Cascade Corporation Announces Earnings of $0.68 Per Share for the Quarter Ended October 31, 2004
PORTLAND, Ore.--Dec. 9, 2004--Cascade Corporation today reported earnings of $0.68 per share, fully diluted, for the third quarter ended October 31, 2004. Approximately $0.57 per share was attributable to net income, and $0.11 was attributable to a gain on the sale of marketable securities and settlement of insurance litigation. Consolidated and segment financial results for the third quarter are detailed below.Third Quarter Fiscal 2005 Summary
-- Summary financial results for the third quarter and results for the comparable quarter of the previous year are outlined below (in thousands, except earnings per share):
Quarter ended October 31, 2004 2003 % Change ---------------------------------------------------------------------- Net sales $96,342 $75,772 27.1% Gross profit 30,884 24,824 24.4% % 32.1% 32.8% SG&A 17,631 15,806 11.5% Amortization 682 117 - Insurance litigation recovery (1,300) - - Environmental expense 155 - - Interest expense, net 790 931 (15.1%) Other expenses 516 126 - Gain on sale of investment (1,044) - - Income before tax 13,454 7,844 71.5% Provision for income taxes 4,763 2,752 Effective tax rate 35% 35% - Net income $8,691 $5,092 70.7% Earnings per share $0.68 $0.41 65.9%
-- Higher sales are primarily the result of strong lift truck markets throughout the world. In addition the continuing strengthening of foreign currencies against the US dollar contributed to higher sales levels. Details of the sales increase follows (in millions):
Revenue growth $15.6 20.5% Acquisitions 2.1 2.8% Foreign currency changes 2.9 3.8% Total $20.6 27.1%
Excluding the effect of currency changes and acquisitions, revenue growth in North America, Europe and Asia Pacific was 21%, 20% and 18%, respectively, over the prior year's third quarter.
-- Consolidated gross profit percentage in the third quarter of 32% was down from 33% in the prior year. The Company has experienced increasing material costs, primarily steel, throughout the year. The Company has been able to offset the majority of these cost increases to date with sales price increases and surcharges.
-- The majority of the increase in SG&A was attributable to implementation of Sarbanes-Oxley requirements, SG&A attributable to Roncari Srl, which was acquired late in the third quarter of fiscal 2004, and the strengthening of foreign currencies against the US dollar.
-- The increase in amortization expense was primarily due to compensation expense related to stock appreciation rights.
-- During the third quarter the Company received $1.3 million in settlement of litigation with an insurance provider related to recovery of environmental expenses.
-- The Company recorded a $1.0 million gain on the sale of investment. The securities were received as a reversion from a pension plan terminated in 1997.
-- The effective tax rate of 35% was consistent with the prior year.
-- Earnings per share for the quarter ended October 31, 2004, excluding the effects of the gain on sale of marketable securities and the environmental insurance recovery, is calculated as follows (in thousands, except per share amounts and net of tax):
Earnings
Per
Share
--------
Net income $8,691 $0.68
Gain on sale of investment (674) (0.05)
Insurance litigation recovery (840) (0.07)
Environmental expense 100 0.01
------- --------
$7,277 $0.57
======= ========
Market Conditions
-- FY05 third quarter shipments in the North American lift truck market were up 16% over the third quarter of FY04 and up 12% for the first nine months of FY 05 as compared to the same period in FY04. Lift truck order rates year-to-date were up 24% over the comparable period in the prior year. With the current industry backlog, lift truck shipments should remain strong at least through the next quarter. Although lift truck shipments are an indicator of the general health of the industry, they do not necessarily correlate with the demand for Cascade's products.
-- FY05 third quarter shipments in the European lift truck market were up 12% over the third quarter of FY04 and up 13% for the first nine months of FY05 as compared to the first nine months of FY04. Orders were up 11% year-to-date over the prior year. We are cautiously optimistic about the European lift truck market for the balance of the year.
-- FY05 third quarter shipments in the Asia-Pacific lift truck market were up 13% as compared to the third quarter of FY04 and up 19% for the first nine months of FY05 as compared to the same period in FY04. For the first nine months of FY05 order rates were up 20% over the prior year. We continue to see strength in the Asia-Pacific region as a whole and in the Chinese market in particular.
-- The Company has continued to experience increases in steel costs for many of the steel grades used in our products. We have aggressively worked to mitigate these increases through a variety of means. We will continue to actively monitor steel prices in the coming months.
