Cascade Corporation

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Cascade Corporation

2201 NE 201st Avenue
Fairview, Oregon 97024-9718
U.S.A.
Telephone: (503) 669-6300
Toll Free: (800) 227-2233
Fax: (503) 669-6716
Web site: http://www.cascorp.com

Public Company
Incorporated: 1943 as Cascade Manufacturing Company
Employees: 1,700
Sales: $297.75 million (2004)
Stock Exchanges: New York
Ticker Symbol: CAE
NAIC: 333924 Industrial Truck, Tractor, Trailer, and Stacker Machinery Manufacturing

Cascade Corporation is a publicly traded company based in Fairview, Oregon, that manufactures forklift attachments, forks, hydraulic cylinders, and replacement parts under two brand names: Cascade and Cascade-Kenhar. In addition to its primary market, the lift truck industry, Cascade also manufactures materials handling products for construction and agricultural vehicles. The company sells worldwide to industries such as pulp and paper, grocery products, textiles, recycling, and general consumer goods, through lift truck dealers and original equipment manufacturers. Cascade's CEO, Robert C. Warren, Jr., is the son of the company's founder.

Founding the Company in 1943

Cascade was founded by Robert C. Warren, Sr., in 1943. He was born in Portland, Oregon, in 1918. After graduating from Stanford University in 1940 he went to work for Henry Kaiser as the chief expediter at the Kaiser Shipyards, where he became interested in manufacturing. In 1943 he was recruited by several Esco Corp. executives to run a machine shop in Portland. The business was called Cascade Manufacturing Company, funded by $7,500 in seed money. Warren started out modestly, possessing nothing more than a single employee, an old lathe, and a drill press. In the first year he added three more employees to machine and assemble stainless steel valves, pipe fittings, and other components. After recording first year sales of $60,000, Cascade grew steadily, so that by the end of five years the company employed 40 people and revenues totaled $330,000. In the 1940s Cascade designed and manufactured its first hydraulic cylinder, which proved to be a turning point in the company's history. During the 1950s Cascade expanded into designing and making hydraulic attachments for forklifts. By the time the business was 15 years old, sales had improved to $2.3 million, and the workforce had grown to 180. Cascade was now ready to open a second manufacturing plant, located in Springfield, Ohio.

Cascade experienced a number of changes during the 1960s. At the start of the decade, the company began looking to international markets, and acquired interests in companies in Australia, the United Kingdom, and The Netherlands. Ultimately the company would operate three manufacturing plants in The Netherlands and another in the United Kingdom. The company changed its name to Cascade Corporation in 1964 and a year later became a public company, making an initial offer of 200,000 shares of stock. Cascade also grew through acquisition. In 1967 it acquired C.M. Scott Fluid Power, Ltd., and in 1968 used stock to acquire Ramey Hydraulic Loaders, Inc., a Roseburg, Oregon, company.

Founder's Son Joining the Company in 1972

Warren was joined by his son, Robert C. Warren, Jr., in 1972. The decade also was marked by the acquisition of Diamond Corp. and the start of a relationship with the People's Republic of China. The younger Warren met with a Chinese government engineer while attending a technical conference in Bulgaria. He became convinced that China was determined to grow industrially and eager to find Western partners. Warren realized that more business in China meant more forklifts to move goods, which in turn meant the need for the kind of forklift attachments and parts that Cascade manufactured. Finally in 1995 a joint venture was forged with the Ministry of Machine Building, an agency with strong connections to China's 15 forklift manufacturers. A plant was built in Xiamen, located south of Shanghai, to manufacture forklift parts and carry on sales and service activities. Cascade provided the funding, while the Ministry supplied the customers and a well-connected general manager who was able to guide the venture through a maze of local regulations and taxes.

Although it grew to be the largest company in its field, Cascade after 40 years in existence was barely known to the investment community. Part of the problem was the company's limited number of shares of stock. For many years there were only 750,000 shares, of which few were traded. In 1986 Cascade engineered a four-for-one split, raising the number of shares to three million, and a year later looked to increase that number to ten million. The maneuvers proved successful, as evidenced by a money manager in the late 1980s telling Barron's that Cascade was his favorite stock. Not only did the company make more of its stock available to the public, it also took significant steps in the 1980s to fend off foreign competition, such as the Japanese, Taiwanese, and Koreans, all of which had an edge on labor costs. Cascade met the challenge by increasing productivity, and the labor force worked in concert with management to initiate changes that were needed. Rigid job descriptions were replaced with flexible work assignments. Everyone was put on salary, and a cash incentive program based on productivity was implemented. Employees eventually decided to do without their traditional union.

Cascade also grew through the introduction of innovative products. The company introduced a forklift clamp attachment that did away with the usual forks that slipped under a pallet to lift a load. The new product pinched a load from all sides, eliminating the need for pallets, which were expensive, cumbersome, and took up valuable space. Cascade also brought out another product, a forklift mast, or vertical lift mechanism at the front of a forklift. Called the "World Mast" because it could be used on any forklift manufactured by any company, the product was built in a new 110,000-square-foot plant built in Westminster, South Carolina, Cascade's fifth and largest domestic operation. The primary market for the mast was the U.S. operations of Japanese forklift manufacturers, which by law were required to increase the domestic content of their products or pay large penalties.

Cascade's revenues approached $170 million in 1991, with net income of $9.8 million, but a recession soon began to take its toll. Sales slumped, bottoming out at $141.3 million in 1993, and did not begin to improve until 1994. In the meantime, in August 1993, Robert Warren, Sr., retired as chairman of the company. He was replaced as chair by longtime Cascade executive Joseph J. Barclay, who had been president of the company since 1972 and chief executive officer since 1983. Barclay retained the CEO position, while Robert Warren was promoted to president and chief operating officer, after serving as vice-president of marketing since 1990. Prior to that appointment he had been named vice-president of administration in 1986. In 1996 he would become chief executive officer of the company his father founded. A year later, his father would die from heart failure in his home in Palm Springs, California, at the age of 78.

