal 2007, we recognizeda $715,000 gain on the sale of our manufacturing facility in Hoorn, TheNetherlands. We had closed this facility in fiscal 2006.

**Note 15—Acquisitions**

During the second quarter of fiscal 2008, we purchased100% of the stock of American Compaction Equipment, Inc., a manufacturer ofconstruction attachments located in San Juan Capistrano, California.  The total purchase price was approximately$11.5 million, net of assumed liabilities. Results of operations for American Compaction Equipment, Inc. have beenincluded in our consolidated statement of income since the acquisition date ofMay 1, 2007.  We have not included proforma financials as though the acquisition had occurred on February 1, 2007,due to materiality.

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 periods ended July 31, 2006 (fiscal 2007) and the periodsended July 31, 2007 (fiscal 2008).

**COMPARISONOF SECOND QUARTER OF FISCAL 2008 AND FISCAL 2007**

**Executive Summary**
|                             | ** ** | **Three Months Ended July 31**                   | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------|------------|----------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                  | ** ** | **2007**                                                             | ** ** | **2006**   | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                  | ** ** | **(In thousands except per share amounts)** | ** ** | ** ** | ** ** |
|                        |       |                                                                 |       |       |       |       |       |   |   |
| Net sales                   |       | $                                                                    | 143,183    |       | $          | 119,376    |       | $ | 23,807 |   | 20 | % |
| Operating income            |       | $                                                                    | 23,525     |       | $          | 18,106     |       | $ | 5,419 |   | 30 | % |
| Net income                  |       | $                                                                    | 15,144     |       | $          | 11,923     |       | $ | 3,221 |   | 27 | % |
| Diluted earnings per  share |       | $                                                                    | 1.21       |       | $          | 0.91       |       | $ | 0.30 |   | 33 | % |

 

Higher levels of net sales, operating income and netincome in the second quarter of fiscal 2008 as compared to the second quarterof fiscal 2007 are primarily the result of the strength of lift truck marketsin Europe, China and Asia Pacific as well as acquisitions in North America overthe past year.  Lift truck shipmentsglobally were up 10% over the prior year. Excluding the impact of foreign currency, net sales increased 17% duringthe second quarter of fiscal 2008.

In addition, we realized a gain of $1.1 million on thesale of land in Fairview, Oregon during the second quarter of fiscal 2008.  The calculated diluted earnings per share,excluding the land sale gain is $1.16 for the three months ended July 31, 2007compared to $0.91 in the prior year.  Webelieve the exclusion of the land sale gain provides a more appropriatecomparison with prior year results.  Thecalculation of diluted earnings per share excluding the land sale gain is asfollows (in thousands, except per share amount):
|                                                       | ** ** | **Three months ended** | ** ** |
|-------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                            | ** ** | **July 31, 2007**      | ** ** |
|                                                  |       |                             |       |
| Net income as  reported                               |       | $                                | 15,144     |   |
| Less: land sale  gain, net of income taxes of $424    |       | (714                             | )          |
| Adjusted net  income, excluding land sale gain        |       | $                                | 14,430     |   |
|                                                  |       |                             |       |
| Diluted weighted  average shares outstanding          |       | 12,479                           |       |
|                                                  |       |                             |       |
| Diluted earnings per  share, excluding land sale gain |       | $                                | 1.16       |   |

 

18

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**North America**
|                                            | ** ** | **Three Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                 | ** ** | **2007**                                           | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                 | ** ** | **(In thousands)**                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                  |       | $                                                  | 74,569     |       | 90         | %          | $          | 65,847 |   | 91 | % | $ | 8,722 |   | 13 | % |
| Transfers  between areas                   |       | 8,594                                              |       | 10         | %          | 6,510      |       | 9 | % | 2,084 |   | 32 | % |
| Net sales and  transfers                   |       | 83,163                                             |       | 100        | %          | 72,357     |       | 100 | % | 10,806 |   | 15 | % |
|                                       |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                        |       | 54,122                                             |       | 65         | %          | 46,276     |       | 64 | % | 7,846 |   | 17 | % |
| Gross profit                               |       | 29,041                                             |       | 35         | %          | 26,081     |       | 36 | % | 2,960 |   | 11 | % |
|                                       |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative                |       | 12,402                                             |       | 15         | %          | 11,503     |       | 16 | % | 899 |   | 8 | % |
| Loss (gain) on  disposition of assets, net |       | (1,120                                             | )          | (1         | )%         | 5          |       | — |   | (1,125 | ) | — |   |
| Amortization                               |       | 639                                                |       | —     |       | 89         |       | — |   | 550 |   | — |   |
|                                       |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                           |       | $                                                  | 17,120     |       | 21         | %          | $          | 14,484 |   | 20 | % | $ | 2,636 |   | 18 | % |

 

The following arefinancial highlights for North America for the second quarter of fiscal 2008:

·                  Higher sales are primarily the resultof the acquisitions of Pacific Services & Manufacturing, Inc. and AmericanCompaction Equipment, Inc. made in the fourth quarter of fiscal 2007 and thesecond quarter of fiscal 2008, respectively. Excluding sales related to our acquisitions, net sales increased 2%.

