Cascade Corporation Announces Financial Results for the First Quarter Ended April 30, 2005
PORTLAND, Ore.--June 9, 2005--Cascade Corporation today reported its financial results for the first quarter ended April 30, 2005.Overview
-- Net sales of $114.5 million for the first quarter of fiscal 2006 were 22% higher than net sales of $93.5 million for the prior year quarter.
-- Net income of $12.2 million ($0.95 per diluted share) for the first quarter of fiscal 2006 was 49% higher than net income of $8.2 million ($0.65 per diluted share) for the prior year quarter.
First Quarter Fiscal 2006 Summary
-- Summary financial results for the first quarter are outlined below (in thousands, except earnings per share):
Quarter ended April 30, 2005 2004 % Change ---------------------------------------------------------------------- Net sales $114,515 $93,529 22.4% Gross profit 37,488 31,376 19.5% Gross profit % 32.7% 33.5% SG&A 18,346 17,918 2.4% Amortization (52) 140 - Interest expense, net 643 802 (19.8)% Other income (230) (95) 142.1% Income before tax 18,781 12,611 48.9% Provision for income taxes 6,573 4,401 49.4% Effective tax rate 35% 35% - Net income $12,208 $8,210 48.7% Diluted earnings per share $0.95 $0.65 46.2%
-- Higher sales in the first quarter of fiscal 2006 were primarily the result of strong lift truck markets throughout the world. The continued strengthening of foreign currencies against the US dollar also contributed to higher reported sales. Details of the sales increase for the first quarter of fiscal 2006 follow (in millions):
Revenue growth $18.4 19.6%
Foreign currency changes 2.6 2.8%
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Total $21.0 22.4%
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-- The consolidated gross profit percentage of 33% in the first quarter was down approximately 1% from the first quarter of the prior year. This decrease reflects a higher volume of sales of lower margin products and the effects of higher material costs. We have been able to offset most of these material cost increases in certain markets with sales price increases and surcharges.
-- The majority of the increase in SG&A was attributable to foreign currency changes and higher professional fees.
-- The effective tax rate of 35% is consistent with the rate in the first quarter of the prior year.
Market Conditions
-- Year-to-date North American lift truck shipments were up 25% and orders were up 5% over the prior year. With the current industry backlog, lift truck shipments should remain strong at least through second quarter of fiscal 2006. 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.
-- European lift truck shipments were up 10% and orders were up 3% over the first quarter of the prior year.
-- Asia-Pacific lift truck shipments were up 5% and orders were up 7% over the first quarter of the prior year.
-- We continue to experience increases in steel costs for some steel grades and certain parts and components. We have aggressively worked to mitigate these increases through a variety of means and are continuing to closely monitor this situation.
North America Summary
Quarter ended April 30, 2005 2004 % Change
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Net sales $61,617 $50,594 21.8%
Gross profit 23,992 19,956 20.2%
Gross profit % 38.9% 39.4%
SG&A 10,640 10,251 3.8%
Amortization (191) 36 -
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Operating income $13,543 $9,669 40.1%
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-- Revenue growth reflected the strong North American lift truck market in the first quarter of fiscal 2006. Revenues continued to be favorably impacted by the current US dollar to Euro exchange rate, which made it more difficult for European competitors to import into the North American market. Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $10.5 20.8%
Foreign currency changes 0.5 1.0%
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Total $11.0 21.8%
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-- The gross profit percentage of 39% was consistent with the prior year first quarter. Higher shipping volumes, resulting in better fixed cost absorption, pricing adjustments, and cost reduction initiatives have covered increases in material costs to date.
-- Increased SG&A expense was primarily attributable to higher levels of professional fees.
-- Negative amortization expense reflects the adjustment of previously recognized compensation expense related to stock appreciation rights (SARS). Currently applicable accounting rules require a quarterly mark-to-market adjustment for SARS. The decrease in the market price of our common stock from $36.60 at January 31, 2005 to $31.50 at April 30, 2005 resulted in income of $228,000 for the first quarter of fiscal 2006. No amortization expense was recorded for SARS in the first quarter of fiscal 2005 since SARS were initially granted after the end of that quarter.
Europe Summary
Quarter ended April 30, 2005 2004 % Change
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Net sales $36,704 $27,419 33.9%
Gross profit 8,294 6,187 34.1%
Gross profit % 22.6% 22.6%
SG&A 5,511 5,340 3.2%
Amortization 132 96 37.5%
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Operating income $2,651 $751 -
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-- Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $7.8 28.4%
Foreign currency changes 1.5 5.5%
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Total $9.3 33.9%
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-- The primary factor contributing to the increase in sales in Europe was an increase of $5.5 million in sales from our German manufacturing facility. In the fourth quarter of fiscal 2005, we integrated the majority of our German operations, including the Falkenroth assets purchased in the third quarter, into one facility. The first quarter of fiscal 2006 reflects the first full quarter after completion of the majority of the integration work.
-- Gross profit percentage was consistent with the prior year's first quarter. While our gross profit percentages are consistent, Europe is one market where we have not been able to fully recover the effect of the material cost increases in certain product lines.
-- The increase in SG&A was due to the effects of foreign exchange fluctuations.
