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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 1-12557

CASCADE CORPORATION
(Exact name of registrant as specified in its charter)

        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 ý    No o

        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.    o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes ý    No o

        The aggregate market value of common stock held by non-affiliates of the registrant as of March 17, 2003 was $173,710,092.

        The number of shares outstanding of the registrant's common stock as of March 17, 2003 was 11,398,300.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the definitive Proxy Statement to be filed on or before April 25, 2003, to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held May 22, 2003 are incorporated by reference into Part III.

TABLE OF CONTENTS

NOTE: All references to fiscal years are defined as year ended January 31, 2003 (fiscal 2003), year ended January 31, 2002 (fiscal 2002) and year ended January 31, 2001 (fiscal 2001).

PART I

Item 1.    Business

General

        Cascade Corporation is a corporation organized in 1943 under the laws of the State of Oregon. The term "the Company" includes Cascade Corporation and its subsidiaries. The Company's headquarters are located in Fairview, Oregon, a suburb of Portland, Oregon. The Company is one of the world's leading manufacturers of materials handling load engagement devices and related replacement parts, primarily for the lift truck industry.

Products

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

        The Company's products are primarily manufactured with the Cascade and Cascade-Kenhar names and symbols, for which the Company has secured trademark protection. The primary function of these products is to provide the lift truck with the capability of engaging, lifting, carrying and depositing various types of loads and products. The Company offers a wide variety of functionally different products, each of which has numerous sizes, models, capacities and optional combinations. Products are designed to handle loads with pallets and for specialized applications without pallets. Examples of specialized applications include the ability to expand the basic lift truck's functionality to reposition, clamp, rotate, and carry a variety of loads such as appliances, paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, plywood and boxed, packaged and containerized products.

        The Company's products are subject to strict design, construction and safety requirements established by industry associations and the International Organization for Standardization (ISO). Major manufacturing facilities are ISO certified. The Company presently offers a wide variety of both standardized and specialized products. Product specifications and characteristics are dictated by the expected capacity to be lifted, the characteristics of the load, the ambient 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 load engagement 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. A portion of the Company's bar steel purchases are obtained under annual pricing arrangements, which do not require minimum quantity purchases. The Company uses several domestic and foreign suppliers for other materials. The Company is not currently experiencing any shortages in obtaining raw materials or purchased parts. Difficulties in obtaining alternative sources of rolled, bar, plate and extruded steel products and other materials from one of its primary suppliers could affect operating results.

Markets

        The Company markets its products throughout North and South America, Europe and the Asia-Pacific region. The 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. The Company's products are sold to the ultimate customer through the retail lift truck dealer distribution channel and to lift truck manufacturers as OEM equipment.

        In the major industrialized countries lift trucks are a mature and widely utilized method of materials handling. In these markets lift trucks are generally considered replacement investment. This makes the industry subject to cyclicality patterns similar to the broader capital goods economic sector.

        Some of the Company's products in these countries are subject to the same economic factors. However, many of the Company's products measurably improve overall materials handling and lift truck productivity. Further, products to serve new types of materials handling applications are continually being developed to meet specific customer and industry requirements. In this sense the Company's products may be generally considered as both replacement and productivity enhancing investment. Historically this has somewhat reduced the negative impact of downward trends in the lift truck market on the Company's net sales.

        In the 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 technology in these markets. It appears this makes the lift truck market generally less susceptible to downward trends in capital goods spending. The Company's relatively limited experience in these emerging markets supports this observation.

Competition

        The Company is one of the leading domestic and foreign independent suppliers of load engagement products for industrial fork lift trucks. Several lift truck manufacturers, who are customers of the Company, are also competitors in varying degrees to the extent that they manufacture a portion of their load engagement product requirements. Since the Company offers a broad line of products capable of supplying a significant part of the total requirements for the entire lift truck industry, its experience has shown that lower costs resulting from its relatively high unit volume would be difficult for any individual lift truck manufacturer to achieve.

        In addition to lift truck manufacturers, the Company competes with a number of companies in different parts of the world. The majority of these competitors are privately-owned companies with a strong presence in local and regional markets. A smaller portion of these competitors compete with the Company in its major markets of North America, Europe and Asia Pacific.