·                  North America lift truck industryshipments from fiscal 2007 to fiscal 2008 decreased 4%.  We have found that lift truck industrystatistics provide an indication of the direction of our business activity.  However, changes in our net sales do notcorrespond directly to the percentage changes in lift truck industry shipments.

·                  During the second quarter of fiscal2008 we realized a gain of $1.1 million on the sale of land in Fairview,Oregon.  Excluding the impact of the landsale gain, operating income increased 10%.

·                  Transfers to other Cascade geographicareas increased 32% during fiscal 2008 compared to fiscal 2007, reflectingincreased customer demand globally.

·                  Our gross profit percentage decreasedslightly from 36% in fiscal 2007 to 35% in fiscal 2008, due to product mix.

·                  Selling and administrative costsincreased 7%, excluding currency changes, mainly due to acquisitions.  As a percentage of net sales and transfers,selling and administrative costs decreased 1% in fiscal 2008 to 15%.

·                  Higheramortization costs in fiscal 2008 relate to the amortization of intangibleassets from our acquisitions.

**Europe**
|                                     | ** ** | **Three Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **2007**                                           | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                          | ** ** | **(In thousands)**                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                           |       | $                                                  | 43,418     |       | 99         | %          | $          | 33,827 |   | 99 | % | $ | 9,591 |   | 28 | % |
| Transfers  between areas            |       | 373                                                |       | 1          | %          | 432        |       | 1 | % | (59 | ) | (14 | )% |
| Net sales and  transfers            |       | 43,791                                             |       | 100        | %          | 34,259     |       | 100 | % | 9,532 |   | 28 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                 |       | 35,867                                             |       | 82         | %          | 27,986     |       | 82 | % | 7,881 |   | 28 | % |
| Gross profit                        |       | 7,924                                              |       | 18         | %          | 6,273      |       | 18 | % | 1,651 |   | 26 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative         |       | 6,523                                              |       | 15         | %          | 5,548      |       | 16 | % | 975 |   | 18 | % |
| Loss on  disposition of assets, net |       | —                                             |       | —     |       | 45         |       | — |   | (45 | ) | — |   |
| Amortization                        |       | 209                                                |       | —     |       | 208        |       | 1 | % | 1 |   | — |   |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                    |       | $                                                  | 1,192      |       | 3          | %          | $          | 472 |   | 1 | % | $ | 720 |   | 153 | % |

 

19

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The following arefinancial highlights for Europe for the second quarter of fiscal 2008:

·                  Net sales increased 21%, excludingcurrency changes, reflecting a strong European lift truck market.

·                  European lift truck industryshipments increased 20% compared to the prior year.

·                  Our gross profit percentage remainedconsistent at 18% during fiscal 2008 and fiscal 2007.  We were able to offset material costincreases with better fixed cost absorption due to higher sales and productionlevels.

·                  Excludingthe impact of currency changes, selling and administrative expenses increased11% in Europe, due to higher selling costs with the increased sales volume andincreased marketing activities.  As apercentage of net sales and transfers, selling and administrative costsdecreased from 16% in fiscal 2007 to 15% for fiscal 2008.

**Asia Pacific**
|                                     | ** ** | **Three Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **2007**                                           | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                          | ** ** | **(In thousands)**                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                           |       | $                                                  | 15,091     |       | 100        | %          | $          | 12,319 |   | 99 | % | $ | 2,772 |   | 23 | % |
| Transfers  between areas            |       | 28                                                 |       | —     |       | 76         |       | 1 | % | (48 | ) | (63 | )% |
| Net sales and  transfers            |       | 15,119                                             |       | 100        | %          | 12,395     |       | 100 | % | 2,724 |   | 22 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                 |       | 11,537                                             |       | 76         | %          | 9,416      |       | 76 | % | 2,121 |   | 23 | % |
| Gross profit                        |       | 3,582                                              |       | 24         | %          | 2,979      |       | 24 | % | 603 |   | 20 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative         |       | 2,144                                              |       | 14         | %          | 2,130      |       | 17 | % | 14 |   | 1 | % |
| Gain on  disposition of assets, net |       | (17                                                | )          | —     |       | (6         | )          | — |   | (11 | ) | — |   |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                    |       | $                                                  | 1,455      |       | 10         | %          | $          | 855 |   | 7 | % | $ | 600 |   | 70 | % |

 

The following arefinancial highlights for Asia Pacific for the second quarter of fiscal 2008:

·                  Excluding currency changes, net salesincreased 22% during fiscal 2008 compared to the prior year, reflectingincreases in all locations throughout the region.

·                  Lift truck industry shipments in AsiaPacific increased 6% in fiscal 2008.

·                  Sellingand administrative costs decreased 1% in fiscal 2008, excluding the impact ofcurrency changes, due to general cost decreases in the current year.