North America Summary
Quarter ended October 31, 2004 2003 % Change
----------------------------------------------------------------------
Net sales $53,898 $44,168 22.0%
Gross profit 20,898 16,648 25.5%
% 38.8% 37.7%
SG&A 10,194 9,662 5.5%
Amortization 550 59 -
Insurance litigation recovery (1,300) - -
Environmental expense 155 - -
--------------------------
Operating income $11,299 $6,927 63.1%
-- Revenue growth reflected the strong North American lift truck market in the third quarter of FY05, which resulted in increased third quarter shipments. Revenues were also favorably impacted by the current US$/Euro exchange rate, which reduced European imports into the North American market. Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $ 9.4 21.3% Foreign currency changes 0.3 0.7% Total $ 9.7 22.0%
-- The increase in gross profit percentage was a result of higher volumes in all North American factories resulting in better fixed cost absorption. In addition, pricing adjustments have covered increases in material costs to date.
-- Increased SG&A expense was primarily attributable to implementation of Sarbanes-Oxley requirements and increased R&D expense.
-- The increase in amortization expense was primarily due to compensation expense related to stock appreciation rights.
-- The Company received a settlement of $1.3 million from an insurance company related to the recovery of expenses incurred in prior years related to environmental matters.
Europe Summary
Quarter ended October 31, 2004 2003 % Change
----------------------------------------------------------------------
Net sales $27,614 $19,442 42.0%
Gross profit 5,135 3,957 29.8%
% 18.6% 20.4%
SG&A 5,496 4,383 25.4%
Amortization 126 51 -
--------------------------
Operating loss $(487) $(477) 2.1%
-- Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $ 3.9 20.1% Acquisitions 2.2 11.1% Foreign currency changes 2.1 10.8% Total $ 8.2 42.0%
-- Gross margins declined primarily due to higher steel costs.
-- The increase in SG&A was due to higher warranty costs and the effects of both foreign exchange and additional SG&A attributable to Roncari Srl, an acquisition made late in the third quarter of FY04.
-- The Company completed the acquisition of the assets of Falkenroth Foerdertechnik, GmbH on October 14, 2004 for approximately $6.6 million, net of assumed liabilities. The impact of this acquisition on the Company's results of operations for the third quarter of fiscal 2005 was not material.
Asia Pacific Summary
Quarter ended October 31, 2004 2003 % Change
----------------------------------------------------------------------
Net sales $14,830 $12,162 21.9%
Gross profit 4,851 4,219 15.0%
% 32.7% 34.7%
SG&A 1,941 1,761 10.2%
Amortization 6 7 (14.3%)
--------------------------
Operating income $2,904 $2,451 18.5%
-- The sales increase in the Asia-Pacific region is primarily related to increased shipments of fork products from the Company's Hebei, China facility. Sales from Hebei increased $1.7 million in the third quarter of fiscal 2005 after completion of a plant expansion, which became fully operational in the second quarter of fiscal 2005. Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $2.2 17.9% Foreign currency changes 0.5 4.0% Total $2.7 21.9%
-- Gross margins declined due to higher sales of lower margin OEM products.
-- The increase in SG&A was due to the effect of strengthening foreign currencies and expansion of sales and service support capabilities in the Chinese market.
Dividend
-- On December 3, 2004, the Company's Board of Directors declared a quarterly dividend of $.12 per share, payable on January 14, 2005 to shareholders of record as of December 31, 2004.
Forward-Looking Statements:
This press release contains forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Readers are cautioned that a number of factors could cause our actual results to differ materially from any results indicated in this release or in any other forward-looking statements made by us, or on our behalf. These include among others factors related to general economic conditions, interest rates, demand for materials handling products, performance of our manufacturing facilities and the cyclical nature of the materials handling industry. Further, historical information should not be considered an indicator of future performance. Additional considerations and important risk factors are described in our reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission.
Earnings Call Information:
We will discuss our results in a conference call on Thursday, December 9, 2004 at 2:00 pm PST. Robert C. Warren, President and Chief Executive Officer, and Richard "Andy" Anderson, Senior Vice President and Chief Financial Officer will host the call. The conference call can be accessed in the U.S. and Canada by dialing (800) 218-0204, International callers can access the call by dialing (303) 262-2130. Participants are encouraged to dial-in 15 minutes prior to the beginning of the call. A replay will be available for 48 hours after the live broadcast and can be accessed by dialing (800) 405-2236 and entering pass-code 11016180#, or internationally, by dialing (303) 590-3000.
The call will be simultaneously webcast and can be accessed on the Investor Relations page of the company's website, www.cascorp.com. Listeners should go to the website at least 15 minutes early to register, download and install any necessary audio software.
About Cascade Corporation:
Cascade Corporation, headquartered in Fairview, Oregon, is a leading international manufacturer of materials handling products used primarily on lift trucks. Additional information on Cascade is available on its website, www.cascorp.com.
CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited -- in thousands, except per share amounts)
Three Months
Ended Nine Months Ended
October 31, October 31,
----------------- -------------------
2004 2003 2004 2003
-------- -------- --------- ---------
Net sales $96,342 $75,772 $282,246 $220,338
Cost of goods sold 65,458 50,948 190,635 147,817
-------- -------- --------- ---------
Gross profit 30,884 24,824 91,611 72,521
Selling and administrative
expenses 17,631 15,806 53,275 45,575
Amortization 682 117 1,330 313
Insurance litigation recovery (1,300) - (1,300) -
Environmental expense 155 - 155 -
-------- -------- --------- ---------
Operating income 13,716 8,901 38,151 26,633
Interest expense 934 1,165 2,758 3,496
Interest income (144) (234) (364) (779)
Other (income) expense 516 126 574 (273)
Gain on sale of investment (1,044) - (1,044) -
-------- -------- --------- ---------
Income before provision for
income taxes 13,454 7,844 36,227 24,189
Provision for income taxes 4,763 2,752 12,824 7,982
-------- -------- --------- ---------
Net income 8,691 5,092 23,403 16,207
Dividends paid on preferred
shares of subsidiary - - - (30)
-------- -------- --------- ---------
Net income applicable to common
shareholders $8,691 $5,092 $23,403 $16,177
======== ======== ========= =========
Basic earnings per share $0.71 $0.42 $1.93 $1.36
Diluted earnings per share $0.68 $0.41 $1.84 $1.31
Basic weighted average shares
outstanding 12,195 12,054 12,149 11,882
Diluted weighted average shares
outstanding 12,799 12,534 12,705 12,335
CASCADE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except per share amounts)
Oct 31, Jan. 31,
2004 2004
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $34,983 $25,584
Marketable securities 7,342 6,002
Accounts receivable, less allowance for doubtful
accounts of $1,889 and $2,023 68,955 57,871
Inventories 41,661 36,353
Deferred income taxes 3,020 2,542
Income taxes receivable - 142
Prepaid expenses and other 5,485 4,626
--------- ---------
Total current assets 161,446 133,120
Property, plant and equipment, net 81,608 75,244
Goodwill 74,568 68,915
Deferred income taxes 9,663 9,703
Other assets 5,099 5,837
--------- ---------
Total assets $332,384 $292,819
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $2,039 $2,805
Current portion of long-term debt 12,858 13,018
Accounts payable 21,047 17,904
Accrued payroll and payroll taxes 6,821 6,815
Accrued environmental expenses 794 847
Other accrued expenses 18,547 10,011
--------- ---------
Total current liabilities 62,106 51,400
Long-term debt 37,932 38,111
Accrued environmental expenses 8,144 8,551
Deferred income taxes 2,458 1,441
Other liabilities 10,430 9,628
--------- ---------
Total liabilities 121,070 109,131
--------- ---------
Commitments and contingencies (Note 7)
Shareholders' equity:
Common stock, $.50 par value, 20,000
authorized shares; 12,201 and 12,102
shares issued and outstanding 6,100 6,051
Additional paid-in capital 16,599 11,111
Unamortized deferred compensation (3,012) -
Retained earnings 184,886 165,495
Accumulated other comprehensive income 6,741 1,031
--------- ---------
Total shareholders' equity 211,314 183,688
--------- ---------
Total liabilities and shareholders' equity $332,384 $292,819
========= =========
CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
For the Nine
Months Ended
October 31,
-----------------
2004 2003
--------- --------
Cash flows from operating activities:
Net income $23,403 $16,207
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,672 9,202
Amortization of deferred compensation 861 -
Deferred income taxes (331) 736
Gain on disposition of assets (76) (71)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (11,212) (10,044)
Inventories (3,704) 622
Prepaid expenses and other (859) 108
Accounts payable and accrued expenses 3,149 988
Current income taxes payable and receivable 3,957 3,954
Other liabilities 2,922 2,814
-------- --------
Net cash provided by operating activities 28,782 24,516
-------- --------
Cash flows from investing activities:
Capital expenditures (9,710) (8,835)
Purchase of marketable securities, net (2,384) (17,228)
Proceeds from sale of investment 1,044 -
Business acquisitions (4,710) (11,173)
Proceeds from sale of assets 275 819
Other assets 269 (377)
Proceeds from notes receivable - 9,556
-------- --------
Net cash used in investing activities (15,216) (27,238)
-------- --------
Cash flows from financing activities:
Cash dividends paid (4,012) (3,606)
Payments on long-term debt and capital leases (338) (63)
Notes payable to banks, net (766) (130)
Common stock issued under stock option plan 1,306 1,094
-------- --------
Net cash used in financing activities (3,810) (2,705)
-------- --------
Effect of exchange rate changes (357) 1,499
-------- --------
Change in cash and cash equivalents 9,399 (3,928)
Cash and cash equivalents at beginning of period 25,584 29,501
-------- --------
Cash and cash equivalents at end of period $34,983 $25,573
======== ========