Edgar Filing: CASCADE CORP

Form 10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

LOGO

FORM 10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 31, 2010

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

CASCADE CORPORATION

(Exact name of registrant as specified in its charter)

Oregon

93-0136592

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

2201 N.E. 201st Ave. Fairview, Oregon 97024-9718

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: 503-669-6300

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $.50 per share

Name of exchange on which registered: New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files ). Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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


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

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

The aggregate market value of common stock held by non-affiliates of the registrant as of July 31, 2009 was $266,094,827, based on the closing sale price of the common stock on the New York Stock Exchange on that date.

The number of shares outstanding of the registrant’s common stock as of March 9, 2010 was 10,885,426.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be filed within 120 days after the registrant’s fiscal year end of January 31, 2010, to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held June 2, 2010 are incorporated by reference into Part III.

TABLE OF CONTENTS


PART I			4
	Item 1.	Business	4
		General	4
		Products	4
		Markets	4
		Competition	5
		Customers	6
		Backlog	6
		Research and Development	6
		Environmental Matters	6
		Employees	6
		Construction Attachments	6
		Foreign Operations	6
		Available Information	6
		Officers of the Registrant	7
	Item 1A.	Risk Factors	8
	Item 1B.	Unresolved Staff Comments	12
	Item 2.	Properties	13
	Item 3.	Legal Proceedings	13
	Item 4.	Reserved	13
PART II			14
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
	Item 6.	Selected Financial Data	16
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37
	Item 8.	Financial Statements and Supplementary Data	39
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	74
	Item 9A.	Controls and Procedures	74
	Item 9B.	Other Information	74
PART III			75
	Item 10.	Directors, Executive Officers and Corporate Governance	75
	Item 11.	Executive Compensation	75
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	75
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	76
	Item 14.	Principal Accounting Fees and Services	76
PART IV			77
	Item 15.	Exhibits and Financial Statement Schedules	77
SIGNATURES			78

NOTE: All references to fiscal years are defined as year ended January 31, 2010 (fiscal 2010), year ended January 31, 2009 (fiscal 2009) and year ended January 31, 2008 (fiscal 2008).

Forward-looking Statements

This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Item 7) contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of revenue, gross profit, expenses, earnings or losses from operations, synergies or other financial items; any statements of plans, strategies, and objectives of management for future operations; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties, and assumptions referred to above include, but are not limited to:

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General business and economic conditions globally, in particular North America, Europe, Asia Pacific and China;

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Effectiveness of our cost reduction initiatives and reorganization plans;

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Competitive factors and the cyclical nature of the materials handling industry and lift truck orders;

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Cost and availability of raw materials;

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Risks and complexities associated with international operations;

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Ability to comply with debt covenants;

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Foreign currency fluctuations;

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Environmental matters;

•

Impact of tax law changes;

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Assumptions relating to pension and other postretirement costs;

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Levels of construction activity;

•

Impact of acquisitions;

•

Fluctuations in interest rates.

We undertake no obligation to publicly revise or update forward-looking statements to reflect events or circumstances that arise after the date of this report. See “Risk Factors” (Item 1A) for additional information on risk factors with the potential to impact our business.

PART I

Item 1.

Business

General

Cascade Corporation (Cascade) was organized in 1943 under the laws of the state of Oregon. The terms “Cascade”, “we”, and “our” include Cascade Corporation and its subsidiaries. Our headquarters are located in Fairview, Oregon, a suburb of Portland, Oregon. We are one of the world’s leading manufacturers of materials handling load engagement devices and related replacement parts, primarily for the lift truck industry and to a lesser extent the construction industry. We also manufacture attachments for the construction industry.

Products

We manufacture an extensive range of materials handling load engagement products that are widely used on lift trucks and, to a lesser extent, on construction and agricultural vehicles.

Our products are primarily manufactured and distributed under the Cascade name and symbol, for which we have secured trademark protection. The primary function of lift truck related products is to provide the lift truck with the capability of engaging, lifting, repositioning, carrying and depositing various types of loads and products. We offer a wide variety of functionally different products, each of which has numerous sizes, models, capacities and optional combinations. Lift truck related products are designed to handle loads with pallets and for specialized application loads without pallets. Examples of specialized products include devices specifically designed to handle loads such as appliances, carpet and paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, plywood, and boxed, packaged and containerized products. Certain construction related products allow vehicles such as loaders, backhoes and rough terrain lift trucks to move materials in much the same manner as conventional lift trucks. Our other construction related products are used on excavators and loaders for both conventional and specialized ground engagement applications.

Our products are subject to strict design, construction and safety requirements established by industry associations and the International Organization for Standardization (ISO). Our major manufacturing facilities are ISO certified. Product specifications and characteristics are determined by the expected capacity to be lifted, the characteristics of the load, the environment in which employed, the terrain over which the load will be moved and the operational life cycle of the vehicle. Accordingly, while there are some standard products, the market demands a wide range of products in custom configurations and capacities.

The manufacturing of our products includes the purchase of raw materials and components: principally rolled bar, plate and extruded steel products; unfinished castings and forgings; hydraulic cylinders and motors; and hardware items such as fasteners, rollers, hydraulic seals and hose assemblies. Certain purchased parts are provided worldwide by a limited number of suppliers. Difficulties in obtaining alternative sources of rolled bar, plate and extruded steel products and other materials from a limited number of suppliers could affect operating results. We are not currently experiencing any shortages in obtaining raw materials, purchased parts, or other steel products.

Markets

We market our products throughout the world. Our primary customers are companies and industries that use lift trucks for materials handling. Examples of these industries include pulp and paper, grocery products, textiles, recycling and general consumer goods. Our products are sold to the end-user customer through the retail lift truck dealer distribution channel and to lift truck manufacturers as original equipment manufacturer (OEM) equipment.

In major industrialized countries, lift trucks are a widely utilized method of materials handling. In these markets lift trucks are generally considered maintenance capital investment. This tends to subject the industry in general to the cyclical patterns similar to the broader capital goods economic sector.

However, many of our products measurably improve overall materials handling and lift truck productivity. Further, we are continually developing products to serve new types of materials handling applications to meet specific customer and industry requirements. In this sense, our products may also be generally considered a productivity enhancing investment. Historically, this has somewhat cushioned the negative impact of downward trends in the lift truck market on our net sales.

In emerging industrialized countries, China in particular, lift trucks are replacing manual labor and other less productive methods of materials handling. As such, lift trucks are generally considered productivity enhancing investments in these markets. We believe this makes the lift truck markets in these countries generally less susceptible to downward trends in overall capital goods spending.

See “Recent Trends and Developments Affecting Our Results” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Item 7) for further discussion on how the economic recession is affecting the markets we serve.

Competition

We are one of the leading global independent suppliers of load engagement products for industrial lift trucks. We compete with a number of companies in different parts of the world. Our primary competitor is Bolzoni Auramo, an Italian public company. Most of our remaining competitors are privately-owned companies with a strong presence in local and regional markets. A small number of these competitors compete with us globally.

In addition, several lift truck manufacturers, who are customers of ours, are also competitors in varying degrees to the extent they manufacture a portion of their load engagement product requirements. Since we offer a broad line of products capable of supplying a significant part of the total requirements for the entire lift truck industry, our experience has shown that lower costs resulting from our relatively high unit volume would be difficult for any individual lift truck manufacturer to achieve for most products. We design and position our products to be the performance and service leaders in their respective product categories and geographic markets.

Our market share and gross profit throughout the world vary by geographic region due to the different competitive environments we face in each of these regions. Fluctuations in gross profit within a geographic region over time are generally due to a change in the competitive environment, such as new competitors entering a market or existing entities merging or otherwise leaving the market. Additionally, cyclical variations in product demand directly affect margins as higher manufacturing volumes generally result in greater fixed cost absorption and increased gross profit.

A further discussion of the competition in each geographic region follows:

North America—We are the leading manufacturer in North America and the preferred supplier of many OEMs as well as original equipment dealers (OEDs) and distributors. We compete in this region primarily with smaller regionally-based companies and a limited number of smaller foreign competitors. Our leading position is the result of our continued focus on providing high quality products and outstanding customer service.

Europe—While we are also a leading manufacturer in Europe, we compete with Bolzoni Auramo and several privately-owned companies with a strong presence in local and regional markets. Price competition in this region has historically resulted in lower gross profit margins than in some other regions.

Asia Pacific—This region includes operations in Japan, Australia, New Zealand, Korea, India and South Africa. The competitive environment varies somewhat from country to country, and competitors vary in size from smaller regionally-based private companies to some larger lift truck manufacturers. In general, we believe we have established a strong presence in the majority of markets in this region.

China—We have operated in China for over 20 years and have established a strong presence in the lift truck market. As a result of the continued growth in China’s economy and the expanded use of lift trucks for various industrial purposes, we are seeing an increase in the number of competitors in the Chinese market, including European based manufacturers.

Customers

Our products are marketed and sold primarily to lift truck OEDs, OEMs and distributors globally. Our primary markets are North America, Europe, China and Asia Pacific. In addition to sales to the lift truck market, we do sell products to OEMs who manufacture construction, mining, agricultural and industrial vehicles other than lift trucks.

No single customer accounts for more than 10% of our consolidated net sales. Our sales to OEM customers account for approximately 42% of our consolidated net sales.

Backlog

Our products are manufactured with short lead times of generally less than one month. Accordingly, the level of backlog orders is not a significant factor in evaluating our overall level of business activity.

Research and Development

The majority of our research and development activities are performed at our corporate headquarters in Fairview, Oregon and at our manufacturing facility in Guelph, Ontario, Canada. Our engineering staff develops and designs substantially all of the products we sell and is continually involved in developing products for new applications. We generally do not consider patents to be important to our business.

Environmental Matters

From time to time, we are the subject of investigations, conferences, discussions and negotiations with various federal, state, local and foreign agencies with respect to cleanup of hazardous waste and compliance with environmental laws and regulations. “Risk Factors” (Item 1A), Notes to Consolidated Financial Statements (Item 8) and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Item 7) contain additional information concerning our environmental matters.

Employees

At January 31, 2010, we had approximately 1,700 full-time employees throughout the world. The majority of these employees are not subject to collective bargaining agreements. We believe our relations with our employees are excellent.

Construction Attachments

We manufacture attachments for construction vehicles at two facilities on the West coast of the United States. The construction attachments are for medium and heavy duty construction vehicles used in a variety of construction markets, including infrastructure, demolition, recycling, forestry, utility and general construction. The prevailing levels of commercial, infrastructure and general construction activity have a significant influence on sales of these products. Housing construction has some overall influence. These products are sold through construction equipment dealers and major equipment manufacturers throughout the western United States. We have approximately 40 employees working to design, manufacture and market these products.

Foreign Operations

We have substantial operations outside the United States. There are additional business risks attendant to our foreign operations, including the risk that the relative value of the underlying local currencies may weaken when compared to the U.S. dollar. For further information about foreign operations, see “Risk Factors” (Item 1A), “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Item 7) and Notes to Consolidated Financial Statements (Item 8).

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on or through our website at www.cascorp.com when such reports

are available on the Securities and Exchange Commission (SEC) website—www.sec.gov. Once filed with the SEC, such documents may be read and/or copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Officers of the Registrant

Robert C. Warren, Jr.—Chief Executive Officer and President (1)—Mr. Warren, 61, has served as President and Chief Executive Officer of Cascade since 1996. He was President and Chief Operating Officer from 1993 until 1996 and was formerly Vice President—Marketing. Mr. Warren joined Cascade in 1972.

Richard S. Anderson—Senior Vice President and Chief Operating Officer (1)—Mr. Anderson, 62, has served as Chief Operating Officer since 2008. Mr. Anderson has been employed by Cascade since 1972 and held several positions including his appointments as Chief Financial Officer from 2001 to 2008, Vice President—Material Handling Product Group in 1996 and Senior Vice President—International in 1999.

Frank R. Altenhofen, Vice President—Asia Pacific (1)—Mr. Altenhofen, 48, was appointed Vice President—Asia Pacific in June 2008 and was appointed Vice President, Americas in 2007. He started his career with Cascade in 1983 and held numerous manufacturing, marketing, and management positions including General Manager of Cascade’s operations in China, until his departure in 2001. Mr. Altenhofen’s experience from 2001 to 2007 includes four years as President of an international medical device company.

Peter D. Drake, Vice President—Americas (1)—Mr. Drake, 42, was appointed Vice President—Americas in June 2008. He started his career with Cascade in 1991 and has held a number of management positions including serving as Plant Manager for Cascade’s Portland facility since 2000.

Michael E. Kern, Vice President—Construction Attachment Division (1)—Mr. Kern, 63, has served as Vice President—Construction Attachment Division since 2007. He has been employed by Cascade since 1966 and has held several positions, including his appointments as Vice President—Sales and Marketing in 2003, as Vice President—Director of Dealer Marketing and Sales in 2001 and Aftermarket Sales Manager in 1999.

Kevin B. Kreiter, Vice President—Engineering and Marketing (1)—Mr. Kreiter, 56, has served in his current position since 2007. He has been employed by Cascade since 1979 and has held several positions within the engineering group, including his appointment as Vice President—Engineering in 2006.

Jeffrey K. Nickoloff, Vice President—Corporate Manufacturing (1)—Mr. Nickoloff, 54, has served in his current position since 2002. He has held several positions with Cascade, including his appointments as Director of North American Manufacturing in 2000 and Plant Manager in 1993. Mr. Nickoloff joined Cascade in 1979.

Joseph G. Pointer, Vice President and Chief Financial Officer (1)—Mr. Pointer, 49, has served as Chief Financial Officer since 2008. He was the Vice President—Finance from 2000 to 2008. Prior to joining Cascade in 2000, Mr. Pointer was a partner at PricewaterhouseCoopers LLP in Portland, Oregon.