**China**
|                                     | ** ** | **Three Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|----------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **2007**                                           | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                          | ** ** | **(In thousands)**                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                           |       | $                                                  | 10,105     |       | 72         | %          | $          | 7,383 |   | 81 | % | $ | 2,722 |   | 37 | % |
| Transfers  between areas            |       | 3,890                                              |       | 28         | %          | 1,704      |       | 19 | % | 2,186 |   | 128 | % |
| Net sales and  transfers            |       | 13,995                                             |       | 100        | %          | 9,087      |       | 100 | % | 4,908 |   | 54 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                 |       | 9,256                                              |       | 66         | %          | 6,067      |       | 67 | % | 3,189 |   | 53 | % |
| Gross profit                        |       | 4,739                                              |       | 34         | %          | 3,020      |       | 33 | % | 1,719 |   | 57 | % |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative         |       | 985                                                |       | 7          | %          | 716        |       | 8 | % | 269 |   | 38 | % |
| Loss on  disposition of assets, net |       | —                                             |       | —     |       | 1          |       | — |   | (1 | ) | — |   |
| Amortization                        |       | (4                                                 | )          | —     |       | 8          |       | — |   | (12 | ) | — |   |
|                                |       |                                               |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                    |       | $                                                  | 3,758      |       | 27         | %          | $          | 2,295 |   | 25 | % | $ | 1,463 |   | 64 | % |

 

20

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The following arefinancial highlights for China for the second quarter of fiscal 2008:

·                  Net sales increased 32%, excludingthe impact of currency changes.  Ourrecent capital expansion plan in China has increased our capabilities tomanufacture a larger volume of products. We are currently seeing the benefits of this effort with our increasedsales activity.

·                  Lift truck shipments in Chinaincreased 17% in fiscal 2008 compared to fiscal 2007.

·                  Transfers to other Cascade geographicareas increased 128% during fiscal 2008 compared to fiscal 2007 due to therecent expansion of operations in China. Transfers were shipped to Asia Pacific and Europe.

·                  Current year gross profit percentageincreased to 34% from 33% in the prior year. This increase primarily reflects the benefit of sourcing certain rawmaterials and components from within China, which is offset by lower marginsdue to product and customer mix.

·                  Excludingthe impact of currency changes, selling and administrative costs increased 33%due to additional costs to support our expanded operations in China.  As a percentage of net sales and transfers,selling and administration costs decreased from 8% in fiscal 2007 to 7% forfiscal 2008.

**Non-Operating Items**

The effective tax rate decreased 2% in the secondquarter of fiscal 2008 from 35% in the prior year to 33% in the currentyear.  The change was primarily relatedto proportionally higher levels of income in the current year from China, whichhas a lower tax rate compared to other Cascade locations.

**Lift Truck Market Outlook**

Based on our review of preliminary industry data webelieve the general lift truck market outlook for the remainder of fiscal 2008is as follows:

·                  The market in North America willcontinue to be down compared to the prior year.

·                  Europe will continue to grow but at amore modest rate than experienced for the second quarter.

·                  The market in Asia Pacific willremain at the current levels through the remainder of the year.

·                  Themarket in China will continue to experience robust growth through the remainderof the year.

21

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**COMPARISONOF THE FIRST SIX MONTHS OF FISCAL 2008 AND FISCAL 2007**

**Executive Summary**
| ** **                  | ** ** | **Six Months Ended July 31**                     | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------|------------|----------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                  | ** ** | **2007**                                                             | ** ** | **2006**   | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                  | ** ** | **(In thousands except per share amounts)** | ** ** |
|                        |       |                                                                 |       |       |       |       |       |   |   |
| Net sales                   |       | $                                                                    | 278,683    |       | $          | 237,150    |       | $ | 41,533 |   | 18 | % |
| Operating income            |       | $                                                                    | 60,836     |       | $          | 35,303     |       | $ | 25,533 |   | 72 | % |
| Net income                  |       | $                                                                    | 38,940     |       | $          | 22,957     |       | $ | 15,983 |   | 70 | % |
| Diluted earnings per  share |       | $                                                                    | 3.11       |       | $          | 1.75       |       | $ | 1.36 |   | 78 | % |

 

Higher levels ofnet sales, operating income and net income in the first six months of fiscal2008 as compared to the first six months of fiscal 2007 are primarily theresult of the strength of lift truck markets in Europe, China and Asia Pacific,as well as acquisitions in North America over the past year.  Lift truck shipments globally were up 9% overthe prior year.

In addition, wesettled an insurance litigation matter during the first quarter of fiscal 2008which accounted for a $16 million increase to operating income compared to theprior year.  The calculated dilutedearnings per share, excluding the insurance litigation recovery is $2.31 forthe six months ended July 31, 2007 compared to $1.75 in the prior year.  We believe the exclusion of the insurancelitigation recovery provides a more appropriate comparison with prior yearresults.  The calculation of dilutedearnings per share excluding the insurance recovery is as follows (inthousands, except per share amount):
|                                                                      | ** ** | **Six months ended** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                           | ** ** | **July 31, 2007**    | ** ** |
|                                                                 |       |                           |       |
| Net income as  reported                                              |       | $                              | 38,940     |   |
| Less: insurance  litigation recovery, net of income taxes of $5,951  |       | (10,026                        | )          |
|                                                                 |       |                           |       |
| Adjusted net  income, excluding insurance litigation recovery        |       | $                              | 28,914     |   |
| Diluted weighted  average shares outstanding                         |       | 12,513                         |       |
|                                                                 |       |                           |       |
| Diluted earnings  per share, excluding insurance litigation recovery |       | $                              | 2.31       |   |

 

