Cascade Corporation Announces Earnings of $0.84 Per Share for the Quarter Ended October 31, 2005
PORTLAND, Ore.--Dec. 8, 2005--Cascade Corporation today reported net income for the third quarter of fiscal 2006 of $10.8 million, a 25% increase from $8.7 million for the third quarter of fiscal 2005. Net sales for the third quarter of fiscal 2006 were $112.6 million or 17% greater than the third quarter of fiscal 2005.Third Quarter Fiscal 2006 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, 2005 2004 % Change --------------------------------------------------------------------- Net sales $112,599 $96,342 17% Gross profit 36,824 30,884 19% Gross profit % 33% 32% SG&A 19,287 18,151 6% Amortization 251 162 - Insurance litigation recovery - (1,300) - Environmental expense - 155 - Interest expense, net 429 790 (46%) Other expense 191 516 (63%) Gain on sale of investment - (1,044) - Income before tax 16,666 13,454 24% Provision for income taxes 5,838 4,763 Effective tax rate 35% 35% Net income $10,828 $8,691 25% Diluted earnings per share $0.84 $0.68 24%
-- Higher sales in North America, Europe and Asia-Pacific all contributed to the 17% increase in total revenues. Revenue growth in North America, Europe and Asia Pacific was 20%, 10% and 17%, respectively, over the prior year's third quarter. Foreign currency changes were not significant for the quarter.
-- Consolidated gross profit percentage of 33% was up slightly from the 32% in the comparable quarter of the prior year. Margins were favorably impacted by increased absorption of fixed costs due to higher volumes and price increases. This was substantially offset by continuing increases in material costs and by increased sales of lower margin OEM products.
-- Results for the third quarter of fiscal 2005 include income of $2.3 million related to an insurance litigation recovery and a gain on the sale of an investment. The after-tax effect of these items was $1.5 million or $0.11 per diluted share.
-- The increase in SG&A was primarily attributable to share-based compensation, increases in consulting fees and marketing costs and currency changes.
Market Conditions
-- Year-to-date shipments in the North American lift truck market were up 18% over the prior year, with the shipments in the most recent quarter reflecting a more modest increase of 4%. Based on current booking levels, lift truck shipments should remain strong through at least the remainder of the year. Although lift truck shipments are an indicator of the general health of the industry, they do not necessarily correlate directly with the demand for Cascade's products.
-- Year-to-date shipments in the European lift truck market were up 3% over the prior year. However, the trend in the third quarter was flat in comparison with the third quarter of last year.
-- Year-to-date and third quarter shipments in the Asia-Pacific lift truck market were up 11% and 13%, respectively, compared to the prior year. We continue to see strength in the Asia-Pacific region as a whole and in the Chinese market in particular.
-- We are continuing to aggressively work to mitigate the effect of steel cost increases through a variety of means. We will continue these efforts in the coming months, although there is no assurance we will be able to mitigate the full impact of all steel cost increases.
North America Summary
Quarter ended October 31, 2005 2004 % Change
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Net sales $65,056 $53,898 21%
Gross profit 26,429 20,898 26%
Gross profit % 41% 39%
SG&A 11,392 10,676 7%
Amortization 37 30 23%
Insurance litigation recovery - (1,300) -
Environmental expense - 155 -
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Operating income $15,000 $11,337 32%
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-- Higher shipments and sales in the third quarter reflect a strong North American lift truck market. Details of the revenue increase for the quarter over the prior year quarter follow (in thousands):
Revenue growth $10,682 20%
Foreign currency changes 476 1%
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Total $11,158 21%
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-- The gross profit percentage of 41% was higher than the 39% in the prior year. The increase was due to better fixed cost absorption from higher shipment volumes. This increase was offset somewhat by higher material costs and additional shipments of certain lower margin OEM products.
-- Increased SG&A expenses were primarily attributable to share-based compensation expense and consulting fees.
Europe Summary
Quarter ended October 31, 2005 2004 % Change
---------------------------------------------------------------------
Net sales $29,786 $27,614 8%
Gross profit 4,585 5,135 (11%)
Gross profit % 15% 19%
SG&A 5,336 5,534 (4%)
Amortization 207 126 64%
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Operating loss $(958) $(525) 82%
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-- Details of the revenue increase for the quarter over the prior year quarter follow (in thousands):
Revenue growth $2,664 10%
Foreign currency changes (492) (2%)
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Total $2,172 8%
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-- Revenue growth in Europe can be attributed to strong demand for OEM products and to additional fork production capacity acquired in the prior year with the purchase of assets of a major German competitor.
-- Gross margins declined in the third quarter of the current year. Factors contributing to lower gross margins include higher steel costs, increased sales of lower margin OEM products and costs related to the closure of a manufacturing facility in The Netherlands.
-- We announced in the second quarter our plans to close a manufacturing facility in The Netherlands. The plant closure eliminated excess production capacity for attachment products in Europe and transferred certain production assets to other facilities in The Netherlands and Italy. Total estimated costs of the closure, primarily related to employee terminations and movement of equipment, are $2.1 million. Our costs incurred year-to-date are $1.4 million. During the third quarter we incurred $1.1 million of costs related to the closure. We expect to incur the remaining costs of $700,000 by the end of fiscal 2006.
-- SG&A decreased 4% due to lower marketing and warranty and other miscellaneous cost reductions.