Davide Roncari, Vice President—Europe (1)—Mr. Roncari, 37, was appointed Vice President—Europe in June 2008. He has held a number of management positions in Cascade’s European operations since 2003, including his most recent assignment as Director of Engineering—Europe and Director of Production for the Verona, Italy manufacturing operations.

Susan Chazin-Wright, Vice President—Human Resources (1)—Susan Chazin-Wright, 57, was appointed as Vice President–Human Resources in March 2008. Prior to joining Cascade, Ms. Wright served as Director of Human Resources at the Stanford Graduate School of Business and as Vice President of Corporate Services at Denso Corporation, a Toyota affiliate automotive component manufacturer.

John A. Cushing—Treasurer—Mr. Cushing, 49, has served as Treasurer since 2001. He previously was Assistant Treasurer from 1999 until 2001. Prior to joining Cascade in 1999, Mr. Cushing was Assistant Treasurer for Fred Meyer, Inc., a retail company in Portland, Oregon.

(1)—These individuals are considered executive officers of Cascade Corporation.

Item 1A.

Risk Factors

In addition to the other information contained in this Form 10-K, the following are certain risks that we believe should be considered carefully in evaluating Cascade’s business. Our business, financial condition, cash flows or results of operations could be materially adversely affected by any of these risks. The risks summarized below do not represent an exhaustive list, and additional risks not presently known to us or that we currently consider immaterial may also impair our business and operations.

Economic or industry downturns

Our business has historically experienced periodic cyclical downturns generally consistent with economic cycles in the markets in which we operate. The level of sales of our products reflects to a significant extent the capital investment decisions of the customers who buy our products and the lift trucks and other vehicles on which our products are used. These customers have had a tendency to delay capital projects, including the purchase of new equipment or upgrades, during industry or general economic downturns. Past downturns have been characterized by diminished product demand, excess manufacturing capacity and erosion of gross profit and net income. Therefore, a significant downturn in the markets of our customers, including lift truck manufacturers and to a lesser extent construction equipment manufacturers, or in general economic conditions, such as the recent global economic recession, will result in a reduction in demand for our products and negatively affect our business.

Fluctuations in raw material costs and availability

To manufacture our products we purchase a variety of raw materials and components. These consist principally of rolled bar, plate and extruded specialty steel products, unfinished castings and forgings, hydraulic cylinders and motors and various hardware items. The price of steel is particularly significant to our manufacturing costs since most of our products are manufactured using specialty steel as a primary raw material and specialty steel based components as purchased parts. As a result, we are exposed to increases in the market prices of raw materials and components. We may not be able to mitigate these increases by changing the selling prices of our products or through other means.

Significant cost decreases in raw materials and components could result in pressure from customers to lower our sales prices. Due to large quantities of raw material on hand at the end of the year, these lower sales prices could result in a write down of inventory costs to market value.

We may also experience shortages of raw materials and purchased parts, which in certain cases are provided by a limited number of suppliers. Shortages may require us to curtail production or to devote additional financial resources to maintaining inventories of raw materials and purchased parts in excess of our normal requirements.

Credit and Equity Markets

Our results of operations are materially affected by the conditions in the global economy. The recent global financial crisis has caused extreme volatility and disruptions in the capital and credit markets, principally in the U.S. and Europe. These conditions have decreased availability of liquidity and credit capacity for certain issuers and customers.

Although we generally generate funds from our operations to pay our operating expenses, fund our capital expenditures, pay dividends and fund our employee retirement benefit programs, our ability to continue to meet these cash requirements over the long-term will require substantial liquidity and access to sources of funds, including capital and credit markets. Changes in global economic conditions, including material cost increases and decreases in economic activity in many of the markets that we serve, and our success in managing cost increases, inventory and other important elements of our business may significantly impact our ability to generate funds from operations. Continuing market volatility, the impact of government intervention in financial markets and general economic conditions may also adversely impact our ability to access capital and credit markets to fund operating needs.

Our line of credit agreement requires us to achieve certain financial and operating results and maintain compliance with specified financial ratios as outlined in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Financial Condition and Liquidity.” During fiscal 2010, we renegotiated the terms of our line of credit due to significant restructuring charges incurred in Europe that would have put us in violation of debt covenant ratios. Failure to comply with the updated terms of our line of credit agreement could result in a default allowing our lenders to declare all borrowings under the line of credit to be immediately due and payable. This would require us to obtain additional financing or renegotiate the terms of our line of credit agreement again. The terms under which we could obtain new or revised financing would likely be less favorable and require higher interest rates, significant fees and tighter restrictions and covenants.

Economic, political and other risks associated with international operations

Foreign operations represent a significant portion of our business. We expect revenue from foreign markets to continue to represent a significant portion of our total sales. As noted in “Properties” (Item 2), we own or lease facilities in several foreign countries throughout the world. Since we manufacture and sell our products worldwide, our business is subject to risks associated with doing business internationally. Accordingly, our future results could be harmed by a variety of factors, including:

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Foreign currency exchange risks;

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Difficulty in staffing and managing global operations;

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Imposition of foreign exchange controls;

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Changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets such as China;

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Seizure of our property or assets by a foreign government;

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Tariffs, quotas, other trade protection measures and import or export licensing requirements;

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Restrictions on our ability to own or operate or repatriate profits from our subsidiaries, make investments or acquire new businesses in foreign jurisdictions;

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Potentially negative consequences from changes in tax laws;

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Differing labor regulations;

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Requirements relating to withholding taxes on remittances and other payments by subsidiaries;

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Civil unrest or war in any of the countries in which we operate;

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Unexpected transportation delays or interruptions;

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Difficulty in enforcement of contractual obligations governed by non-U.S. law and complying with multiple and potentially conflicting laws; and

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Unexpected changes in regulatory requirements.

Foreign currency fluctuations

Changes in economic or political conditions globally and in any of the countries in which we operate could result in exchange rate movements, new currency or exchange controls or other restrictions being imposed on our operations.

Because our combined financial results are reported in U.S. dollars, translation of sales or earnings generated in other currencies into U.S. dollars can result in a significant increase or decrease in the amount of those sales or earnings. In addition, our debt service requirements are primarily in U.S. dollars, even though a portion of our cash flow is generated in foreign currencies. Significant changes in the value of these foreign currencies relative to the U.S. dollar could have a material adverse effect on our financial condition.

Fluctuations in currencies relative to currencies in which our earnings are generated make it more difficult to perform period-to-period comparisons of our reported results of operations. For purposes of accounting, the assets and liabilities of our foreign operations, where the local currency is the functional currency, are translated using period-end exchange rates, and the revenues, expenses and cash flows of our foreign operations are translated using average exchange rates during each period.

In addition to currency translation risks, we incur currency transaction risk whenever we enter into a purchase or a sales transaction using a currency other than the local currency of the transacting entity. Given the volatility of exchange rates, we cannot be assured we will be able to effectively manage our currency transaction and/or translation risks. We have purchased and may continue to purchase foreign currency hedging instruments protecting or offsetting positions in certain currencies to reduce the risk of adverse currency fluctuations. We only purchase these instruments to cover actual currency exposures. We have in the past experienced and expect to experience at times in the future an impact on earnings as a result of foreign currency exchange rate fluctuations.

Original equipment manufacturers sourcing practices

We sell approximately 42% of our products directly to OEMs, several of which are global manufacturers. The following actions taken by these OEMs could significantly affect our business:

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Adjusting their inventories of finished products as part of ongoing operations.

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Shifting from local or regional sourcing of products to lower cost global sourcing.

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Altering the distribution channels of certain products by acquiring all or part of their dealer network or by exerting influence over their sale of replacement parts and attachments through their distribution channels.

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Manufacturing their own attachments.

Competition

Our products do not depend upon proprietary technology to any significant degree, and therefore can be subject to intense competition. Competitive characteristics of our products include overall performance, ease of use, quality, safety, customer service and support, manufacturing lead times, global reach, brand reputation, breadth of product line and price. Our customers increasingly demand more technologically advanced and integrated products in certain cases and we must continue to develop our expertise and technical capabilities in order to manufacture and market these products successfully. To retain our competitive position, we will need to invest continuously in research and development and improve our manufacturing, marketing, customer service and support and our distribution networks.

Environmental compliance costs and liabilities

Our operations and properties are subject to stringent U.S. and foreign, federal, state and local laws and regulations relating to environmental protection. These laws and regulations govern the investigation and cleanup of contaminated properties as well as air emissions, water discharges, waste management and disposal and workplace health and safety. We can be held responsible under these laws and regulations whether or not the original actions were legal and whether or not we knew of, or were responsible for, the presence of such hazardous or toxic substances. We could be responsible for payment of the full amount of any liability, whether or not any other responsible party also is liable.

These laws and regulations affect a significant percentage of our operations, are different in every jurisdiction and can impose substantial fines and sanctions for violations. Further, they may require substantial clean-up costs for our properties, many of which are sites of long-standing manufacturing operations, and the installation of costly pollution control equipment or operational changes to limit pollution emissions and/or

decrease the likelihood of accidental hazardous substance releases. We must conform our operations and properties to these laws and adapt to regulatory requirements in all jurisdictions as these requirements change.

We routinely deal with natural gas, oil and other petroleum products. As a result of our operations, we generate, manage and dispose of or recycle hazardous wastes and substances such as solvents, thinner, waste paint, waste oil, wash-down wastes and sandblast material. Hydrocarbons or other hazardous substances or wastes may have been disposed or released on, under or from properties owned, leased or operated by us or on, under or from other locations where such substances or wastes have been taken for disposal. These properties may be subject to investigatory, clean-up and monitoring requirements under U.S. and foreign, federal, state and local environmental laws and regulations.

In prior years, we entered into settlement agreements with various environmental insurance providers with respect to litigation of claims under insurance policies issued by the providers to recover expenses incurred in connection with environmental and related proceedings. As a part of these settlement agreements, we released all of our rights to any future recovery under these policies.

Loss of senior management

The success of our business is dependent on our ability to attract and retain qualified personnel. Several members of our senior management team have been with us for over 20 years, including our President and Chief Operating Officer, who have each been with us for over 35 years. We may lose the services of key management personnel or fail to attract and develop additional personnel.

Reliance on customers

Approximately 58% of our products are sold to the end-user customer through OEDs. Therefore, a significant portion of our sales is dependent on the quality and effectiveness of these dealers, who are not subject to our control. In addition, under current economic conditions customers may experience difficulty in obtaining credit to fund purchases of our products.

Underfunded benefit plans

Our obligations under our postretirement benefit plan and certain foreign subsidiaries’ defined benefit pension plans are currently underfunded. At some time in the future we may have to make significant cash payments to fund these plans, which would reduce the cash available for our business.

As of January 31, 2010 our accumulated postretirement benefit obligation under our postretirement benefit plan, which is not funded, was $7.9 million. As of January 31, 2010, our projected benefit obligations under our defined benefit pension plans exceed the fair value of assets by $2 million. The underfunding in our defined benefit pension plans are impacted by fluctuations in the discount rate and financial markets that cause the valuation of assets to change. Also, the trustees of the UK defined benefit plan could decide to wind up the plan, which would cause us to be required to immediately fund the plan through a buyout of the obligation in full. We expect any required cash payments to our plans that are not fully funded will be made from future cash flows from operations. If our cash contributions are insufficient to adequately fund the plans to cover our future obligations, the performance of the pension plan assets do not meet our expectations or assumptions are modified, our contributions could be materially higher than we expect. This would reduce the cash available for our business. Changes in U.S. or foreign laws governing these plans could require us to make additional contributions and changes to generally accepted accounting principles in the United States could require the recording of additional costs related to these plans.

Impact of acquisitions

We have historically expanded our business through acquisitions and expect we will do so in the future if appropriate opportunities arise. If we are not successful in integrating acquisitions, we may not realize the

operating results we anticipated at the time of acquisition. In addition, industry downturns in the markets the acquired companies serve and general economic conditions may adversely affect our financial results. Future acquisitions may require us to incur additional debt and contingent liabilities, which may materially and adversely affect our business, operating results, cash flows and financial condition. The acquisition and integration of businesses involve a number of risks, including:

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Doing business in industries outside the lift truck material handling business;

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Difficulties in matching the business culture of the acquired business with our culture;

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Difficulties in the assimilation and retention of employees;

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Difficulties in retaining customers and integrating customer bases;

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Diversion of management’s attention from existing operations due to the integration of acquired businesses;

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Difficulties in integrating operations and systems; and

•

Assumption of unexpected liabilities.

Due to the decreased availability of, and the related high cost in accessing, liquidity and credit in this current volatile credit and capital market, we may, in a bid to conserve cash for operations, undertake acquisitions that would be financed in part through public offerings or private placements of debt or equity securities, or other arrangements. Such acquisition financing could result in a decrease of our ratio of earnings to fixed charges and adversely affect other leverage measures. We cannot guarantee any such acquisition financing would be available to us on acceptable terms if and when required. If we were to undertake an acquisition by issuing equity securities, the issued securities may have a dilutive effect on the interests of the holders of our common shares.

Item 1B.

Unresolved Staff Comments

None.

Item 2.