22

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**North America**
|                                            | ** ** | **Six Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                 | ** ** | **2007**                                         | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                 | ** ** | **(In thousands)**                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                  |       | $                                                | 145,951    |       | 90         | %          | $          | 132,462 |   | 91 | % | $ | 13,489 |   | 10 | % |
| Transfers between  areas                   |       | 16,903                                           |       | 10         | %          | 12,504     |       | 9 | % | 4,399 |   | 35 | % |
| Net sales and  transfers                   |       | 162,854                                          |       | 100        | %          | 144,966    |       | 100 | % | 17,888 |   | 12 | % |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                        |       | 105,657                                          |       | 65         | %          | 92,927     |       | 64 | % | 12,730 |   | 14 | % |
| Gross profit                               |       | 57,197                                           |       | 35         | %          | 52,039     |       | 36 | % | 5,158 |   | 10 | % |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative                |       | 24,541                                           |       | 15         | %          | 22,971     |       | 16 | % | 1,570 |   | 7 | % |
| Loss (gain) on  disposition of assets, net |       | (1,194                                           | )          | —     |       | 9          |       | — |   | (1,203 | ) | — |   |
| Amortization                               |       | 1,227                                            |       | —     |       | 178        |       | — |   | 1,049 |   | — |   |
| Insurance  litigation recovery, net        |       | (15,977                                          | )          | (10        | )%         | —     |       | — |   | (15,977 | ) | — |   |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                           |       | $                                                | 48,600     |       | 30         | %          | $          | 28,881 |   | 20 | % | $ | 19,719 |   | 68 | % |

 

The following arefinancial highlights for North America for the first six months of fiscal 2008:

·                  Higher sales in fiscal 2008 areprimarily the result of the acquisitions made in the fourth quarter of fiscal2007 and the second quarter of fiscal 2008. Excluding net sales from acquisitions, net sales increased 1%.

·                  North America lift truck industryshipments from 2007 to 2008 decreased 6%. We have found that lift truck industry statistics provide an indicationof the direction of our business activity. However, changes in our net sales do not correspond directly to thepercentage changes in lift truck industry shipments.

·                  Transfers to other Cascade geographicareas increased 35% during fiscal 2008 compared to fiscal 2007 due to increasedcustomer demand globally.

·                  Our gross profit percentage decreased1% during fiscal 2008 compared to fiscal 2007, due to product mix.

·                  Selling and administrative costsincreased 7%, excluding currency changes, mainly due to acquisitions.  As a percentage of net sales and transfers,selling and administrative costs decreased from 16% in fiscal 2007 to 15% forfiscal 2008.

·                  During the second quarter of fiscal2008 we realized a gain of $1.1 million on the sale of land in Fairview,Oregon.

·                  Higher amortization costs in fiscal2008 relate to the amortization of intangible assets from our acquisitions.

·                  Duringthe first 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.

23

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**Europe**
|                                            | ** ** | **Six Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|--------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                 | ** ** | **2007**                                         | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                                 | ** ** | **(In thousands)**                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                                  |       | $                                                | 85,022     |       | 99         | %          | $          | 67,048 |   | 99 | % | $ | 17,974 |   | 27 | % |
| Transfers  between areas                   |       | 697                                              |       | 1          | %          | 837        |       | 1 | % | (140 | ) | (17 | )% |
| Net sales and  transfers                   |       | 85,719                                           |       | 100        | %          | 67,885     |       | 100 | % | 17,834 |   | 26 | % |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                        |       | 70,190                                           |       | 82         | %          | 56,268     |       | 83 | % | 13,922 |   | 25 | % |
| Gross profit                               |       | 15,529                                           |       | 18         | %          | 11,617     |       | 17 | % | 3,912 |   | 34 | % |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative                |       | 12,749                                           |       | 15         | %          | 11,400     |       | 17 | % | 1,349 |   | 12 | % |
| Loss (gain) on  disposition of assets, net |       | 8                                                |       | —     |       | (617       | )          | (1 | )% | 625 |   | — |   |
| Amortization                               |       | 414                                              |       | —     |       | 415        |       | — |   | (1 | ) | — |   |
|                                       |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                           |       | $                                                | 2,358      |       | 3          | %          | $          | 419 |   | 1 | % | $ | 1,939 |   | 463 | % |

 

The following arefinancial highlights for Europe for the first six months of fiscal 2008:

·                  During fiscal 2008, net salesincreased 19%, excluding currency changes.

·                  European lift truck industryshipments increased 22% compared to the prior year.

·                  Our gross profit percentage increased1% in fiscal 2008 compared to fiscal 2007. We were able to offset material cost increases with better fixed costabsorption due to higher sales and production levels.

·                  Excludingthe impact of currency changes, selling and administrative expenses increased4% in Europe because of higher sales and marketing costs.  As a percentage of net sales and transfers,selling and administration costs decreased from 17% in fiscal 2007 to 15% forfiscal 2008.