Cascade's revenues grew to $234 million in 1995, but dipped the next year to $218.5 million. Net income decreased from $18.3 million to $17.4 million. To increase its product offering and spur growth, the company completed a flurry of acquisitions. In January 1997 it completed the $23.7 million purchase of Industrial Tires Limited, a Canadian company that was a global manufacturer of solid rubber tires for forklift trucks, ground support, and construction equipment. Next, Cascade acquired Australia-based Hyco-Cascade Pty. Ltd., paying $12.6 million in cash and stock. For three years Hyco had been Cascade's exclusive distributor in Australia and New Zealand and also designed and manufactured container handling products. In March 1997, Cascade completed the acquisition of Kenhar Corporation at a cost of nearly $72 million.

As a result of the acquisitions, as well as strong economic conditions, Cascade saw its revenues jump to $369.9 million in 1998 and $407.9 million in 1999. Net income during this period totaled $21 million in 1998 and $21.4 million in 1999. But with the acquisitions also came some disappointing quarters, which began to adversely impact the price of Cascade's stock. To help rectify the situation management made a pair of divestitures in 1999. It sold the World Mast product line, which had not performed to the level the company had envisioned, to a Cascade executive who led a buyout effort. Cascade also sold Industrial Tires to Maine Rubber Company for $381 million, electing to focus resources on its core attachment and fork business. As a result of these divestitures, revenue in 2000 fell to $324.8 million and net income dipped below $5 million, declines that caused further concern in the investment community.

Company Perspectives:

From our beginnings as a small machine shop in the early 1940s to the leading worldwide manufacturer that we are today, Cascade continues to grow as the premier supplier of lift truck attachments and related products.

Failed Sale of Company in 2002

Cascade was a profitable company but the price of its stock, in the opinion of management, was much too low, over-shadowed at the time by the high-tech sector. Shares that traded at more than $18 in late 1997 barely fetched $8 by early 2000. Because there was little reason now to remain public and to placate disgruntled shareholders, Warren and his management team indicated they were interested in pursuing a leveraged buyout and taking the company private. The board of directors led by Chairman Jim Osterman, on the other hand, decided in May 2000 to retain Gleacher & Co. as a financial advisor to pursue all options in increasing shareholder value, including fielding other offers for the business. By July, the management team was working with Chicago-based investment firm Code Hennessy & Simmons L.L.C. to fashion an offer, while the board had winnowed the number of outside suitors to six. The process continued into early 2001 when the privately held Lift Group finally emerged as the board's choice to buy Cascade at a cost of $320 million. The deal was delayed because of pending environmental litigation that involved a $19 million damage claim made by the City of Portland. A second delay was the result of Wall Street's negative reaction to the terms of the deal, with investors making it clear that they believed Lift was paying too much for the company by causing the price of Cascade stock to tumble below $10. Lift Group attempted to lower its per share offer price to $15.75 from $17.25, prompting the Cascade board to decide in April 2001 to simply scuttle the acquisition. In the short term the company needed to deal with more pressing matters, focusing on the business and settling the environmental litigation. Perhaps later the board could revisit the idea of taking the company private. The decision did little to placate some of Cascade's unhappy shareholders.

Cascade's environmental problems dated back to the 1980s when the Department of Environmental Quality determined that ground water had been contaminated from industrial cleaning solutions at Boeing, which was situated close to a Cascade facility. Two years later, in 1988, the ground water under Cascade also was found to be polluted. Boeing and Cascade took immediate steps to prevent contaminants from leaking into the downstream well field that supplied backup water to Portland's water system, agreeing to split the costs until the courts could decide levels of responsibility. During a drought in 1992 Portland was still unable to access its backup water, which led the City to sue Boeing and Cascade. The matter would linger for the next ten years before a lawsuit was filed in 1999 and the matter finally reached a courtroom in 2002. On the first day of the trial, the city asked for $20.5 million in damages, and the companies countered with a $1 million offer. In the end, the sides agreed to a $6.2 million settlement to finally end the matter.

Due to poor economic conditions, revenues fell to $252.7 million in 2002 before beginning to rebound. To better focus on its core business, Cascade decided in 2002 to sell off its hydraulic cylinder division, then in 2003 it acquired FEMA Forks GmbH, a German manufacturer of forks and lifting tines that supplied European lift truck manufacturers. Later in 2003 Cascade acquired Roncari S.r.L., a supplier of materials handling equipment to the Italian lift truck market. Cascade's revenues reached $297.8 million in 2004 and net income improved to $18.5 million. During the ensuing quarter, the company enjoyed even stronger growth, the result of strong sales, a weak dollar, and recent acquisitions. As the economy continued to improve there was every reason to expect that Cascade would continue to enjoy renewed growth. Whether its mundane business would ever win over Wall Street, or the company would eventually go private, remained open questions.

Principal Subsidiaries

Cascade Xiamen Forklift Truck Attachment; Cascade Kenhar, Inc.; Hyco-Cascade Pty. Ltd.; Roncari S.r.l.

Key Dates:

1943:: The company is founded as Cascade Manufacturing Company by Robert C. Warren, Sr.
1959:: A second manufacturing plant is opened in Spring-field, Ohio.
1964:: The name is changed to Cascade Corporation.
1965:: The company is taken public.
1996:: Robert C. Warren, Jr., is named CEO.
1997:: The company founder dies.
2001:: An attempt to take the company private fails.