Properties

We own and lease various types of properties located throughout the world. Our corporate office is located in Fairview, Oregon. We generally consider the productive capacity of our manufacturing facilities to be adequate and suitable to meet our requirements. Our primary locations are presented below:


Location	Primary Activity	Approximate Square Footage	Status
NORTH AMERICA
Springfield, Ohio	Manufacturing	200,000	Owned
Fairview, Oregon	Manufacturing/Headquarters	155,000	Owned
Guelph, Ontario Canada	Manufacturing	125,000	Owned
Toronto, Ontario Canada	Manufacturing	73,000	Leased
Woodinville, Washington	Manufacturing	68,000	Leased
Warner Robins, Georgia	Manufacturing	65,000	Owned
Findlay, Ohio	Manufacturing	52,000	Owned
San Juan Capistrano, California	Manufacturing	9,000	Leased
EUROPE
Almere, The Netherlands*	Distribution	162,000	Owned
Schalksmuhle, Germany*	Distribution	81,000	Owned
Verona, Italy	Manufacturing	74,000	Leased
Manchester, England	Manufacturing	44,000	Owned
La Machine, France*	Vacant	37,000	Owned
Brescia, Italy	Manufacturing	19,000	Owned
Ancenis, France*	Distribution	12,000	Owned
Vaggeryd, Sweden	Sales	2,000	Leased
Epignay, France	Sales	2,000	Leased
Barcelona, Spain	Sales	1,000	Leased
Vantaa, Finland	Sales	500	Leased
ASIA PACIFIC
Brisbane, Australia	Manufacturing	46,000	Leased
Osaka, Japan	Sales/Distribution	24,000	Owned
Inchon, Korea	Manufacturing	12,000	Owned
Auckland, New Zealand	Sales/Distribution	9,000	Leased
Johannesburg, South Africa	Sales	9,000	Leased
Pune, India	Sales	120	Leased
CHINA
Xiamen, China	Manufacturing	189,000	Leased
Hebei, China	Manufacturing	88,000	Leased
Xiamen, China	Manufacturing	87,000	Leased
Hebei, China	Manufacturing	65,000	Leased

*—Location is currently available for sale.

Item 3.

Legal Proceedings

Neither Cascade nor any of our subsidiaries are involved in any material pending legal proceedings. We believe we are adequately insured against product liability, personal injury and property damage claims, which may occasionally arise.

Item 4.

Reserved

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

As of March 9, 2010, there were 159 shareholders of record of Cascade’s common stock including blocks of shares held by various depositories. It is our belief that when the shares held by the depositories are attributed to the beneficial owners, the total exceeds 2,000.

Performance Graph

The following graph compares the annual percentage change in the cumulative shareholder return on our common stock with the cumulative total return of the Russell 2000 Index and an industry group of peer companies, in each case assuming investment of $100 on January 31, 2005, and reinvestment of dividends. The stock price performance shown in the graph below is not necessarily indicative of future stock price performance. Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, the stock performance graph shall not be incorporated by reference into any such filings and shall not otherwise be deemed filed under such acts.

LOGO

The peer group comprises the following companies: Actuant Corporation., Alamo Group Inc., Ampco-Pittsburgh Corporation, Astec Industries, Inc., Columbus-McKinnon Corporation, Gulf Island Fabrication, Inc., IDEX Corporation, Lindsay Manufacturing Company and Nordson Corporation.

Market Information

The high and low sales prices of our common stock based on intra-day prices on the New York Stock Exchange for each quarter during the last two fiscal years were as follows:


	Year ended January 31
	2010				2009
	High		Low		High		Low
First quarter	$	26.38	$	12.81	$	54.87	$	39.70
Second quarter		31.91		15.11		51.05		39.01
Third quarter		28.83		22.85		53.76		27.65
Fourth quarter		32.26		21.36		36.16		20.60

Dividends

The cash dividends declared during each quarter of the last two fiscal years were as follows:


	Year ended January 31
	2010		2009
First quarter	$	0.05	$	0.18
Second quarter		0.05		0.20
Third quarter		0.01		0.20
Fourth quarter		0.01		0.20

Total	$	0.12	$	0.78

Stock Exchange Listing and Transfer Agent

Cascade’s stock is traded on the New York Stock Exchange under the symbol CASC.

Cascade’s registrar and transfer agent is BNY Mellon Shareowner Services, P.O. Box 358015, Pittsburgh, P.A., 15252, (877) 268-3023.

Equity Compensation Plan Information

For information on our equity compensation plans, see Items 8 and 12 of this report.

Item 6.

Selected Financial Data

The following selected financial data should be read in conjunction with our consolidated financial statements and accompanying notes contained in Item 8 of this Form 10-K.


	Year Ended January 31
	2010			2009			2008			2007			2006
	(In thousands, except per share amounts and employees)
Income statement data:
Net sales	$	314,353		$	534,172		$	558,073		$	478,850		$	450,503
Operating income (loss)(1)	$	(31,494	)	$	11,477		$	95,613		$	68,351		$	63,894
Net income (loss)(2)	$	(38,649	)	$	1,267		$	60,147		$	45,481		$	42,051
Cash flow data:
Cash flows from operating activities	$	45,413		$	41,086		$	53,326		$	57,109		$	50,425
Cash flows from investing activities	$	(5,732	)	$	(16,134	)	$	(31,627	)	$	(33,582	)	$	(31,723	)
Cash flows from financing activities	$	(44,659	)	$	(20,382	)	$	(33,432	)	$	(22,153	)	$	(13,191	)
Free cash flow(3)	$	39,479		$	24,377		$	30,518		$	39,031		$	39,845
Stock information:
Basic earnings per share(2)	$	(3.57	)	$	0.12		$	5.08		$	3.64		$	3.40
Diluted earnings per share(2)	$	(3.57	)	$	0.11		$	4.88		$	3.48		$	3.27
Dividends declared	$	0.12		$	0.78		$	0.70		$	0.61		$	0.54
Balance sheet information:
Cash and marketable securities	$	20,201		$	31,185		$	21,223		$	36,593		$	58,497
Working capital(4)	$	112,378		$	161,718		$	151,971		$	113,130		$	124,962
Property, plant and equipment, net	$	73,408		$	93,826		$	98,350		$	84,151		$	75,374
Total assets	$	341,931		$	397,583		$	462,500		$	397,432		$	361,283
Total debt	$	59,416		$	102,763		$	110,716		$	51,119		$	29,922
Shareholders’ equity	$	215,762		$	236,967		$	268,025		$	271,636		$	259,406
Other:
Capital expenditures	$	5,934		$	16,709		$	22,808		$	18,078		$	10,580
Depreciation	$	11,893		$	13,801		$	13,898		$	13,753		$	14,562
Amortization	$	403		$	2,519		$	3,214		$	1,472		$	1,443
Share-based compensation expense(5)	$	3,562		$	4,421		$	4,451		$	4,033		$	2,278
Interest expense, net of interest income	$	1,561		$	3,475		$	3,315		$	400		$	1,762
Diluted weighted average shares outstanding		10,816			11,077			12,333			13,071			12,850
Number of employees		1,700			2,100			2,400			2,100			1,900

(1)	Amount includes $30,001 of restructuring costs in 2010, a $46,376 asset impairment charge in 2009 and a $15,977 insurance litigation recovery in 2008.

(2)	Amount includes an after-tax restructuring charge of $29,519 ($2.73 per diluted share) in 2010, an after-tax asset impairment charge in 2009 of $31,576 ($2.85 per diluted share) and an after-tax insurance litigation recovery in 2008 of $10,026 ($0.81 per diluted share).

(3)	A non-GAAP measure defined as cash flow from operating activities less capital expenditures. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information about free cash flow.

(4)	Defined as current assets less current liabilities.

(5)	See Notes 2 and 13 to the Consolidated Financial Statements for additional information on share-based compensation.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of certain significant factors that have affected our financial condition as of January 31, 2010, and the results of operations and cash flows for the fiscal years ended January 31, 2010, 2009 and 2008. This information should be read in conjunction with our consolidated financial statements and notes thereto under Item 8, “Financial Statements and Supplementary Data” of this report.

OVERVIEW

Our businesses globally manufacture and distribute material handling load engagement products primarily for the lift truck industry and to a lesser extent the construction industry. We operate our business in four geographic segments: North America, Europe, Asia Pacific and China. A further discussion of the nature of our business is contained in Item 1, “Business,” of this report.

RECENT TRENDS AND DEVELOPMENTS AFFECTING OUR RESULTS

Global Economic Conditions

The financial and banking crisis that began in the third quarter of fiscal 2009 triggered a significant deterioration in global economic conditions, which included depressed demand for lift trucks and our products. Excluding the impact of foreign currencies, our consolidated net sales decreased 40% during fiscal 2010, while global lift truck shipments were down 42% compared to the prior year. During this very challenging global business environment, we initiated a major restructuring of our European operations and implemented a number of steps to control costs, while continuing to meet customer needs. We believe the steps we have taken will position us to emerge from this economic cycle a stronger company, enable us to take advantage of improved markets and increase our market share.

Towards the end of fiscal 2010, we started to see some more positive regional trends in the lift truck market which we believe could continue into 2011. Based on these trends, we believe the following:

•

North America—North America has begun to recover, however it will be at a slow, gradual pace over the upcoming year.

•

Europe—The decrease in European shipments has leveled off and will begin to see a gradual recovery during the next 18 months.

•

Asia Pacific—The Asia Pacific market will experience slow growth during fiscal 2011.

•

China—China will continue to grow at a rate that is comparable to the Chinese gross domestic product growth rate.

Europe Restructuring

During the past two fiscal years we have taken a number of steps to change the structure of our European business and improve operational efficiencies with the goal of achieving a sustainable level of operating income. These steps have included closing production facilities in Germany, The Netherlands and France, changes in management personnel, other workforce reductions within Europe and movement of certain production activities to Italy. We have incurred $32.5 million of European restructuring costs over the past two years. We believe we have been able to continue to serve our customers needs during this transition period despite operational disruption due to the restructuring effort.

We will continue to review our existing production capacity and look for further opportunities to improve our European operations. At this time, however, we do not anticipate incurring any significant European restructuring costs during fiscal 2011 and believe that over the long-term our objective of sustained profitability in Europe will be met.

COMPARISON OF FISCAL 2010 AND FISCAL 2009

Executive Summary


	Year Ended January 31						Change			Change %
	2010			2009			Change			Change %
	(In thousands except per share amounts)
Net sales	$	314,353		$	534,172		$	(219,819	)	(41	)%
Operating income (loss)	$	(31,494	)	$	11,477		$	(42,971	)	(374	)%
Income (loss) before taxes	$	(33,498	)	$	4,391		$	(37,889	)	(863	)%
Provision for income taxes	$	5,151		$	3,124		$	2,027		65	%
Effective tax rate		(15	)%		71	%		—		—
Net income (loss)	$	(38,649	)	$	1,267		$	(39,916	)	—
Diluted earnings (loss) per share	$	(3.57	)	$	0.11		$	(3.68	)	—

The following is an overview of fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Consolidated net sales decreased 40% as a result of the general economic downturn and a weak lift truck market. Global lift truck shipments were down 42% compared to the prior year. We have found that lift truck industry statistics provide a strong indication of the direction of our business activity. However, changes in our net sales do not correspond directly to the percentage changes in lift truck shipments or orders.

•

Our consolidated gross profit percentage decreased from 28% to 23%, primarily as a result of operational costs associated with our European restructuring and unabsorbed fixed and variable costs due to lower sales volumes, particularly in Europe and North America.

•

We incurred restructuring costs of $30 million, primarily related to shutting down production activities at our facilities located in France, Germany and The Netherlands.

•

We paid down outstanding debt by $43.3 million during 2010 using cash flow from operations.

•

The income tax expense in fiscal 2010 is a result of taxes due in countries where we are generating income and taxes on foreign dividends related to the repatriation of cash to the U.S. We are currently unable to realize a tax benefit in several European countries where we have incurred losses.

•

During fiscal 2009, we recognized a $46.4 million asset impairment charge for goodwill and intangible assets associated with our construction attachment business.

North America


	Year Ended January 31									Change			Change %
	2010		%		2009			%		Change			Change %
	(In thousands)
Net sales	$	154,654	91	%	$	257,077		90	%	$	(102,423	)	(40	)%
Transfers between areas		15,086	9	%		29,083		10	%		(13,997	)	(48	)%

Net sales and transfers		169,740	100	%		286,160		100	%		(116,420	)	(41	)%

Cost of goods sold		120,933	71	%		198,236		69	%		(77,303	)	(39	)%

Gross profit		48,807	29	%		87,924		31	%		(39,117	)	(44	)%

Selling and administrative		39,802	24	%		45,451		16	%		(5,649	)	(12	)%
Environmental		1,255	1	%		—		—			1,255		—
Loss on disposition of assets, net		3	—			178		—			(175	)	—
Amortization		191	—			2,221		1	%		(2,030	)	(91	)%
Asset impairment charge		—	—			46,376		16	%		(46,376	)	—

Operating income (loss)	$	7,556	4	%	$	(6,302	)	(2	)%	$	13,858		220	%

Details of the change in net sales compared to the prior year are as follows (in thousands):


	Amount			Change %
Net sales change	$	(101,744	)	(40	)%
Foreign currency change		(679	)	—

Total	$	(102,423	)	(40	)%

The following summarizes financial results for North America for fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Net sales decreased 40% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments decreased 43% compared to the prior year.

•

Shipments of product to other Cascade locations decreased 48% during fiscal 2010 due to lower global customer demand and efforts to reduce inventory.

•

Our gross profit percentage decreased in the current year due to significantly lower sales volumes which resulted in unabsorbed fixed and variable costs. This was offset by a favorable product mix during the current year and a reduction of overhead costs as a result of headcount reductions and other cost cutting measures. All of our facilities in North America operated at reduced work schedules during fiscal 2010.

•

Selling and administrative costs decreased 12% due to lower personnel and other general costs.

•

During fiscal 2010, we recorded a $1.3 million environmental charge primarily related to our Springfield, Ohio location. This expense was the result of formalizing a revised remediation plan with the Ohio Environmental Protection Agency, which will require additional cleanup activities related to groundwater contamination.

•

During fiscal 2009, we recognized a $46.4 million asset impairment charge for goodwill and intangible assets associated with our construction attachment business.