**Asia Pacific**
|                                     | ** ** | **Six Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **2007**                                         | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                          | ** ** | **(In thousands)**                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                           |       | $                                                | 28,886     |       | 100        | %          | $          | 23,456 |   | 99 | % | $ | 5,430 |   | 23 | % |
| Transfers  between areas            |       | 98                                               |       | —     |       | 168        |       | 1 | % | (70 | ) | (42 | )% |
| Net sales and  transfers            |       | 28,984                                           |       | 100        | %          | 23,624     |       | 100 | % | 5,360 |   | 23 | % |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                 |       | 21,805                                           |       | 75         | %          | 17,896     |       | 76 | % | 3,909 |   | 22 | % |
| Gross profit                        |       | 7,179                                            |       | 25         | %          | 5,728      |       | 24 | % | 1,451 |   | 25 | % |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative         |       | 4,101                                            |       | 14         | %          | 4,078      |       | 17 | % | 23 |   | 1 | % |
| Gain on  disposition of assets, net |       | (17                                              | )          | —     |       | (10        | )          | — |   | (7 | ) | — |   |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                    |       | $                                                | 3,095      |       | 11         | %          | $          | 1,660 |   | 7 | % | $ | 1,435 |   | 86 | % |

 

The following arefinancial highlights for Asia Pacific for the first six months of fiscal 2008:

·                  Excluding currency changes, net salesincreased 20% during fiscal 2008 compared to the prior year.  This increase occurred in all locationsthroughout the region.

·                  Lift truck industry shipments in AsiaPacific increased 4% in fiscal 2008 compared to fiscal 2007.

·                  The gross profit percentage in AsiaPacific increased 1% for fiscal 2008 compared to fiscal 2007, primarily due tothe sourcing of lower cost product from Cascade operations in China.

·                  Sellingand administrative costs decreased 2% in the current year, excluding the impactof currency changes, due to general cost decreases in the current year.

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**China**
|                                     | ** ** | **Six Months Ended July 31** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                          | ** ** | **2007**                                         | ** ** | **%**      | ** ** | **2006**   | ** ** | **%** | ** ** | **Change** | ** ** | **Change %** | ** ** |
| ** **                          | ** ** | **(In thousands)**                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Net sales                           |       | $                                                | 18,824     |       | 74         | %          | $          | 14,184 |   | 81 | % | $ | 4,640 |   | 33 | % |
| Transfers  between areas            |       | 6,559                                            |       | 26         | %          | 3,371      |       | 19 | % | 3,188 |   | 95 | % |
| Net sales and  transfers            |       | 25,383                                           |       | 100        | %          | 17,555     |       | 100 | % | 7,828 |   | 45 | % |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Cost of goods  sold                 |       | 16,773                                           |       | 66         | %          | 11,897     |       | 68 | % | 4,876 |   | 41 | % |
| Gross profit                        |       | 8,610                                            |       | 34         | %          | 5,658      |       | 32 | % | 2,952 |   | 52 | % |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Selling and  administrative         |       | 1,795                                            |       | 7          | %          | 1,300      |       | 7 | % | 495 |   | 38 | % |
| Loss on  disposition of assets, net |       | 31                                               |       | —     |       | 1          |       | — |   | 30 |   | — |   |
| Amortization                        |       | 1                                                |       | —     |       | 14         |       | — |   | (13 | ) | — |   |
|                                |       |                                             |       |       |       |       |       |   |   |   |   |   |   |
| Operating income                    |       | $                                                | 6,783      |       | 27         | %          | $          | 4,343 |   | 25 | % | $ | 2,440 |   | 56 | % |

 

The following arefinancial highlights for China for the first six months of fiscal 2008:

·                  During fiscal 2008, net salesincreased 28%, excluding the impact of currency changes.

·                  Lift truck shipments in Chinaincreased 19% compared to fiscal 2007.

·                  Transfers to other Cascade geographicareas increased 95% compared to fiscal 2007 due to the recent expansion ofoperations in China.  Transfers wereshipped to Asia Pacific and Europe.

·                  Current year gross profit percentageincreased to 34% from 32% in the prior year. This increase primarily reflects the benefit of sourcing certain rawmaterials and components from within China, which is offset by lower marginsdue to product and customer mix.

·                  Excludingthe impact of currency changes, selling and administrative costs increased 34%due to additional costs to support our expanded operations in China.  As a percentage of net sales and transfers,selling and administrative costs remained consistent at 7%.

**Non-Operating Items**

The effective taxrate of 34% in the first six months of fiscal 2008 was a decrease of 1%compared to fiscal 2007.  The change wasprimarily related to proportionally higher levels of income in the current yearfrom China, which has a lower tax rate compared to other Cascade locations.

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**CASHFLOWS**

The statements of cash flows reflect the changes incash and cash equivalents for the six months ended July 31, 2007 and July 31,2006 by classifying transactions into three major categories of activities:operating, investing and financing.

**Operating**

Our primary source of liquidity is cash generated fromoperating activities. This consists of net income adjusted for noncashoperating items such as depreciation and amortization, losses and gains ondisposition of assets, share-based compensation, deferred income taxes andchanges in operating assets and liabilities.

Net cash provided by operating activities fromcontinuing operations was $28.1 million in the first six months of fiscal2008 compared to $16.4 million for the same period in fiscal 2007. Theincrease in cash provided by operating activities in fiscal 2008 was due to anincrease in net income, which includes proceeds from the insurance litigationrecovery, and changes in accounts payable, accrued expenses and income taxespayable.  These changes were partiallyoffset by increases in accounts receivable and inventory due to higher salesand sourcing of product globally.