Asia Pacific Summary
Quarter ended October 31, 2005 2004 % Change
--------------------------------------------------------------------
Net sales $17,757 $14,830 20%
Gross profit 5,810 4,851 20%
Gross profit % 33% 33%
SG&A 2,559 1,941 32%
Amortization 7 6 17%
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Operating income $3,244 $2,904 12%
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-- All markets in the Asia-Pacific region made a significant contribution to the increase in total revenues. Details of the revenue increase for the quarter over the prior year quarter follow (in thousands):
Revenue growth $2,551 17%
Foreign currency changes 376 3%
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Total $2,927 20%
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-- The increase in SG&A was primarily due to higher employee benefit costs and professional fees in China.
-- We are currently planning a significant expansion of our manufacturing capabilities in China with an anticipated investment of up to $23 million over the next 18 months. This investment will position us to undertake a significant expansion of our business in the Asia Pacific region.
Dividend
-- On December 6, 2005, the Company's Board of Directors declared a quarterly dividend of $.15 per share, payable on January 23, 2006, to shareholders of record as of January 5, 2006.
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, 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 8th 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 303-262-2140. 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 11045271#, 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
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Net sales $112,599 $96,342 $342,080 $282,246
Cost of goods sold 75,775 65,458 231,197 190,635
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Gross profit 36,824 30,884 110,883 91,611
Selling and administrative
expenses 19,287 18,151 56,333 54,135
Amortization 251 162 1,195 470
Insurance litigation recovery - (1,300) - (1,300)
Environmental expense - 155 - 155
--------- -------- --------- ---------
Operating income 17,286 13,716 53,355 38,151
Interest expense 727 934 2,177 2,758
Interest income (298) (144) (576) (364)
Other expense 191 516 24 574
Gain on sale of investment - (1,044) - (1,044)
--------- -------- --------- ---------
Income before provision for
income taxes 16,666 13,454 51,730 36,227
Provision for income taxes 5,838 4,763 17,944 12,824
--------- -------- --------- ---------
Net income $10,828 $8,691 $33,786 $23,403
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Basic earnings per share $0.87 $0.71 $2.74 $1.93
Diluted earnings per share $0.84 $0.68 $2.63 $1.84
Basic weighted average shares
outstanding 12,403 12,195 12,312 12,149
Diluted weighted average shares
outstanding 12,966 12,799 12,848 12,705
CASCADE CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited - in thousands, except per share amounts)
October 31 January 31
2005 2005
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ASSETS
Current assets:
Cash and cash equivalents $ 30,490 $ 30,482
Marketable securities 28,978 1,503
Trade accounts receivable, less allowance for
doubtful accounts of $1,556 and $2,182 71,002 70,728
Inventories 52,157 46,212
Deferred income taxes 3,450 3,042
Prepaid expenses and other 5,786 4,592
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Total current assets 191,863 156,559
Property, plant and equipment, net 75,156 82,027
Goodwill 76,361 74,786
Deferred income taxes 9,984 9,688
Other assets 4,711 5,032
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Total assets $358,075 $328,092
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 2,682 $ 2,461
Current portion of long-term debt 12,775 12,916
Accounts payable 21,288 25,778
Accrued payroll and payroll taxes 7,225 7,283
Income taxes payable 3,215 2,068
Other accrued expenses 13,214 11,005
Accrued environmental expenses 893 894
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Total current liabilities 61,292 62,405
Long-term debt, net of current portion 25,085 25,187
Accrued environmental expenses 7,256 7,799
Deferred income taxes 4,562 3,988
Postretirement and defined benefit obligations 7,928 7,560
Other liabilities 3,177 3,270
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Total liabilities 109,300 110,209
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Shareholders' equity:
Common stock, $.50 par value, 20,000 authorized
shares;
12,448 and 12,224 shares issued and outstanding 6,224 6,112
Additional paid-in capital 20,305 20,004
Unamortized deferred compensation - (4,506)
Retained earnings 217,481 188,507
Accumulated other comprehensive income 4,765 7,766
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Total shareholders' equity 248,775 217,883
---------- ----------
Total liabilities and shareholders' equity $358,075 $328,092
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CASCADE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
Nine Months Ended
October 31
------------------
2005 2004
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Cash flows from operating activities:
Net income $ 33,786 $ 23,403
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 12,208 10,672
Share-based compensation and amortization of
deferred compensation 1,243 861
Deferred income taxes (755) (331)
Gain on disposition of assets 93 (76)
Changes in operating assets and liabilities:
Trade accounts receivable (274) (11,212)
Inventories (5,945) (3,704)
Prepaid expenses and other (475) (859)
Accounts payable and accrued expenses (2,339) 7,667
Current income taxes payable 1,147 3,957
Other assets and liabilities 81 (1,327)
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Net cash provided by operating activities 38,770 29,051
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Cash flows from investing activities:
Capital expenditures (7,473) (9,710)
Sales of marketable securities 17,575 13,206
Purchases of marketable securities (45,050) (15,590)
Proceeds from sale of investment - 1,044
Business acquisition - (4,710)
Proceeds from sale of assets 295 275
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Net cash used in investing activities (34,653) (15,485)
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Cash flows from financing activities:
Cash dividends paid (4,812) (4,012)
Payments on long-term debt and capital leases (243) (338)
Notes payable to banks, net 221 (766)
Common stock issued under share-based compensation
plans 2,709 1,306
Excess tax benefit from exercise of stock options
and stock appreciation rights 967 -
-------- --------
Net cash used in financing activities (1,158) (3,810)
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Effect of exchange rate changes (2,951) (357)
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Change in cash and cash equivalents 8 9,399
Cash and cash equivalents at beginning of period 30,482 25,584
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Cash and cash equivalents at end of period $ 30,490 $ 34,983
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