Europe


	Year Ended January 31
	2010			%		2009			%		Change			Change %
	(In thousands)
Net sales	$	81,068		96	%	$	167,955		99	%	$	(86,887	)	(52	)%
Transfers between areas		3,648		4	%		1,686		1	%		1,962		116	%

Net sales and transfers		84,716		100	%		169,641		100	%		(84,925	)	(50	)%

Cost of goods sold		90,021		106	%		144,388		85	%		(54,367	)	(38	)%

Gross profit (loss)		(5,305	)	(6	)%		25,253		15	%		(30,558	)	(121	)%

Selling and administrative		19,424		23	%		26,148		15	%		(6,724	)	(26	)%
Loss on disposition of assets, net		59		—			108		—			(49	)	(45	)%
Amortization		212		—			298		—			(86	)	(29	)%
Restructuring costs		30,001		36	%		2,544		2	%		27,457		—

Operating loss	$	(55,001	)	(65	)%	$	(3,845	)	(2	)%	$	(51,156	)	—

Details of the change in net sales compared to the prior year are as follows (in thousands):


	Amount			Change %
Net sales change	$	(82,173	)	(49	)%
Foreign currency change		(4,714	)	(3	)%

Total	$	(86,887	)	(52	)%

The following summarizes financial results for Europe for fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Net sales decreased 49% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments decreased 58% during 2010 as the economic recession had a more significant impact on European economies.

•

Our gross profit percentage decreased due to costs associated with our European restructuring effort, including considerable operational disruption costs and inventory writeoffs. In addition, significantly lower sales volumes resulted in unabsorbed overhead costs, as all facilities operated under reduced work schedules during fiscal 2010.

•

Selling and administrative costs decreased 22% primarily due to lower personnel costs, as a result of headcount reductions made during our European restructuring activities. Marketing, selling and travel costs were also lower.

•

Restructuring costs of $30 million were primarily a result of closing production activities at our facilities in Germany ($10.9 million), The Netherlands ($13.2 million) and France ($5.3 million). These costs included severance costs of $17.3 million, fixed asset write downs of $9 million, costs for movement of equipment and facility shutdowns of $2.6 million and other restructuring costs of $1.1 million.

Asia Pacific


	Year Ended January 31								Change			Change %
	2010		%		2009		%		Change			Change %
	(In thousands)
Net sales	$	44,102	100	%	$	68,466	99	%	$	(24,364	)	(36	)%
Transfers between areas		147	—			355	1	%		(208	)	(59	)%

Net sales and transfers		44,249	100	%		68,821	100	%		(24,572	)	(36	)%

Cost of goods sold		32,972	74	%		52,458	76	%		(19,486	)	(37	)%

Gross profit		11,277	26	%		16,363	24	%		(5,086	)	(31	)%

Selling and administrative		7,485	17	%		9,040	13	%		(1,555	)	(17	)%
Loss on disposition of assets, net		2	—			47	—			(45	)	—

Operating income	$	3,790	9	%	$	7,276	11	%	$	(3,486	)	(48	)%

Details of the change in net sales compared to the prior year are as follows (in thousands):


	Amount			Change %
Net sales change	$	(23,734	)	(35	)%
Foreign currency change		(630	)	(1	)%

Total	$	(24,364	)	(36	)%

The following summarizes the financial results for Asia Pacific for fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Net sales decreased 35% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments decreased 43% during the current year.

•

Our gross profit percentage increased due to changes in product mix and fluctuations in foreign currency rates primarily in Australia and Korea.

•

Selling and administrative costs decreased 17% due to lower personnel, sales and other general costs.

China


	Year Ended January 31								Change			Change %
	2010		%		2009		%		Change			Change %
	(In thousands)
Net sales	$	34,529	77	%	$	40,674	64	%	$	(6,145	)	(15	)%
Transfers between areas		10,549	23	%		23,219	36	%		(12,670	)	(55	)%

Net sales and transfers		45,078	100	%		63,893	100	%		(18,815	)	(29	)%

Cost of goods sold		28,787	64	%		44,885	70	%		(16,098	)	(36	)%

Gross profit		16,291	36	%		19,008	30	%		(2,717	)	(14	)%

Selling and administrative		4,096	9	%		4,590	8	%		(494	)	(11	)%
Loss on disposition of assets, net		34	—			70	—			(36	)	(51	)%

Operating income	$	12,161	27	%	$	14,348	22	%	$	(2,187	)	(15	)%

Details of the change in net sales compared to the prior year are as follows (in thousands):


	Amount			Change %
Net sales change	$	(6,584	)	(16	)%
Foreign currency change		439		1	%

Total	$	(6,145	)	(15	)%

The following summarizes the financial results for China for fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Net sales decreased 16% primarily due to lower sales volumes as a result of the general economic downturn and a weak export lift truck market. Lift truck industry shipments within China increased 5% during the current year but export shipments decreased 65%. The Chinese market was significantly impacted by the global economic downturn in the first quarter of fiscal 2010. Overall the Chinese market recovered during the last three quarters.

•

Transfers to other Cascade locations decreased 55% due to lower customer demand in Europe and Asia Pacific and efforts to reduce inventory.

•

Our gross profit percentage increased due to changes in product mix and fewer intercompany transfers, which carry lower gross margins.

•

Selling and administrative costs decreased 12% due to lower personnel and other general costs.

Non-Operating Items

The following are financial highlights for non-operating items during fiscal 2010:

•

Interest expense decreased $2.2 million during fiscal 2010 as a result of lower interest rates and our efforts to pay down debt. During fiscal 2010 we reduced our outstanding debt by 42% or $43.3 million.

•

Foreign currency losses decreased $3.2 million during the current year as a result of more stable foreign currency rates and changes in our practices for managing foreign currencies put in place during the year.

•

The effective tax rate for fiscal 2010 was negative 15% compared to 71% for fiscal 2009. The current year income tax expense was a result of taxes due in countries where we are generating income and taxes on foreign dividends related to the repatriation of cash to the U.S. We are currently unable to realize a tax benefit in several European countries where we have incurred losses. During 2009, the high tax rate was attributable to a low level of net income as a result of impairments of intangible assets and goodwill that were not deductible for tax purposes.

Lift Truck Market Outlook

The uncertain duration of the current recession makes it very difficult to estimate the effect on the global lift truck market in the future. A summary of regional lift truck market trends can be found under “Recent Trends and Developments Affecting Our Results.”

Additional information on lift truck industry trends can be found at www.cascorp.com/investor/industrytrends. This website address is intended to provide an inactive, textual reference only. The information at this website is not part of this Form 10-K and is not incorporated by reference.

Fourth Quarter Results (2010/2009)


	Three Months Ended January 31										Change			Change %
	2010			%		2009			%		Change			Change %
	(In thousands)
Net sales	$	80,572		100	%	$	95,068		100	%	$	(14,496	)	(15	)%
Cost of goods sold		62,179		77	%		72,122		76	%		(9,943	)	(14	)%

Gross profit		18,393		23	%		22,946		24	%		(4,553	)	(20	)%

Selling and administrative expenses		17,836		22	%		17,614		19	%		222		1	%
Environmental		1,255		2	%		—		—			1,255		—
Loss on disposition of assets		8		—			236		—			(228	)	(97	)%
Amortization		47		—			518		—			(471	)	(91	)%
Asset impairment charge		—		—			46,376		49	%		(46,376	)	—
European restructuring costs		12,121		15	%		806		1	%		11,315		—

Operating loss		(12,874	)	(16	)%		(42,604	)	(45	)%		29,730		(70	)%
Interest expense, net		421		1	%		399		—			22		6	%
Foreign currency losses, net		159		—			1,239		2	%		(1,080	)	(87	)%

Loss before taxes		(13,454	)	(17	)%		(44,242	)	(47	)%		30,788		(70	)%
Provision for (benefit from) taxes		976		1	%		(13,741	)	(15	)%		14,717		(107	)%

Net loss	$	(14,430	)	(18	)%	$	(30,501	)	(32	)%	$	16,071		(53	)%

Diluted loss per share	$	(1.33	)			$	(2.82	)

Operating income (loss) by region:
North America	$	1,403				$	(41,827	)			$	43,230		(103	)%
Europe		(18,750	)				(3,439	)				(15,311	)	(445	)%
Asia Pacific		701					1,065					(364	)	(34	)%
China		3,772					1,597					2,175		136	%

	$	(12,874	)			$	(42,604	)			$	29,730		(70	)%

The following summarizes the financial results from the fourth quarter of fiscal 2010. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

Consolidated net sales decreased 19% as a result of the general economic downturn and a weak lift truck market. Global lift truck shipments were down 25% compared to the prior year.

•

Our consolidated gross profit percentage decreased primarily as a result of operational costs associated with our European restructuring, including considerable operational disruption costs and inventory writeoffs. This decrease was offset by a favorable product mix in the current year and a reduction of overhead costs as a result of headcount reductions and other cost cutting measures implemented during fiscal 2010.

•

We incurred restructuring costs of $12.1 million, primarily related to shutting down production at our fork facility in Hagen, Germany.

•

Selling and administrative expenses decreased 4%, due to lower personnel and other general costs.

•

During the fourth quarter of fiscal 2009, we recognized a $46.4 million asset impairment charge for goodwill and intangible assets associated with our construction attachment business.

•

COMPARISON OF FISCAL 2009 AND FISCAL 2008

Executive Summary


	Year Ended January 31				Change			Change %
	2009		2008		Change			Change %
	(In thousands except per share amounts)
Net sales	$	534,172	$	558,073	$	(23,901	)	(4	)%
Operating income	$	11,477	$	95,613	$	(84,136	)	(88	)%
Net income	$	1,267	$	60,147	$	(58,880	)	(98	)%
Diluted earnings per share	$	0.11	$	4.88	$	(4.77	)	(98	)%

The following is an overview of fiscal 2009. All percentage comparisons to the prior year exclude the impact of foreign currencies:

•

During fiscal 2009 net sales were down 6%. Global lift truck shipments were flat compared to fiscal 2008.

•

During fiscal 2009, gross profit percentages decreased in all geographic regions as a result of lower sales volumes and material price increases. Our consolidated gross profit percentage decreased to 28% in fiscal 2009 from 31% in fiscal 2008.

•

During the fourth quarter of fiscal 2009 we recognized a $46.4 million asset impairment charge for goodwill and intangible assets associated with our construction attachment business, which decreased net income $31.6 million.

•

During the first quarter of fiscal 2008 we settled an insurance litigation matter which accounted for a $16 million increase to operating income and a $10 million increase to net income.

North America


	Year Ended January 31										Change			Change %
	2009			%		2008			%		Change			Change %
	(In thousands)
Net sales	$	257,077		90	%	$	286,832		90	%	$	(29,755	)	(10	)%
Transfers between areas		29,083		10	%		33,118		10	%		(4,035	)	(12	)%

Net sales and transfers		286,160		100	%		319,950		100	%		(33,790	)	(11	)%
Cost of goods sold		198,236		69	%		210,118		66	%		(11,882	)	(6	)%

Gross profit		87,924		31	%		109,832		34	%		(21,908	)	(20	)%
Selling and administrative		45,451		16	%		51,020		16	%		(5,569	)	(11	)%
Loss (gain) on disposition of assets, net		178		—			(1,135	)	(1	)%		1,313		—
Amortization		2,221		1	%		2,482		1	%		(261	)	(11	)%
Insurance litigation recovery, net		—		—			(15,977	)	(5	)%		15,977		—
Asset impairment		46,376		16	%		—		—			46,376		—

Operating income (loss)	$	(6,302	)	(2	)%	$	73,442		23	%	$	(79,744	)	(109	)%

Details of the change in net sales compared to fiscal 2008 are as follows (in thousands):


	Amount			Change %
Net sales change	$	(29,354	)	(10	)%
Foreign currency change		(401	)	(0	)%

Total	$	(29,755	)	(10	)%

The following summarizes financial results for North America for fiscal 2009. All percentage comparisons to fiscal 2008 exclude the impact of foreign currencies:

•

Net sales decreased 10% during fiscal 2009 primarily as a result of lower sales volumes due to the general economic downturn, which worsened during the fourth quarter, but was partially offset by sales price increases. North America lift truck industry shipments decreased 12% from 2008 to 2009.

•

Transfers to other Cascade geographic areas decreased 12% during fiscal 2009 due to lower global customer demand.

•

Our gross profit percentage decreased 3% during fiscal 2009 due to higher material costs, changes in product mix, lower production volumes, new product introduction costs and other cost increases, which were partially offset by sales price increases. Our gross profit percentage was consistent each quarter during fiscal 2009.

•

Selling and administrative costs decreased 11% during fiscal 2009 due to a reduction in personnel and consulting costs combined with significant discretionary spending reductions in other areas.

•

During the fourth quarter of fiscal 2009, we recognized a $46.4 million asset impairment charge for goodwill and intangible assets associated with our construction attachment business. See Critical Accounting Policies and Estimates for further discussion related to the asset impairment charge.

•

During fiscal 2008, we realized a $1.1 million pre-tax gain on the sale of land in Fairview, Oregon.

•

During fiscal 2008, we entered into a settlement agreement with Employers Reinsurance Corporation with respect to litigation to recover various expenses incurred in connection with environmental and related proceedings. The recovery from this settlement was $16 million, net of expenses.