**Investing**

Our capital expenditures are primarily for equipmentand tooling related to product improvements, more efficient production methods,expansion of production capacity and replacement for normal wear and tear.Capital expenditures by geographic segments were as follows (in thousands):
|               | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|---------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **    | ** ** | **July 31**                 | ** ** | **July 31**               | ** ** |
| ** **    | ** ** | **2007**                         | ** ** | **2006**                       | ** ** | **2007** | ** ** | **2006** | ** ** |
|          |       |                             |       |                           |       |   |   |   |   |
| North America |       | $                                | 1,947      |                           | $          | 1,724 |   | $ | 3,501 |   | $ | 3,727 |   |
| Europe        |       | 543                              |       | 645                            |       | 1,361 |   | 992 |   |
| Asia Pacific  |       | 262                              |       | 73                             |       | 449 |   | 144 |   |
| China         |       | 1,105                            |       | 555                            |       | 3,795 |   | 1,385 |   |
|          |       | $                                | 3,857      |                           | $          | 2,997 |   | $ | 9,106 |   | $ | 6,248 |   |

 

We expect capital expenditures for the rest of fiscal2008 to approximate depreciation expense, excluding expenditures related to ourexpansion plans in China.  The increasein capital expenditures in China is the result of the continued expansion ofour Chinese operations.  We currently anticipateadditional investments of up to $7 million in China over the next twelvemonths.  Depreciation expense for thefirst six months in fiscal 2008 and fiscal 2007 was $6.9 million for bothperiods.

During the second quarter of fiscal 2008, we purchased100% of the stock of American Compaction Equipment, Inc., a manufacturer of constructionattachments located in San Juan Capistrano, California.  The total purchase price was approximately$11.5 million, net of assumed liabilities.

**Financing**

We declared dividends totaling $0.34 and $0.30 pershare during the first six months of fiscal 2008 and 2007, respectively.

The issuance of common stock related to the exerciseof stock options and stock appreciation rights generated $3.8 million and$724,000 of cash for the first six months of fiscal 2008 and 2007,respectively.

We paid $24.5 million to repurchase common stockduring the first quarter of fiscal 2008. There were no repurchases of common stock during the second quarter offiscal 2008.

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**FINANCIALCONDITION AND LIQUIDITY**

Our working capital, defined as current assets lesscurrent liabilities, at July 31, 2007 was $128.7 million as compared to$113.1 million at January 31, 2007. Our current ratio at July 31,2007 increased to 2.8 to 1 compared to 2.6 to 1 at January 31, 2007.

Total outstanding debt, including notes payable tobanks at July 31, 2007 and January 31, 2007 was $51.1 million.  Our debt agreements contain covenantsrelating to net worth and leverage ratios. We were in compliance with thesecovenants at July 31, 2007.  Borrowingarrangements currently in place with commercial banks provide lines of credittotaling $125 million, of which $36.5 million was outstanding and $3.4million was used to issue letters of credit at July 31, 2007.  The lines of credit expire on December 7,2011.  The interest rate on the lines ofcredit, which is based on LIBOR plus a margin of 0.75%, was 6.1% at July 31,2007 and January 31, 2007.  Averageinterest rates on notes payable to banks were 4.2% at July 31, 2007 and 4.9% atJanuary 31, 2007.

Our current plans are to fund our existingpostretirement obligation as costs are incurred.  Any defined benefit obligations will befunded to meet minimum statutory funding requirements or any additional fundingrequirements which we have committed to in specific plan agreements.  Currently, these additional fundingrequirements are limited to annual contributions of $400,000 through fiscalyear 2011 to a defined benefit plan in England. During the first quarter of fiscal 2008, we made our second annualcontribution to this defined benefit plan.

On September 5, 2006, our Board of Directorsauthorized a share repurchase program of up to $80 million over a two yearperiod.  During the first quarter offiscal 2008, we repurchased and retired 389,000 shares of common stock.  We made no common stock repurchases duringthe second quarter of fiscal 2008.  Underthe current program, as of July 31, 2007, we have repurchased and retired atotal of 1.1 million shares of common stock for $61 million.  We anticipate completing this program withinthe authorized two-year period.

We believe that our cash and cash equivalents,existing credit facilities and cash flows from operations will be sufficient tosatisfy our expected working capital, capital expenditure, acquisition, sharebuyback and debt retirement requirements for the next twelve months.

**OTHERMATTERS**

The U.S. dollar weakened in the first six months offiscal 2008 in comparison to most foreign currencies used by our significantforeign operations, which are the Euro, Canadian Dollar, Chinese Yuan andBritish Pound.  As a result, foreigncurrency translation adjustments increased shareholders’ equity by $4.6 millionand $12.1 million in the second quarter and first six months of fiscal 2008,respectively.

**CRITICAL ACCOUNTING POLICIES AND ESTIMATES**

Our discussion and analysis of financial position andresults of operations is based on our consolidated financial statements whichhave been prepared in accordance with generally accepted accounting principlesin the United States of America (GAAP). The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities,revenues and expenses and the disclosure of contingent assets andliabilities.  We evaluate our estimatesand judgments on an on-going basis, including those related to uncollectiblereceivables, inventories, goodwill and long-lived assets, warranty obligations,environmental liabilities and deferred taxes. We base our estimates on historical experience and various otherassumptions that we believe to be reasonable under the circumstances.  Actual results may differ from theseestimates 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 Form10-K for the year ended January 31, 2007.