-- In order to eliminate excess production capacity and lower overall production costs in Europe we announced plans on April 29, 2005 to close our manufacturing facility in Hoorn, The Netherlands. Manufacturing operations in Hoorn will be moved to one of our facilities in Almere, The Netherlands or Verona, Italy. The closure and movement of production will take place over the next six months and result in a reduction in our European workforce by approximately 20 employees. We are currently finalizing the social plans with the local unions. No accruals have been recorded in the April 30, 2005 financial statements related to the closure because the final terms of the social plans have not yet been approved. Total direct costs related to the closure will be approximately $2.2 million, including employee related costs of $1.4 million and moving related costs of $800,000. We expect to begin realizing the full benefits of this consolidation of operations in the first quarter of fiscal 2007.
Asia Pacific Summary
Quarter ended April 30, 2005 2004 % Change
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Net sales $16,194 $15,516 4.4%
Gross profit 5,202 5,233 (0.6%)
Gross profit % 32.1% 33.7%
SG&A 2,195 2,327 (5.7%)
Amortization 7 8 (12.5%)
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Operating income $3,000 $2,898 3.5%
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-- The sales increase in the Asia-Pacific region was primarily related to foreign currencies and increased sales from both our facilities in China. Details of the revenue increase for the quarter over the prior year quarter follow (in millions):
Revenue growth $0.1 1.0%
Foreign currency changes 0.6 3.4%
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Total $0.7 4.4%
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-- Gross profit percentage declined due to higher sales of OEM products which tend to have lower margins.
-- The decrease in SG&A was due to lower engineering and marketing costs in China during the first quarter of fiscal 2006.
Dividend
-- On June 7, 2005, Cascade's Board of Directors declared a quarterly dividend of $.12 per share, payable on July 21, 2005 to shareholders of record as of July 6, 2005.
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, June 9, 2005 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) 219-6110, International callers can access the call by dialing (303) 262-2143. 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 11031756#, or internationally, by dialing (303) 590-3000 and entering pass-code 11031756#.
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
April 30
------------------
2005 2004
--------- --------
Net sales $114,515 $93,529
Cost of goods sold 77,027 62,153
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Gross profit 37,488 31,376
Selling and administrative expenses 18,346 17,918
Amortization (52) 140
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Operating income 19,194 13,318
Interest expense 750 899
Interest income (107) (97)
Other income (230) (95)
--------- --------
Income before provision for income taxes 18,781 12,611
Provision for income taxes 6,573 4,401
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Net income $12,208 $8,210
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Basic earnings per share $1.00 $0.68
Diluted earnings per share $0.95 $0.65
Basic weighted average shares outstanding 12,229 12,104
Diluted weighted average shares outstanding 12,827 12,558
CASCADE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except per share amounts)
April January
30, 31,
2005 2005
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ASSETS
Current assets:
Cash and cash equivalents $19,307 $30,482
Marketable securities 13,053 1,503
Trade accounts receivable, less allowance for
doubtful accounts of $2,040 and $2,182 79,643 70,728
Inventories 48,328 46,212
Deferred income taxes 3,235 3,042
Prepaid expenses and other 4,470 4,592
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Total current assets 168,036 156,559
Property, plant and equipment, net 79,729 82,027
Goodwill 74,029 74,786
Deferred income taxes 9,703 9,688
Other assets 4,786 5,032
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Total assets $336,283 $328,092
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $1,396 $2,461
Current portion of long-term debt 12,909 12,916
Accounts payable 22,275 25,778
Accrued payroll and payroll taxes 7,463 7,283
Income taxes payable 4,632 2,068
Other accrued expenses 11,360 11,005
Accrued environmental expenses 891 894
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Total current liabilities 60,926 62,405
Long-term debt, net of current portion 25,181 25,187
Accrued environmental expenses 7,589 7,799
Deferred income taxes 3,664 3,988
Other liabilities 11,109 10,830
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Total liabilities 108,469 110,209
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Shareholders' equity:
Common stock, $.50 par value, 20,000
authorized shares; 12,241 and 12,224
shares issued and outstanding 6,121 6,112
Additional paid-in capital 17,897 20,004
Unamortized deferred compensation (2,424) (4,506)
Retained earnings 199,248 188,507
Accumulated other comprehensive income 6,972 7,766
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Total shareholders' equity 227,814 217,883
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Total liabilities and shareholders' equity $336,283 $328,092
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CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
For the Three
Months Ended
April 30
-----------------
2005 2004
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Cash flows from operating activities:
Net income $12,208 $8,210
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,730 3,540
Amortization of deferred compensation (228) -
Deferred income taxes (532) (330)
Loss (gain) on disposition of assets (28) 4
Changes in operating assets and liabilities:
Accounts receivable (8,915) (4,965)
Inventories (2,116) 292
Prepaid expenses and other 122 412
Accounts payable and accrued expenses (3,323) 3,028
Current income taxes payable 2,564 2,434
Other liabilities 444 168
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Net cash provided by operating activities 3,926 12,793
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Cash flows from investing activities:
Capital expenditures (2,014) (3,787)
Sales of marketable securities 1,000 3,500
Purchases of marketable securities (12,550) (6,040)
Proceeds from sale of assets 163 39
Other assets 70 572
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Net cash used in investing activities (13,331) (5,716)
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Cash flows from financing activities:
Cash dividends paid (1,467) (1,332)
Payments on long-term debt and capital leases (13) (114)
Notes payable to banks, net (1,065) (1,208)
Common stock issued under stock option plan 189 61
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Net cash used in financing activities (2,356) (2,593)
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Effect of exchange rate changes 586 (1,962)
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Change in cash and cash equivalents (11,175) 2,522
Cash and cash equivalents at beginning of period 30,482 25,584
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Cash and cash equivalents at end of period $19,307 $28,106
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