Europe


	Year Ended January 31									Change			Change %
	2009			%		2008		%		Change			Change %
	(In thousands)
Net sales	$	167,955		99	%	$	171,435	99	%	$	(3,480	)	(2	)%
Transfers between areas		1,686		1	%		1,497	1	%		189		13	%

Net sales and transfers		169,641		100	%		172,932	100	%		(3,291	)	(2	)%
Cost of goods sold		144,388		85	%		145,288	84	%		(900	)	(1	)%

Gross profit		25,253		15	%		27,644	16	%		(2,391	)	(9	)%

Selling and administrative		26,148		15	%		26,201	15	%		(53	)	—
Loss on disposition of assets, net		108		—			—	—			108		—
Amortization		298		—			732	1	%		(434	)	(59	)%
European restructuring costs		2,544		2	%		—	—			2,544		—

Operating income (loss)	$	(3,845	)	(2	)%	$	711	0	%	$	(4,556	)	(641	)%

Details of the change in net sales compared to fiscal 2008 are as follows (in thousands):


	Amount			Change %
Net sales change	$	(8,249	)	(5	)%
Foreign currency change		4,769		3	%

Total	$	(3,480	)	(2	)%

The following summarizes financial results for Europe for fiscal 2009. All percentage comparisons to fiscal 2008 exclude the impact of foreign currencies:

•

During fiscal 2009 net sales decreased 5%, primarily as a result of weakening economic conditions in the fourth quarter. Although lift truck industry shipments for the year increased 1%, European lift truck shipments for the fourth quarter 2009 were down 27%.

•

Our fiscal 2009 gross profit percentage decreased 1%, primarily due to increased material costs, which have been mitigated in part by sales price increases and more efficient manufacturing as a result of cost reductions.

•

Selling and administrative expenses decreased 4%, due to lower personnel, selling, and other general costs.

•

During fiscal 2009, we incurred $2.5 million in restructuring costs, primarily severance and legal costs, related to optimization of operations at our facilities in Almere, The Netherlands and Hagen, Germany.

Asia Pacific


	Year Ended January 31									Change		Change %
	2009		%		2008			%		Change		Change %
	(In thousands)
Net sales	$	68,466	99	%	$	59,776		100	%	$	8,690	15	%
Transfers between areas		355	1	%		179		—			176	98	%

Net sales and transfers		68,821	100	%		59,955		100	%		8,866	15	%
Cost of goods sold		52,458	76	%		44,892		75	%		7,566	17	%

Gross profit		16,363	24	%		15,063		25	%		1,300	9	%

Selling and administrative		9,040	13	%		8,297		14	%		743	9	%
Loss (gain) on disposition of assets, net		47	—			(34	)	—			81	—

Operating income	$	7,276	11	%	$	6,800		11	%	$	476	7	%

Details of the change in net sales compared to fiscal 2008 are as follows (in thousands):


	Amount		Change %
Net sales change	$	8,180	14	%
Foreign currency change		510	1	%

Total	$	8,690	15	%

The following summarizes the financial results for Asia Pacific for fiscal 2009. All percentage comparisons to fiscal 2008 exclude the impact of foreign currencies:

•

Net sales increased 14% due to higher shipping volumes as a result of strong business activity in the region. Lift truck industry shipments for the year increased 3%. However, Asia Pacific lift truck shipments for the fourth quarter 2009 were down 20%.

•

Our gross profit percentage in Asia Pacific decreased 1% due to material cost increases and fluctuations in foreign currency rates.

•

Selling and administrative costs increased 6% due to higher personnel, marketing and other general expenses. However, as a percentage of net sales and transfers, selling and administrative costs decreased from 14% in fiscal 2008 to 13% in fiscal 2009.

China


	Year Ended January 31								Change			Change %
	2009		%		2008		%		Change			Change %
	(In thousands)
Net sales	$	40,674	64	%	$	40,030	70	%	$	644		2	%
Transfers between areas		23,219	36	%		17,410	30	%		5,809		33	%

Net sales and transfers		63,893	100	%		57,440	100	%		6,453		11	%
Cost of goods sold		44,885	70	%		38,805	68	%		6,080		16	%

Gross profit		19,008	30	%		18,635	32	%		373		2	%

Selling and administrative		4,590	8	%		3,927	6	%		663		17	%
Loss on disposition of assets, net		70	—			48	—			22		—

Operating income	$	14,348	22	%	$	14,660	26	%	$	(312	)	(2	)%

Details of the change in net sales compared to fiscal 2008 are as follows (in thousands):


	Amount			Change %
Net sales change	$	(2,764	)	(7	)%
Foreign currency change		3,408		9	%

Total	$	644		2	%

The following summarizes the financial results for China for fiscal 2009. All percentage comparisons to fiscal 2008 exclude the impact of foreign currencies:

•

During fiscal 2009 net sales decreased 7% due to a general slowdown in the Chinese economy during the fourth quarter, which included a decline in the lift truck industry. Lift truck industry shipments for the year decreased 4%. China lift truck shipments for the fourth quarter 2009 were down 45%.

•

Transfers to other Cascade geographic areas increased during fiscal 2009 due to the export of products to Europe and Asia Pacific.

•

The fiscal 2009 gross profit percentage decreased 2% due to material cost increases, changes in product mix and higher intercompany transfers, which carry lower gross margins. Price increases implemented during fiscal 2009 helped to mitigate these factors to some extent.

•

Selling and administrative costs increased 7% during fiscal 2009 due to marketing, consulting and other general costs.

Non-Operating Items

The following are financial highlights for non-operating items during fiscal 2009:

•

Interest expense, net of interest income, remained relatively constant during fiscal 2009.

•

Foreign currency losses increased $2.2 million during fiscal 2009. This is a result of significant changes in the Euro, British Pound, Korean Won, Canadian Dollar and Australian Dollar.

The following table represents the percentage change from January 31, 2008 to January 31, 2009 in our most significant foreign currency rates.


Currency	Change %
Korean Won	(32	)%
Australian Dollar	(29	)%
British Pound	(27	)%
Canadian Dollar	(18	)%
Euro	(14	)%
Chinese Yuan	5	%

•

The effective tax rate for fiscal 2009 was 71% compared to 34% in fiscal 2008. The increase is primarily attributable to a low level of net income for fiscal 2009 as a result of impairments of intangible assets and goodwill that are not deductible for tax purposes, offset in part by benefits from foreign tax credits.

CASH FLOWS

Free Cash Flow

Free cash flow, a non-GAAP measure, is defined as cash flow from operating activities less capital expenditures. Free cash flow is considered a liquidity measure and provides useful information to management and investors about the amount of cash generated after capital expenditures, which can then be used for strategic opportunities including, among others, investing in our business, making strategic acquisitions and strengthening our balance sheet. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period.

In addition, management refers to these financial measures to facilitate internal and external comparisons to our historical operating results, in making operating decisions, for budget planning purposes, and to form the basis upon which management is compensated. These measures should be considered in addition to, not as a substitute for, or superior to, gross profit, income from operations, cash flow from operating activities, or other measures of financial performance prepared in accordance with generally accepted accounting principles. The following table presents a summary of our free cash flow:


	Year Ended January 31
	2010			2009			2008			2007			2006
	(In thousands)
Cash flow from operating activities	$	45,413		$	41,086		$	53,326		$	57,109		$	50,425
Capital expenditures		(5,934	)		(16,709	)		(22,808	)		(18,078	)		(10,580	)

Free cash flow	$	39,479		$	24,377		$	30,518		$	39,031		$	39,845

Statements of Cash Flows

The statements of cash flows reflect the changes in cash and cash equivalents for the three years ended January 31, 2010 by classifying transactions into three major categories of activities: operating, investing and financing.

Our overall balance of cash and cash equivalents was $20 million at January 31, 2010 including a balance of $12 million in China. Legal restrictions and tax consequences in certain jurisdictions can limit our ability to repatriate cash to the United States. Certain transactions could result in negative tax consequences.

The following table presents net changes in cash and cash equivalents for the three years ended January 31, 2010.


	Year Ended January 31
	2010			2009			2008
	(In thousands)
Operating activities	$	45,413		$	41,086		$	53,326
Investing activities		(5,732	)		(16,134	)		(31,627	)
Financing activities		(44,659	)		(20,382	)		(33,432	)
Effect of exchange rate changes		(6,006	)		5,392			(3,637	)

Net change in cash	$	(10,984	)	$	9,962		$	(15,370	)

Operating

Our primary source of liquidity is cash generated from operating activities which is measured as net income or loss adjusted for changes in working capital and non-cash operating items such as depreciation, amortization and share-based compensation.

The following are operating activity highlights for fiscal 2010:

•

Net cash provided by operating activities increased from $41.1 million in fiscal 2009 to $45.4 million in fiscal 2010.

•

The net loss in fiscal 2010 was a result of significantly lower sales volumes, lower gross margins and restructuring charges.

•

Inventories decreased $34.1 million during fiscal 2010 compared to an increase of $16 million in fiscal 2009. During fiscal 2010, we limited purchases of materials, focused on lowering inventory quantities and wrote off inventory as a result of our European restructuring plan.

•

During fiscal 2010, accounts receivable decreased $18.2 million compared to a decrease of $21.4 million in fiscal 2009. The decrease in accounts receivable during fiscal 2010 is primarily a result of lower sales.

The following are operating activity highlights for fiscal 2009:

•

Net cash provided by operating activities decreased $12.3 million during fiscal 2009 compared to fiscal 2008.

•

Lower net income in fiscal 2009, as a result of lower sales and gross profit along with the insurance settlement recognized in fiscal 2008, were the primary reasons for the decrease.

•

During fiscal 2009, accounts receivable decreased $21.4 million compared to an increase of $9.8 million during fiscal 2008. The decrease in fiscal 2009 is primarily due to lower sales.

•

Inventories increased during fiscal 2009 by $16 million, compared with $19.5 million in fiscal 2008. Overall our inventory in fiscal 2009 has continued to increase primarily as a result of increasing material costs, additional inventories of product produced in China and additional material purchases made in advance of price increases.

•

During fiscal 2009, accounts payable decreased $13.8 million compared to an increase of $3.7 million in fiscal 2008. The decrease in fiscal 2009 is due to decreased product demand and the elimination of most advance purchases of inventory.

Investing

During the three years ended January 31, 2010, our investing activities consisted primarily of capital expenditures and business acquisitions.

Capital expenditures are primarily for equipment and tooling related to product improvements, more efficient production methods and replacement for normal wear and tear. Capital expenditures by geographic segment were as follows (in thousands):


	Year Ended January 31
	2010		2009		2008
	(In thousands)
North America	$	1,878	$	6,646	$	7,986
Europe		2,678		4,415		4,439
Asia Pacific		581		2,796		5,302
China		797		2,852		5,081

	$	5,934	$	16,709	$	22,808

The following are capital expenditures highlights during the three years ended January 31, 2010:

•

Overall capital expenditures decreased $10.8 million during fiscal 2010 as we limited spending to only critical projects. Capital expenditures in Europe during fiscal 2010 were needed to reallocate production capacity in Europe.

•

During fiscal 2009 we completed renovations on our sales/distribution facility in Korea at a cost of $827,000.

•

During fiscal 2008 we purchased a new sales/distribution facility in Japan for $4.2 million. Additional expenditures of $1.6 million were made during fiscal 2009. We moved to our new facility during fiscal 2009.

•

Capital expenditures in China in fiscal 2008 related primarily to the completion of two manufacturing facilities. Capital expenditures in China in fiscal 2009 related to equipment upgrades and completion of a building to manufacture construction attachments.

We completed the following acquisitions during the three years ended January 31, 2010:

•

During fiscal 2008, we purchased American Compaction Equipment, Inc, a manufacturer of construction attachments located in San Juan Capistrano, California. The total purchase price was approximately $11.5 million, net of assumed liabilities.

Financing

The following were major financing activities during the three years ended January 31, 2010:

•

Net borrowings against our line of credit were $53 million, $96 million and $104 million as of January 31, 2010, 2009, and 2008 respectively. The decrease in our line of credit borrowing in fiscal 2010 is a result of our focus to pay down debt with available cash.

•

We declared dividends of $0.12, $0.78 and $0.70 per share in fiscal 2010, 2009, and 2008, respectively. The reduction in dividends in fiscal 2010 is due to our focus to pay down outstanding debt to maintain compliance with debt covenants.

•

The issuance of common stock related to the exercise of share-based awards generated $130,000 and $3.8 million of cash in fiscal 2009 and 2008, respectively. We did not receive any cash from the exercise of share-based awards during fiscal 2010.

FINANCIAL CONDITION AND LIQUIDITY

The following are highlights regarding our financial condition and liquidity for fiscal 2010:

•

Our working capital, defined as current assets less current liabilities, decreased from $161.7 million at January 31, 2009 to $112.4 million at January 31, 2010. Our current ratio decreased from 4.7 to 1 at January 31, 2009 to 3.3 to 1 at January 31, 2010. The decreases are primarily due to using cash, generated by the reduction of accounts receivable and inventory, to pay down long-term debt.

•

Total outstanding debt, including notes payable to banks, decreased from $102.8 million at January 31, 2009 to $59.4 million at January 31, 2010. We utilized cash from operations to pay down long-term debt.

In July 2009, we entered into an amendment of our loan agreement with Bank of America and Union Bank. The loan amendment, which in addition to modifying the debt covenant ratios themselves, allowed us to exclude cash restructuring costs and lowered the maintenance capital asset expenditures deducted when calculating the ratios, provided us with flexibility to pursue our European restructuring activities without violating our loan covenants.

The following are the major changes made with the loan agreement amendment:

•

Decreased the aggregate amount that may be borrowed under the loan agreement from $144 million to $115 million, but provides that the amount may be increased up to $145 million, subject to the agreement of the lenders.

•

Granted the lenders a security interest in substantially all of our assets.

•

Increased the interest rate on the loan to rates ranging from 1.5% to 3.0% over LIBOR depending on our consolidated leverage ratio.

•

Modified certain loan covenants, including the consolidated leverage ratio and consolidated fixed charge coverage ratio, which we are required to maintain.

The following are details on our two debt covenant ratios, which are calculated quarterly, based on actual results from the previous twelve months:

Fixed charge coverage ratio—requires earnings before interest, taxes, depreciation, amortization and other non-cash charges (EBITDA), reduced for cash taxes paid, $8 million of maintenance capital expenditures and cash dividends, to be 1.15 times interest charges paid in cash plus required principal payments for the rolling four fiscal quarters through January 31, 2010, be 1.25 times from January 31, 2010 to July 30, 2010 and 1.5 times from July 30, 2010 onward. The actual fixed charge coverage ratio at January 31, 2010 was 2.71.