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**OFFBALANCE SHEET ARRANGEMENTS**

At July 31, 2007, we did not have any relationshipswith unconsolidated entities or financial partnerships, such as entities oftenreferred to as structured finance or special purpose entities, which would havebeen established for the purpose of facilitating off-balance sheet arrangementsor for other contractually narrow or limited purposes. As such, we are notmaterially exposed to any financing, liquidity market or credit risk that couldarise if we had engaged in such relationships.

**RECENTACCOUNTING PRONOUNCEMENTS**

**FIN 48**- In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting forUncertainty in Income Taxes” (FIN 48). This interpretation clarifies the accounting for uncertainty in incometaxes recognized in an enterprise’s financial statements in accordance withFASB Statement No. 109, “Accounting for Income Taxes.”

On February 1,2007, we adopted the provisions of  FIN48, which  prescribes amore-likely-than-not threshold for financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn.  This interpretation alsoprovides guidance on derecognition of income tax assets and liabilities,classification of current and deferred income tax assets and liabilities,accounting for interest and penalties associated with tax positions, accountingfor income taxes in interim periods and income tax disclosures.

As of February 1,2007, our liability for uncertain tax positions was $325,000.  As a result of the implementation of FIN 48,we recognized no material adjustment in the liability for uncertain taxpositions.  Our policy is to classifytax-related interest and penalties as income tax expense.

We file income taxreturns in the U.S. federal jurisdiction and various state and foreignjurisdictions. The Internal Revenue Service is currently examining our U.S.income tax return for fiscal year 2006. As of February 1, 2007, we remained subject to examination in thefollowing major tax jurisdictions for the tax years as indicated below:
| Jurisdiction                 | ** ** | **Open Fiscal Tax Years** |
|------------------------------|------------|---------------------------|
| United States -  federal     |       | 2003-2006                 |
| United States –  states |       | 2002-2006                 |
| Canada                       |       | 1999-2006                 |
| China                        |       | 1996-2006                 |
| Germany                      |       | 2002-2006                 |
| Italy                        |       | 2001-2006                 |
| The Netherlands              |       | 2001-2006                 |
| United Kingdom               |       | 1999-2006                 |

 

****SFAS 157****- In September2006, the FASB issued SFAS No. 157 (SFAS 157), “Fair Value Measurements.” SFAS157 provides a common definition of fair value, establishes a framework formeasuring fair value and expands the related disclosure requirements.Application of SFAS 157 is required for our financial statements for the fiscalyear beginning February 1, 2008.  We arecurrently evaluating the impact of SFAS 157 on our financial statements.

****SFAS 158**** - In September2006, the FASB issued SFAS No. 158 (SFAS 158), “Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans – an amendment of FASBStatements No. 87, 88, 106, and 132(R).” This statement requires balance sheet recognition of the overfunded orunderfunded status of pension and postretirement benefit plans. Under SFAS 158,actuarial gains and losses, prior service costs or credits, and any remainingtransition assets or obligations that have not been recognized under previousaccounting standards must be recognized in other comprehensive income, net oftax effects, until they are amortized as a component of net periodic benefitcost.  In addition, the measurement date,the date at which plan assets and the benefit obligation are measured, is requiredto be the company’s fiscal year end. Presently, we use a December 31measurement date for our postretirement benefit plan, which will change tocoincide with our January 31 fiscal year-end date.  As required by SFAS 158, we adopted thebalance sheet recognition provision as of January 31, 2007.  The measurement date 

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provision is effectivefor the fiscal year beginning February 1, 2008. We are currently evaluating the impact of the measurement date provisionof SFAS 158 on our consolidated financial statements.

**SFAS 159**– In February 2007, the FASB issued SFAS No. 159 (SFAS 159), “The Fair ValueOption for Financial Assets and Financial Liabilities – Including an Amendmentof FASB Statement No. 115.”  SFAS 159allows companies the choice to measure many financial instruments and certainother items at fair value.  Applicationof SFAS 159 is required for our financial statements beginning February 1,2008.  We are currently reviewing theimpact of this pronouncement on our consolidated 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 revenues 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 second quarter offiscal 2008 resulting from a 10% weaker U.S. dollar during the quarter,measured against foreign currencies that affect our operations (in millions):
| Euro                                                           |   | $   | 3.4    |   |
|----------------------------------------------------------------|--------|-----|--------|--------|
| Chinese yuan                                                   |   | 1.0 |   |
| British pound                                                  |   | 0.9 |   |
| Canadian dollar                                                |   | 0.7 |   |
| Other currencies  (representing 11% of consolidated net sales) |   | 1.6 |   |

 

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 and British pounds.Our foreign currency forward exchange contracts have terms lasting up to sixmonths, but generally less than one month. We do not enter into derivatives orother financial instruments for trading or speculative purposes.

A majority of our products are manufactured usingsteel as a primary raw material and steel based components as purchased parts.As such, our cost of goods sold is sensitive to fluctuations in steel prices,either directly through the purchase of steel as raw material or indirectlythrough the purchase of steel based components. Presuming that the full impactof commodity steel cost increases is reflected in all steel and steel basedcomponent purchases, we estimate our gross profit percentage sensitivity to beapproximately 0.3% for each 1.0% increase in commodity steel cost withoutoffsetting sales price increases. For example, if the price of commodity steelincreases 1.0%, and the full impact of that increase is reflected in all rawmaterial and component purchases, the net decrease in the gross profitpercentage would be approximately 0.3%. Based on our statement of income forthe quarter ended July 31, 2007, a 1% increase in commodity steel costs withoutoffsetting sales price increases would have decreased consolidated gross profitby approximately $392,000.

To date we have been able to mitigate the effect of aportion of steel cost increases on our gross profit. This has been done throughprice increases, process improvements and production cost reductions. We intendto continue our efforts to mitigate the impact of any additional steel costincreases. There may be some time lag between the absorption of the steel costincreases and realizing the offsetting benefits of the mitigating measures. Itshould be noted that there is no assurance that we can fully mitigate allfuture steel cost increases through price increases and other measures andactual cost increases from steel suppliers could differ from cost increasesthat have been previously communicated.

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. However, certain steelproducts obtained in Europe are subject to allocations from suppliers. At thistime, we believe the current allocation of these products from suppliers issufficient to meet planned production volumes. Nevertheless, there can be noassurance that these suppliers will be able to meet our future requirements. Anextended delay or interruption in the supply of any components could have amaterial adverse effect on our business, results of operations and financialcondition. We are working to identify alternative supplier sources for theseproducts.

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**Item4. Controls and Procedures**

*Evaluationof 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, ourdisclosure controls and procedures are effective in ensuring that informationrequired to be disclosed in our Exchange Act reports is (1) recorded,processed, summarized and reported in a timely manner, and (2) accumulatedand communicated to our management, including our chief executive officer andchief financial officer, as appropriate to allow timely decisions regardingrequired disclosure.

*Changesin Internal Control Over Financial Reporting*

There has been no change in the internal control overfinancial reporting that occurred during the six months ended July 31, 2007that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II—OTHER INFORMATION**

**Item1. Legal Proceedings**

None

**Item1A. Risk Factors**

There are no material changes from risk factorspreviously disclosed in our Form 10-K for the year endedJanuary 31, 2007.

**Item2. Unregistered Sales of Equity Securities and Use of Proceeds**

None

**Item3. Defaults Upon Senior Securities**

None

**Item4. Submission of Matters to a Vote of Security Holders**

At our Annual Meeting of Shareholders held June 5,2007, the following matters were submitted to a vote of common

shareholders:

Election of directors to terms expiring in 2010
| Nominee                      | ** ** | **Votes for** | ** ** | **Votes Withheld** | ** ** |
|------------------------------|------------|--------------------|------------|-------------------------|------------|
| Nicholas R.  Lardy, Ph.D.    |       | 10,376,149         |       | 464,047                 |       |
| Nancy A. Wilgenbusch,  Ph.D. |       | 10,329,504         |       | 510,692                 |       |

 

The following individuals continue to serve asdirectors:
| Director               | ** ** | **Term Expires** | ** ** |
|------------------------|------------|-----------------------|------------|
| Robert C.  Warren, Jr. |       | 2008                  |       |
| Henry W.  Wessinger II |       | 2008                  |       |
| Duane C.  McDougall    |       | 2009                  |       |
| James S.  Osterman     |       | 2009                  |       |

 
| ** **                                                                   | ** ** | **Votes for** | ** ** | **Votes Against** | ** ** | **Abstain** | ** ** | **Broker Non-Votes** | ** ** |
|------------------------------------------------------------------------------|------------|--------------------|------------|------------------------|------------|-------------|------------|---------------------------|------------|
| Proposal to  approve amendment to the Cascade Stock Appreciation Rights Plan |       | 8,119,027          |       | 1,763,108              |       | 11,355      |       | 946,706                   |       |

 

**Item 5.Other Information**

None

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**Item6. Exhibits**

The following exhibits are included with this report:
| Exhibit No. | ** ** | **Description**                                                                                                                          |
|-------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1        |       | Cascade Corporation Stock Appreciation Rights and  Restricted Stock Plan.                                                                |
| 10.2        |       | Form of Restricted Stock Agreement (Employee  Participant) for Cascade Corporation Stock Appreciation Rights and Restricted  Stock Plan. |
| 10.3        |       | Form of Restricted Stock Agreement (Director  Participant) for Cascade Corporation Stock Appreciation Rights and Restricted  Stock Plan. |
| 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                                                                                       |
|--------------------|----------|-----------------------------------------------------------------------------------------------------------|
| September 10, 2007 |     |                                                                                                      |
|               |     |                                                                                                      |
|               |     | /s/ RICHARD S.  ANDERSON                                                                                  |
|               |     | Richard S.  Anderson                                                                                      |
|               | * * | *Senior  Vice President and  Chief Financial Officer   (Principal Financial and Accounting Officer)* |

 

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**EXHIBITINDEX**
| Exhibit No. | ** ** | **Description**                                                                                                                          |
|------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1             |       | Cascade Corporation Stock Appreciation Rights and  Restricted Stock Plan.                                                                |
| 10.2             |       | Form of Restricted Stock Agreement (Employee  Participant) for Cascade Corporation Stock Appreciation Rights and Restricted  Stock Plan. |
| 10.3             |       | Form of Restricted Stock Agreement (Director  Participant) for Cascade Corporation Stock Appreciation Rights and Restricted  Stock Plan. |
| 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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