Leverage ratio—requires outstanding debt and letters of credit to be less than 4.0 times EBITDA through April 29, 2010, less than 3.5 times EBITDA from April 30, 2010 through July 30, 2010 and less than 3.0 times EBITDA from July 31, 2010 onward. The actual leverage ratio at January 31, 2010 was 3.09.

We were in compliance with our debt covenants at January 31, 2010.

As of January 31, 2010, outstanding borrowings under this line of credit totaled $52.5 million and an additional $1.7 million was used to issue letters of credit. The maximum amount that may be borrowed under this line of credit at January 31, 2010, based on our leverage ratio was $79.1 million, thus resulting in available borrowings of $24.9 million. No principal payments are required until December 2011. The interest rate on the line of credit, which was based on LIBOR plus a margin of 2.5% at January 31, 2010 was 2.8%.

We have various notes payable to banks, totaling $2.9 million at January 31, 2010. Average interest rates on these notes were 5.7% at January 31, 2010 and 2.6% at January 31, 2009.

We believe our cash and cash equivalents, existing credit facilities and cash flows from operations will be sufficient to satisfy our expected working capital, capital expenditure and debt requirements for the next twelve

months. We would pursue other options in the event additional liquidity is needed due to a prolonged downturn in our industry. We expect that any outstanding borrowing under our line of credit at the date of maturity will be refinanced.

OTHER MATTERS

Defined Benefit Pension Plans

We maintain defined benefit pension plans in England and France covering certain present and former employees. We calculate the liability and net periodic pension costs related to our defined benefit plans on an annual basis. The following are highlights of these defined benefit pension plans:

•

Our projected benefit obligation for defined benefit pension plans was $8.7 million at January 31, 2010 compared to $6.2 million as of January 31, 2009. The increase is the result of a lower discount rate at January 31, 2010.

•

The unfunded pension liability, net of plan assets, was $2 million and $1 million as of January 31, 2010 and 2009, respectively. The change is a result of increased obligations, partially offset by an increase in the value of plan assets.

•

The allocation of assets in our pension plan in England at January 31, 2010 is comprised of equities (48%), debt (44%), cash (3%) and real estate (5%). Equity includes domestic and international equity securities, such as common, preferred or other capital stock, as well as mutual funds. Debt includes domestic and international debt securities, such as U.S. and other foreign government securities, corporate bonds and commercial paper.

•

Our expected cash contribution to fund the pension plan in England in fiscal 2011 is $352,000.

Postretirement Health Care Plan

We maintain a postretirement health care benefit plan in the United States that provides health care coverage for approximately 150 eligible retirees and qualifying dependents. Another 100 current employees, all over 55 years of age, will be eligible to participate upon retirement. No additional employees will be eligible to participate in the plan. We calculate the liability and net periodic cost related to this health care plan on an annual basis. The following are highlights of the postretirement plan:

•

The postretirement plan is currently unfunded with an accumulated postretirement benefit obligation of $7.9 and $7.1 million at January 31, 2010 and 2009, respectively.

•

Due to the continued trend of increasing health care costs, the overall cost of the plan may continue to rise in future years. We will continue to investigate various options to mitigate future cost increases.

•

We currently fund this plan on a pay-as-you-go basis. Annual cash contributions represent gross benefit payments less required retiree contributions and the medicare subsidy. Our expected cash contribution in fiscal 2011 is $436,000.

Environmental Matters

We are engaged in ongoing environmental remediation efforts at our Fairview, Oregon and Springfield, Ohio manufacturing facilities. Current estimates provide for some level of remediation activities at both facilities through 2019. Costs of certain remediation activities at the Fairview facility are shared with The Boeing Company, with Cascade paying 70% of actual remediation costs. The following are highlights of environmental matters:

•

During fiscal 2010 we recorded a $1.3 million environmental charge primarily related to our Springfield, Ohio location. This expense is a result of formalizing a revised remediation plan with the Ohio Environmental Protection Agency, which will require additional cleanup activities related to groundwater contamination.

•

The environmental liability is $5.1 million and $4.6 million as of January 31, 2010 and 2009, respectively. The liability increase was primarily a result of the Springfield accrual less payments made during fiscal 2010 for activities at both the Fairview and Springfield sites.

•

We expect our cash payments for environmental matters during fiscal 2011 to be approximately $1 million.

Contractual Obligations and Commitments

The following summarizes our contractual obligations and commitments as of January 31, 2010:


	Payment due by fiscal year
	Total		2011		2012 - 2013		2014 - 2015		After 2015
	(In thousands)
Notes payable to banks	$	2,927	$	2,927	$	—	$	—	$	—
Long-term debt		56,489		499		53,498		998		1,494
Estimated interest payments(1)		3,184		1,642		1,391		96		55
Operating leases		6,094		2,655		2,324		1,115		—
Environmental payments		5,126		965		1,825		1,038		1,298
Defined benefit pension obligations(2)		8,710		670		1,179		1,220		5,641
Postretirement benefit obligation(3)		7,871		436		947		1,107		5,381

Total(4)	$	90,401	$	9,794	$	61,164	$	5,574	$	13,869

(1)

Interest payments on the line of credit are calculated using an interest rate of 2.8% and an outstanding debt balance as of January 31, 2010 through the maturity date. Interest payments on the note payable in Japan are calculated using an interest rate of 2.39% and assumes monthly principal payments through fiscal 2018. Interest payments on notes payable to banks are calculated using an average interest rate of 5.69% at January 31, 2010.

(2)	Represents committed and current minimum funding requirements for all plans. The total payments due in the future may vary from these estimates based on actual returns on plan assets, changes in assumptions, plan modifications and actuarial gains and losses.

(3)	Payments represent gross benefit payments less required retiree contributions and the Medicare subsidy. The total payments due in the future may vary from these estimates based on changes in assumptions, plan modifications and actuarial gains and losses.

(4)	Liabilities for uncertain tax positions have been omitted as amounts are immaterial.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. We evaluate our estimates and judgments on an on-going basis, including those related to uncollectible receivables, inventories, impairment of goodwill, warranty obligations, environmental liabilities, benefit plans, share-based compensation and deferred taxes. We base our estimates on our historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies reflect our more significant judgments and estimates in the preparation of our consolidated financial statements.

Allowances for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses on accounts receivable resulting from the inability of customers to make required payments. Such allowances are based on an ongoing review of customer payments against terms and a review of customer financial statements and financial information. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventory Reserves

Inventories are stated at the lower of cost or market. We maintain reserves to write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value, less costs to sell, based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write downs may be required, which would result in cost of goods sold in the consolidated statements of income being greater than expected in the period in which more information becomes available.

Impairment of Long-Lived Assets

Long-lived assets, excluding goodwill, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the assets and eventual disposition in comparison with the carrying value. An estimate of future sales, gross margins and selling and administrative expenses are used to calculate future cash flows. The fair value of each asset is calculated using a cash flow methodology based on these assumptions. An impairment of a long-lived asset exists when the carrying value of an asset exceeds its fair value.

During fiscal 2010 we recorded $9 million of fixed asset write downs related to our European restructuring activities. See “Impairment of Goodwill” below for details relating to our goodwill and intangible asset impairment charge recorded during fiscal 2009.

Impairment of Goodwill

Goodwill represents the excess of the cost of acquired businesses over the fair value of the net identifiable assets acquired. Goodwill is allocated based on the acquisition cost of a component within a reporting unit. Once allocated to a reporting unit, we do not make any adjustments to the manner in which that goodwill is allocated.

We review goodwill for impairment either annually or when events or changes in circumstances indicate the carrying value of the assets might exceed their current fair values. Certain factors we consider important that could trigger an impairment review at an interim date outside of the annual review, include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or our overall business and significant industry or economic trends.

Our goodwill impairment assessment is performed at the reporting unit level. We define our reporting units as either operating segments or components, which are one level below an operating segment. Components of an operating segment are businesses where financial information is available and regularly reviewed by our management. Where appropriate, we aggregated components that have similar economic characteristics into a single reporting unit.

We define our operating segments to be North America, Europe, Asia Pacific and China and define our reporting units for purposes of our goodwill impairment assessment to be North America Non-Construction, North America Construction, Europe and Australia. There is no goodwill in China or in the other components comprising our Asia Pacific operating segment, therefore these are not included as reporting units in our goodwill impairment assessment.

The chart below outlines the relationship between our operating segments and goodwill reporting units:


Business	Operating Segment	Goodwill Reporting Unit
North America	X
Non-Construction		X
Construction		X
Europe	X	X
Asia Pacific	X
Australia		X
Other		N/A
China	X	N/A

N/A—location does not have recorded goodwill.

Our impairment review is a two-step process. The first step compares the fair value of a reporting unit with its carrying amount. If the fair value is greater than the carrying amount, there is no goodwill impairment and the second step in the impairment review is not performed. If the carrying amount of the reporting unit is greater than the fair value, the second step of the impairment test is necessary. The second step compares the implied fair value with the carrying value of the reporting unit’s goodwill. If the reporting unit’s goodwill carrying amount exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess. However, the impairment loss can not exceed the carrying amount of the goodwill.

The first step of our goodwill impairment review utilizes a discounted projected cash flow model that uses estimates of future sales, sales growth rates, gross profits, expense and capital expenditure levels, a discount rate and estimated terminal values to determine the reporting unit fair value. We use a weighted average cost of capital (WACC), which is the expected rate of return based on an industry specific debt and equity capital structure and cost of debt, adjusted for geographic and company size specific factors, to discount future cash flows. The WACC can vary by reporting unit. WACC used in our impairment test at January 31, 2010 ranged from 13.3% to 16.5%.

After completing step one of our goodwill impairment review, as of January 31, 2010, we concluded that all reporting units with goodwill pass step one. As such, step two was not necessary.

Changes in certain economic and market factors could trigger an impairment review at an interim date outside of the annual review. If actual results are not consistent with our goodwill impairment review assumptions and judgments, we could be exposed to a material impairment charge on a portion or all of the $84.1 million of goodwill recorded on our consolidated balance sheet at January 31, 2010.

During fiscal 2009, we determined that the carrying value of goodwill and long-lived assets in our North American construction business exceeded the estimated fair value, resulting in a $46.4 million impairment charge. All of the goodwill related to our construction business was written off. The components of the impairment charge include the following (in thousands):


Goodwill	$	29,157
Customer relationships		13,269
Intellectual property		3,950

	$	46,376

Warranty Obligations

We offer certain warranties with the sale of our products, which generally range from six months to one year. The warranty obligation is recorded as a liability on the balance sheet and is estimated through historical customer claims, product failure rates, material usage and service delivery costs incurred in correcting a product failure. Changes in these factors and statutory requirements for product warranties in markets in which we sell our products may require an adjustment to the recorded warranty obligations.

Environmental Liabilities

We accrue environmental remediation and litigation costs if it is probable a liability has been incurred at the financial statement date and the amount can be reasonably estimated. Our liability for environmental costs, other than for costs of assessments themselves, are generally determined after the completion of investigations and studies and are based on the estimated cost of remediation activities we are then required to undertake. The gross liability is based on our best estimate of undiscounted future costs using currently available technology and applying current regulations, as well as our own historical experience regarding environmental cleanup costs. The reliability and precision of the estimates are affected by numerous factors, such as site evaluation and reevaluation of the degree of remediation required, claims by third parties and changes to environmental laws and regulations. We adjust our liabilities as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made and to reflect new facts.

Benefit Plans

We make a number of assumptions with regard to both future financial conditions and future actions by plan participants to calculate on an actuarial basis the amount of income or expense and assets and liabilities recognized in association with our defined benefit and postretirement benefit plans. These assumptions include the expected return on plan assets, discount rates, expected increases in compensation levels, health care cost trend rates and expected rates of retirement and life expectancy for plan participants. We review the assumptions on an annual basis and make changes to reflect market conditions and the administration of the plans. While we believe the current assumptions are appropriate in the circumstances, actual results and changes in these assumptions in the future will result in adjustments that could impact the income or expense recognized in future years in relation to these plans.

The assumed rate of return on plan assets for our defined benefit plans is evaluated on an annual basis. We select the assumed rate of return based on information considering historical returns, our current and target asset allocation and the expected returns by asset class. We believe this assumption is reasonable given the asset composition and long-term historic trends. Our discount rate reflects the rate at which the pension benefits could be effectively settled. We decreased our discount rate assumption to determine the January 31, 2010 liability to 5.5% from 7.0% at January 31, 2009 due to market decreases in interest rates during the year. Our most significant defined benefit plan is in England so interest rates on high-quality corporate bonds in that market have more influence on the overall discount rate.

Our discount rate, used to determine the liability for our postretirement plan, decreased to 5.75% at January 31, 2010 from the discount rate of 6.5% at January 31, 2009. We determine our discount rate using a “yield curve expected benefit payment” methodology. This methodology uses individual curve rates to discount each future year’s expected plan benefit payments. We select our health care cost trend rates based on recent plan experience and expectations about future increases in plan costs. We assume health care costs in fiscal 2010 will increase by 8.0% and future increases will decline by 0.5% per year until 4.5% is reached in 2017. The following presents the sensitivity of the key postretirement plan assumptions (in thousands):


	Increase
The following presents the sensitivity of a 1% decrease in the discount rate:
Effect on net periodic benefit cost	$	128
Effect on postretirement benefit obligation	$	889

The following presents the sensitivity of a 1% increase in the health care cost trend:
Effect on net periodic benefit cost	$	230
Effect on postretirement benefit obligation	$	944

Share-based Compensation

We account for share-based compensation, for which we receive employee services in exchange for our equity instruments, using a fair value method. Share-based compensation cost is measured at the grant date based on the value of the award and is recognized as a corporate headquarters expense in North America over the service period the award is expected to vest. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the expected term of stock awards, the expected volatility of our common stock and expected dividends. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. We consider many factors when estimating expected forfeitures, including types of awards, award recipient class and historical experience. Significant changes in the assumptions for future awards and actual forfeiture rates could materially impact share-based compensation expense and our results of operations. Subsequent changes in forfeiture rates will be recorded as a cumulative adjustment in the period estimates are revised. See Note 13 to the Consolidated Financial Statements (Item 8) for further discussion of our share-based awards and the related accounting treatment.

Deferred Taxes

Our provision for income taxes and the determination of the resulting deferred tax assets and liabilities involves a significant amount of management judgment. We are subject to taxation from federal, state and international jurisdictions. The taxes paid to these jurisdictions are subject to audit, although to date the results of any tax audits have been minor.

Judgment is also applied in determining whether deferred tax assets will be realized in full or in part. We record a valuation allowance to reduce our deferred tax assets when it is more likely than not that all or some portion of specific deferred tax assets, such as foreign tax credit carryovers or net operating loss carryforwards, will not be realized. We have recorded on our consolidated balance sheets a valuation allowance against various deferred tax assets. We consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event we were to determine that we would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged against income in the period such determination was made. Likewise, should we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. We continually evaluate strategies that could allow for the future utilization of our deferred tax assets.

OFF BALANCE SHEET ARRANGEMENTS

At January 31, 2010 and 2009, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity market or credit risk that could arise if we had engaged in such relationships.

RECENT ACCOUNTING PRONOUNCEMENTS

Business combinations and noncontrolling interests in consolidated financial statements—In December 2007, the Financial Accounting Standards Board (“FASB”) issued accounting guidance on business combinations and noncontrolling interests in consolidated financial statements. The guidance on business combinations requires the acquiring entity in a business combination to recognize the assets acquired and liabilities assumed. Further, it also changes the accounting for acquired in-process research and development assets, contingent consideration, partial acquisitions and transaction costs. Under the guidance on noncontrolling interests, all entities are required to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. In addition, transactions between an entity and noncontrolling interests will be treated as equity transactions. We adopted this new guidance on February 1, 2009. The adoption of this guidance did not have any impact on our financial statements.

Disclosures about derivative instruments and hedging activities—In March 2008, the FASB issued accounting guidance on disclosures about derivative instruments and hedging activities. This guidance expands disclosures for derivative instruments by requiring entities to disclose the fair value of derivative instruments and their gains or losses in tabular format. It also requires disclosure of information about credit risk-related contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments. We adopted this new guidance on February 1, 2009. The adoption of this guidance did not have any impact on our financial statements.

Classification of share based payment instruments as participating securities—In June 2008, the FASB issued accounting guidance which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. The provisions of this guidance were adopted on February 1, 2009 and did not have a material impact on our financial statements.

Subsequent events—In May 2009, the FASB issued accounting guidance on subsequent events that establishes standards of accounting for and disclosure of subsequent events. In addition, it requires disclosure of the date through which an entity has evaluated subsequent events and the nature of any nonrecognized subsequent events. This new guidance was adopted for our financial statements for the quarter ended July 31, 2009. The adoption of this guidance did not have an impact on our financial statements.

Accounting standards codification—In June 2009, the FASB issued guidance on a single source of authoritative U.S. Generally Accepted Accounting Principles (“GAAP”) to be applied by nongovernmental entities. While not intended to change U.S. GAAP, the codification significantly changed the way in which the accounting literature is referenced and organized. All existing accounting standards were superseded by the codification, and all other accounting guidance not included in the codification will be considered non-authoritative. We adopted this new guidance for our financial statements for the quarter ended October 31, 2009. The adoption of this guidance did not have an impact on our financial statements.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rate and interest rate fluctuations. A significant portion of our net sales are denominated in currencies from international markets outside the United States. As a result, our operating results could become subject to significant fluctuations based upon changes in the exchange rates of the foreign currencies in relation to the United States dollar.

The table below illustrates the hypothetical increase or decrease in fiscal 2010 net sales of a 10% change in the U.S. dollar against foreign currencies which impact our operations (in millions):


Euro	$	6.5
Chinese Yuan		3.5
Japanese Yen		1.7
Australian Dollar		1.5
British Pound		1.4
Canadian Dollar		1.4
Other currencies (representing 4% of consolidated net sales)		1.4

We enter into foreign currency forward exchange contracts to offset the impact of currency fluctuations on certain nonfunctional currency assets and liabilities. The principal currencies hedged are denominated in Japanese Yen, Canadian Dollars, Euros, Swedish Krona, Korean Won, Chinese Yuan and British Pounds. Our foreign currency forward exchange contracts have terms lasting up to six months, but generally less than one month. We do not enter into derivatives or other financial instruments for trading or speculative purposes. See Note 18 to the Consolidated Financial Statements (Item 8).

A majority of our products are manufactured using specialty steel. As such, our cost of goods sold is sensitive to fluctuations in specialty steel prices, either directly through the purchase of raw materials or indirectly through the purchase of components. However, due to the nature of specialty steel, we are not impacted by changes in commodity steel prices to the extent others might be.

Presuming that the full impact of steel price increases is reflected in all steel and steel based component purchases, we estimate our gross profit percentage would decrease by approximately 0.4% for each 1.0% increase in steel prices. Based on our statement of income for the year ended January 31, 2010, a 1.0% increase in steel prices would have decreased consolidated gross profit by approximately $1.2 million.

The majority of our debt as of January 31, 2010 has a variable interest rate, which is currently based on LIBOR plus a margin of 2.5%. Based on the outstanding balance of our variable rate debt of $52.5 million at January 31, 2010, a 1% increase in our interest rate would result in a $525,000 increase in annual interest expense.

Item 8.

Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To Board of Directors and Shareholders of Cascade Corporation

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Cascade Corporation and its subsidiaries at January 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended January 31, 2010 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the appendix appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Portland, Oregon

April 5, 2010

Cascade Corporation

Consolidated Statements of Operations


	Year Ended January 31
	2010			2009			2008
	(In thousands, except per share amounts)
Net sales	$	314,353		$	534,172		$	558,073
Cost of goods sold		243,283			385,624			386,899

Gross profit		71,070			148,548			171,174

Selling and administrative expenses		70,807			85,229			89,445
Environmental		1,255			—			—
Loss (gain) on disposition of assets, net		98			403			(1,121	)
Amortization		403			2,519			3,214
Asset impairment charge		—			46,376			—
European restructuring costs		30,001			2,544			—
Insurance litigation recovery, net		—			—			(15,977	)

Operating income (loss)		(31,494	)		11,477			95,613
Interest expense		1,889			4,083			4,094
Interest income		(328	)		(608	)		(779	)
Foreign currency losses, net		443			3,611			1,460

Income (loss) before provision for income taxes		(33,498	)		4,391			90,838
Provision for income taxes		5,151			3,124			30,691

Net income (loss)	$	(38,649	)	$	1,267		$	60,147

Basic earnings (loss) per share	$	(3.57	)	$	0.12		$	5.08
Diluted earnings (loss) per share	$	(3.57	)	$	0.11		$	4.88

Basic weighted average shares outstanding		10,816			10,794			11,841
Diluted weighted average shares outstanding		10,816			11,077			12,333

The accompanying notes are an integral part of the consolidated financial statements.

Cascade Corporation

Consolidated Balance Sheets


	As of January 31
	2010		2009
	(In thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	20,201	$	31,185
Accounts receivable, less allowance for doubtful accounts of $1,328 and $1,441		50,910		64,568
Inventories		63,466		90,806
Deferred income taxes		4,230		4,712
Assets available for sale		9,125		—
Prepaid expenses and other		12,334		13,603

Total current assets		160,266		204,874
Property, plant and equipment, net		73,408		93,826
Goodwill		84,122		74,387
Deferred income taxes		21,022		21,347
Intangible assets, net		763		1,151
Other assets		2,350		1,998

Total assets	$	341,931	$	397,583

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes payable to banks	$	2,927	$	2,255
Current portion of long-term debt		499		501
Accounts payable		20,542		19,704
Accrued payroll and payroll taxes		7,683		7,992
Accrued restructuring costs		5,260		699
Other accrued expenses		10,977		12,005

Total current liabilities		47,888		43,156
Long-term debt, net of current portion		55,990		100,007
Accrued environmental expenses		4,161		3,748
Deferred income taxes		4,839		2,337
Employee benefit obligations		9,120		7,413
Other liabilities		4,171		3,955

Total liabilities		126,169		160,616

Commitments and contingencies (Note 11)

Shareholders’ equity:
Common stock, $.50 par value, 40,000 authorized shares; 10,885 and 10,852 shares shares issued and outstanding		5,443		5,426
Additional paid-in capital		7,119		3,574
Retained earnings		179,747		219,700
Accumulated other comprehensive income		23,453		8,267

Total shareholders’ equity		215,762		236,967

Total liabilities and shareholders’ equity	$	341,931	$	397,583

The accompanying notes are an integral part of the consolidated financial statements.

Cascade Corporation

Consolidated Statements of Changes in Shareholders’ Equity

(In thousands, except per share amounts)


	Common Stock					Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Annual Comprehensive Income (Loss)
	Shares		Amount			Additional Paid-In Capital			Retained Earnings						Annual Comprehensive Income (Loss)
Balance at January 31, 2007	12,070		$	6,035		$	—		$	253,307		$	12,294
Net income	—			—			—			60,147			—		$	60,147
Dividends ($.70 per share)	—			—			—			(8,243	)		—			—
Common stock issued	430			215			3,628			—			—			—
Tax effect from share-based compensation awards	—			—			3,070			—			—			—
Common stock repurchase	(1,660	)		(830	)		(11,149	)		(78,279	)		—			—
Share-based compensation	—			—			4,451			—			—			—
Translation adjustment	—			—			—			—			22,817			22,817
Minimum pension/postretirement liability adjustment, net of tax effect of ($304)	—			—			—			—			562			562

Balance at January 31, 2008	10,840			5,420			—			226,932			35,673		$	83,526

Net income	—			—			—			1,267			—		$	1,267
Dividends ($.78 per share)	—			—			—			(8,460	)		—			—
Common stock issued	30			15			115						—			—
Tax effect from share-based compensation awards	—			—			(61	)		—			—			—
Common stock repurchase	(18	)		(9	)		(901	)		—						—
Share-based compensation	—			—			4,421			—			—			—
Translation adjustment	—			—			—			—			(28,550	)		(28,550	)
Minimum pension/postretirement liability adjustment, net of tax effect of ($319)	—			—			—			(39	)		1,144			1,144

Balance at January 31, 2009	10,852			5,426			3,574			219,700			8,267		$	(26,139	)

Net loss	—			—			—			(38,649	)		—		$	(38,649	)
Dividends ($.12 per share)	—			—			—			(1,304	)		—			—
Common stock issued	33			17			(17	)		—			—			—
Share-based compensation	—			—			3,562			—			—			—
Translation adjustment	—			—			—			—			16,470			16,470
Minimum pension/postretirement liability adjustment, net of tax effect of $359	—			—			—			—			(1,284	)		(1,284	)

Balance at January 31, 2010	10,885		$	5,443		$	7,119		$	179,747		$	23,453		$	(23,463	)

The accompanying notes are an integral part of the consolidated financial statements.

Cascade Corporation

Consolidated Statements of Cash Flows


	Year Ended January 31
	2010			2009			2008
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(38,649	)	$	1,267		$	60,147
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Fixed asset write off due to restructuring		9,004			—			—
Loss on asset impairment		—			46,376			—
Depreciation		11,893			13,801			13,898
Amortization		403			2,519			3,214
Share-based compensation		3,562			4,421			4,451
Deferred income taxes		3,233			(15,911	)		2,560
Loss (gain) on disposition of assets		98			403			(1,121	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		18,172			21,386			(9,843	)
Inventories		34,126			(16,065	)		(19,514	)
Prepaid expenses and other		2,488			(2,734	)		1,237
Accounts payable and accrued expenses		1,348			(13,753	)		3,671
Income tax payable and receivable		(833	)		(653	)		(3,492	)
Other assets and liabilities		568			29			(1,882	)

Net cash provided by operating activities		45,413			41,086			53,326

Cash flows from investing activities:
Capital expenditures		(5,934	)		(16,709	)		(22,808	)
Business acquisitions		—			—			(11,529	)
Proceeds from sale of assets		202			575			2,710

Net cash used in investing activities		(5,732	)		(16,134	)		(31,627	)

Cash flows from financing activities:
Payments on long-term debt and capital leases		(92,983	)		(68,945	)		(112,143	)
Proceeds from long-term debt		49,000			60,500			173,433
Notes payable to banks, net		628			(326	)		(3,166	)
Cash dividends paid		(1,304	)		(8,460	)		(8,243	)
Common stock repurchased		—			(3,220	)		(90,240	)
Common stock issued under share-based compensation plans		—			130			3,843
Tax effect from share-based compensation awards		—			(61	)		3,084

Net cash used in financing activities		(44,659	)		(20,382	)		(33,432	)

Effect of exchange rate changes		(6,006	)		5,392			(3,637	)

Change in cash and cash equivalents		(10,984	)		9,962			(15,370	)
Cash and cash equivalents at beginning of year		31,185			21,223			36,593

Cash and cash equivalents at end of period	$	20,201		$	31,185		$	21,223

Supplemental disclosure of noncash information:
See Note 12 to Consolidated Financial Statements

The accompanying notes are an integral part of the consolidated financial statements.

Cascade Corporation

Notes to Consolidated Financial Statements

Note 1—Description of Business

Cascade Corporation is an international company engaged in the manufacture of materials handling products that are widely used on industrial lift trucks and, to a lesser extent, on construction, mining and agricultural vehicles. Accordingly, our sales are largely dependent on the sales of lift trucks and on the sales of replacement parts. Our sales are made throughout the world. We are headquartered in Fairview, Oregon, employing approximately 1,700 people and maintaining operations in 16 countries outside the United States.

Note 2—Summary of Significant Accounting Policies

Principles of Consolidation

Our consolidated financial statements include the accounts of Cascade Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on deposit and highly liquid investments with maturities of three months or less at the date of purchase.

Allowances for Trade Accounts Receivable

Trade accounts receivable are stated net of allowances for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses on accounts receivable resulting from the inability of our customers to make required payments. Such allowances are based on evaluation of the credit worthiness of our customers, an ongoing review of customer payments against terms, historical trends and economic circumstances.

Inventories

Inventories are stated at the lower of average cost or market. Cost is computed on a standard basis, which approximates actual cost. We classify inventory into two categories: finished goods and raw materials and components. Finished goods inventory represents inventory that is readily available for sale without further manufacturing and spare parts. Raw materials and components include inventory to be used to build finished goods inventory.

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is generally provided using the straight-line method over the estimated useful lives of the assets. Tooling costs are capitalized as machinery and equipment. Useful lives range from thirty to forty years for buildings, fifteen years for land improvements and two to ten years for machinery and equipment. Maintenance and repairs are expensed as incurred and costs of improvements and renewals are capitalized. Upon disposal, cost and accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in operations.

Intangible Assets

Intangible assets represent items such as customer relationships, intellectual property, primarily patents and trade names, and non-compete agreements that are assigned a fair value at the date of acquisition. We amortize finite-lived assets on a straight-line basis over the periods that expected economic benefits will be provided. Useful lives range from six to ten years for customer relationships, four to ten years for intellectual property and one to five years for other intangible assets. At the end of the estimated economic life, the fully-amortized intangible asset cost and corresponding accumulated amortization are eliminated.

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 2—Summary of Significant Accounting Policies (Continued)

Impairment of Long-Lived Assets

Goodwill

Goodwill represents the excess of the cost of acquired businesses over the fair value of the net identifiable assets acquired. Once allocated to a reporting unit, we do not make any adjustments to the manner in which goodwill is allocated.

We review goodwill for impairment either annually or when events or changes in circumstances indicate the carrying value of the assets might exceed their current fair values. Certain factors we consider important which could trigger an impairment review at an interim date outside of the annual review, include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or our overall business and significant industry or economic trends.

We define our operating segments to be North America, Europe, Asia Pacific and China and define our reporting units for purposes of our goodwill impairment assessment to be North America Non-Construction, North America Construction, Europe and Australia. There is no goodwill in China or in the other businesses comprising our Asia Pacific operating segment, therefore these are not included as reporting units in our goodwill impairment assessment.

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 2—Summary of Significant Accounting Policies (Continued)

If actual results are not consistent with our goodwill impairment review assumptions and judgments, we could be exposed to a material impairment charge.

Common Stock

We follow the practice of recording amounts received upon the exercise of awards by crediting common stock and additional paid-in capital. In addition, we credit additional paid-in-capital upon the recognition of share-based compensation expense. We realize an income tax benefit from the exercise or early disposition of certain stock awards. This benefit results in a decrease in current income taxes payable and an increase in additional paid-in capital.

Minimum Pension/Postretirement Liability Adjustment

We record a minimum pension/postretirement liability adjustment to the extent that the accumulated benefit obligation exceeds the fair value of plan assets and accrued pension/postretirement liabilities. This adjustment is reflected as a reduction in shareholders’ equity, net of income tax benefits.

Share-Based Compensation

We account for share-based compensation, for which we receive employee services in exchange for our equity instruments, using a fair value method. Share-based compensation cost is measured at the grant date based on the value of the award and is recognized as a corporate headquarters expense in North America over the service period the award is expected to vest. Determining the fair value share-based awards at the grant date requires judgment, including estimating the expected term of stock awards, the expected volatility of our common stock and expected dividends. In addition, judgment is also required in estimating the amount of share-based awards that are expected to be forfeited. We consider many factors when estimating expected forfeitures, including types of awards, award recipient class and historical experience. Significant changes in the assumptions for future awards and actual forfeiture rates could materially impact share-based compensation expense and our results of operations. Subsequent changes in forfeiture rates will be recorded as a cumulative adjustment in the period estimates are revised.

Foreign Currency Translation

We translate the balance sheets of our foreign subsidiaries using fiscal year-end exchange rates. The cumulative effect on such translations is included in shareholders’ equity. The consolidated statements of income and cash flows are translated using the average exchange rates for the period.

Environmental Remediation

We accrue environmental costs if it is probable a liability has been incurred at the financial statement date and the amount can be reasonably estimated. Recorded liabilities have not been discounted. Environmental compliance and legal costs are expensed as incurred. Assets related to the reimbursement of amounts expended for environmental expenses are recognized only when realization is probable.

Foreign Currency Forward Exchange Contracts

Gains and losses on foreign currency forward exchange contracts, which generally mature in six months or less, are measured over the period of the contract by reference to the forward rate for a contract to be consummated on the same future date as the original contract.

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 2—Summary of Significant Accounting Policies (Continued)

Revenue Recognition

We recognize revenue when the following criteria are met:

Persuasive evidence of an arrangement exists—Sales arrangements are supported by written or electronic documentation or evidence from a customer.

Delivery has occurred or services have been rendered—Revenue is recognized when title transfers and risk and rewards of ownership have passed to the customer. This generally occurs upon shipment of our product with “FOB Shipping Point” terms. Shipments with “FOB Destination” terms are recorded as revenue when products are delivered to the customer. Customers are responsible for payment even if the product is not sold to their end customer. Once shipping terms are met we have no continuing obligations or performance criteria requirements.

Fixed or determinable sales price—Sales are at fixed or established sales prices determined prior to the time the products are shipped with no customer cancellation, price protection or termination clauses.

Collectibility is reasonably assured—Based on our credit management policies, we generally believe collectibility is reasonably assured when product is shipped to a customer. Provisions for uncollectible accounts and return allowances are recorded at the time revenue is recognized based on our historical experience.

Shipping and Handling Costs

We incur shipping, handling and other related costs for the shipment of goods to customers. These costs are recognized in the period in which the expenses occur and are classified as cost of goods sold. Amounts billed to customers for shipping, handling and related costs are reported as a component of net sales.

Warranty Obligations

We record a liability on our consolidated balance sheet for costs related to certain warranties we provide with the sales of our products. This liability is estimated through historical customer claims, product failure rates, material usage and service delivery costs incurred in correcting a product failure.

Income Taxes

Deferred income tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and the amounts reported in the consolidated financial statements. The provision for income taxes is the tax payable for the period and the change during the period in net deferred income tax assets and liabilities. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.

Research and Development Costs

Research and development costs are expensed as incurred and are related to developing new products and to improving existing products or processes. These costs primarily include salaries, consulting, supplies, legal costs related to patents and design costs. We incurred research and development costs of $2.2 million, $3 million, and $3.8 million for the years ended January 31, 2010, 2009 and 2008, respectively.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents, accounts receivable and foreign currency forward exchange contracts. We place our cash

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 2—Summary of Significant Accounting Policies (Continued)

and cash equivalents in major financial institutions. Deposits held with financial institutions may exceed regulatory limits in countries in which we operate.

Accounts receivable are with a large number of customers, primarily equipment manufacturers and dealers, dispersed across a wide geographic base. No single customer accounts for more than 10% of our consolidated net sales. Our consolidated net sales to all original equipment manufacturers (OEM) are approximately 42% of total net sales. This percentage is consistent with recent years. We perform on-going credit evaluations and do not require collateral. Allowances are maintained for potential credit losses when deemed necessary.

See Note 18 “Derivative Instruments and Hedging Activities” for discussion of foreign currency forward exchange contracts.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates on our historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant estimates and judgments made by our management include matters such as the collectibility of accounts receivable, obsolete inventory reserves, realizability of deferred income tax assets, realizability of goodwill and long-lived assets, warranty liabilities, share based compensation and benefit plan assumptions and future costs of environmental matters.

Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects potential dilution that could occur if stock options, stock appreciation rights (SARS) or unvested restricted stock were exercised or converted into common stock using the treasury stock method.

Recent Accounting Pronouncements

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 2—Summary of Significant Accounting Policies (Continued)

contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments. We adopted this new guidance on February 1, 2009. The adoption of this guidance did not have any impact on our financial statements.

Note 3—Segment Information

Our operating units have several economic characteristics and attributes, including similar products, distribution patterns and classes of customers. As a result, we aggregate our operating units into four geographic operating segments related to the manufacturing, distribution and servicing of material handling load engagement products. We evaluate the performance of each of our operating segments based on income before interest, miscellaneous income/expense and income taxes. The accounting policies of the operating segments are the same as those described in the summary of accounting policies.

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 3—Segment Information (Continued)

Revenues and operating results are classified according to the country of origin. Transfers represent sales between our geographic operating segments. The costs of our corporate office are included in North America. Identifiable assets are attributed to the geographic location in which they are located. Net sales and transfers, operating results and identifiable assets by geographic operating segment were as follows (in thousands):


	Year Ended January 31
	North America			Europe			Asia Pacific		China		Eliminations			Consolidated
*2010*
Net sales	$	154,654		$	81,068		$	44,102	$	34,529				$	314,353
Transfers between areas		15,086			3,648			147		10,549		(29,430	)		—

Net sales and transfers	$	169,740		$	84,716		$	44,249	$	45,078	$	(29,430	)	$	314,353

Gross profit (loss)	$	48,807		$	(5,305	)	$	11,277	$	16,291				$	71,070
Selling and administrative		39,802			19,424			7,485		4,096					70,807
Environmental		1,255			—			—		—					1,255
Loss on disposition of assets, net		3			59			2		34					98
Amortization		191			212			—		—					403
European restructuring costs		—			30,001			—		—					30,001

Operating income (loss)	$	7,556		$	(55,001	)	$	3,790	$	12,161				$	(31,494	)

Total assets	$	174,419		$	83,515		$	36,040	$	47,957				$	341,931
Property, plant and equipment, net	$	30,714		$	14,583		$	9,631	$	18,480				$	73,408
Capital expenditures	$	1,878		$	2,678		$	581	$	797				$	5,934
Depreciation expense	$	5,630		$	3,745		$	564	$	1,954				$	11,893

	Year Ended January 31
	North America			Europe			Asia Pacific		China		Eliminations			Consolidated
*2009*
Net sales	$	257,077		$	167,955		$	68,466	$	40,674				$	534,172
Transfers between areas		29,083			1,686			355		23,219		(54,343	)		—

Net sales and transfers	$	286,160		$	169,641		$	68,821	$	63,893	$	(54,343	)	$	534,172

Gross Profit	$	87,924		$	25,253		$	16,363	$	19,008				$	148,548
Selling and administrative		45,451			26,148			9,040		4,590					85,229
Loss on disposition of assets, net		178			108			47		70					403
Amortization		2,221			298			—		—					2,519
Asset impairment charge		46,376			—			—		—					46,376
European restructuring costs		—			2,544			—		—					2,544

Operating income (loss)	$	(6,302	)	$	(3,845	)	$	7,276	$	14,348				$	11,477

Total assets	$	180,782		$	117,199		$	41,698	$	57,904				$	397,583
Property, plant and equipment, net	$	33,614		$	31,530		$	9,033	$	19,649				$	93,826
Capital expenditures	$	6,646		$	4,415		$	2,796	$	2,852				$	16,709
Depreciation expense	$	6,388		$	5,107		$	481	$	1,825				$	13,801

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 3—Segment Information (Continued)


	Year Ended January 31
	North America			Europe		Asia Pacific			China		Eliminations			Consolidated
*2008*
Net sales	$	286,832		$	171,435	$	59,776		$	40,030				$	558,073
Transfers between areas		33,118			1,497		179			17,410		(52,204	)		—

Net sales and transfers	$	319,950		$	172,932	$	59,955		$	57,440	$	(52,204	)	$	558,073

Gross Profit	$	109,832		$	27,644	$	15,063		$	18,635				$	171,174
Selling and administrative		51,020			26,201		8,297			3,927					89,445
Loss (gain) on disposition of assets, net		(1,135	)		—		(34	)		48					(1,121	)
Amortization		2,482			732		—			—					3,214
Insurance litigation recovery, net		(15,977	)		—		—			—					(15,977	)

Operating income	$	73,442		$	711	$	6,800		$	14,660				$	95,613

Total assets	$	236,022		$	135,171	$	43,471		$	47,836				$	462,500
Property, plant and equipment, net	$	35,026		$	38,815	$	6,745		$	17,764				$	98,350
Capital expenditures	$	7,986		$	4,439	$	5,302		$	5,081				$	22,808
Depreciation expense	$	7,066		$	5,091	$	385		$	1,356				$	13,898

The following table represents sales by place of destination:


	Year Ended January 31
	2010		2009		2008
	(In thousands)
United States	$	133,249	$	221,363	$	256,149
Europe, excluding United Kingdom		62,248		132,141		128,017
China		32,621		38,733		36,471
Japan		16,490		28,613		23,437
United Kingdom		15,474		27,894		32,819
Australia/New Zealand		18,113		25,220		21,710
Canada		14,236		23,660		24,941
Other countries (less then 5% of total sales individually)		21,922		36,548		34,529

	$	314,353	$	534,172	$	558,073

Cascade Corporation

Notes to Consolidated Financial Statements (Continued)

Note 3—Segment Information (Continued)

The following table represents the value of long-lived assets including property, plant and equipment (net), goodwill, intangible assets (net) and other long-term assets by the country in which they are located:


	Year Ended January 31
	2010		2009		2008
	(In thousands)
United States	$	30,853	$	33,771	$	82,308