        The Company's market share throughout the world varies by geographic region. The Company believes it is the leading manufacturer in North America and the preferred supplier of many OEMs (original equipment manufacturers) as well as OEDs (original equipment dealers) and distributors. The Company also has significant market share in Europe and is continuing its sales and manufacturing expansion into the Asia/Pacific region. In addition to sales to the lift truck market, the Company sells products to OEMs who manufacture construction, mining, agricultural and industrial mobile equipment other than lift trucks.

        The Company designs and positions its products to be the performance and service leaders in their respective product categories and geographic markets. As such, the Company's products are also generally priced higher than competitive products. In certain geographic markets the Company periodically elects to compete principally on price for products that are considered to be commodity products in nature.

Customers

        The Company's products are marketed and sold to OEMs, OEDs and distributors throughout North America, Latin America, Europe, Asia, Africa, Australia and the Middle East. No single customer accounts for more than 10% of the Company's consolidated net sales. Approximately 32% of the Company's consolidated net sales for the year ended January 31, 2003 were to OEM customers. This percentage is comparable to prior years.

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Backlog

        The Company's products are manufactured with short lead times of generally less than one month. Accordingly, the Company does not believe the level of backlog orders is a significant factor in evaluating the Company's overall level of business activity.

Research and Development

        Most of the Company's research and development activities are performed at the Company's corporate headquarters in Fairview, Oregon and at its manufacturing facility in Guelph, Ontario Canada. The Company's engineering staff develops and designs substantially all of the products sold by the Company and is continually involved in developing products for new applications. The Company does not consider patents to be important to its business.

Environmental Matters

        The Company from time to time is 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. Note 16 to the Consolidated Financial Statements (Item 8), "Legal Proceedings" (Item 3) and "Management's Discussion and Analysis of Financial Conditions and Results of Operations" (Item 7) contain additional information concerning the Company's environmental matters.

Employees

        At January 31, 2003, the Company had approximately 1,500 full-time employees throughout the world. The majority of these employees are not subject to collective bargaining agreements.

Foreign Operations

        The Company has substantial operations outside the United States. There are additional business risks attendant to the Company's foreign operations such as 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 "Management's Discussion and Analysis of Financial Condition and Results of Operations" (Item 7) and Notes to Consolidated Financial Statements (Item 8).

Available Information

        The Company's 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 on the Company's website at www.cascorp.com when such reports are available on the Securities and Exchange Commission website.

Executive Officers of the Registrant

        Robert C. Warren, Jr.—Chief Executive Officer and President—Mr. Warren, 54, has served as President and Chief Executive Officer of the Company since 1996. He was President and Chief Operating Officer of the Company from 1993 until 1996 and was formerly Vice President—Marketing. Mr. Warren joined Cascade in 1972.

        Gregory S. Anderson—Senior Vice President—Human Resources—Mr. Anderson, 54, was appointed to his current position in 2002. He joined Cascade in 1984, and has served as Vice President—Human Resources since 1991.

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        Richard S. Anderson—Senior Vice President and Chief Financial Officer—Mr. Anderson, 55, was appointed Chief Financial Officer in 2001. Mr. Anderson has been employed by Cascade since 1972 and held several positions including his appointments as Vice President—Material Handling Product Group in 1996 and Senior Vice President—International in 1999.

        Terry H. Cathey—Senior Vice President and Chief Operating Officer—Mr. Cathey, 55, has served as Chief Operating Officer since 2000. He has been employed by Cascade since 1973 and has held several positions within the Company, including his appointments as Vice President—Material Handling Operations in 1996 and Vice President—Manufacturing in 1993.

        John A. Cushing—Treasurer—Mr. Cushing, 42, was appointed as Treasurer in 2001. He previously was the Company's Assistant Treasurer from 1999 until 2001. Prior to joining the Company in 1999, Mr. Cushing was Assistant Treasurer for Fred Meyer, Inc., a retail company in Portland, Oregon.

        Charlie S. Mitchelson, Vice President and Managing Director, Europe—Mr. Mitchelson, 47, joined Cascade in 1990. Prior to his current appointment as Managing Director—Europe in 1998, Mr. Mitchelson served as Managing Director of U.K. Cylinder Division from 1995 to 1998.

        Jeffrey K. Nickoloff, Vice President—Corporate Manufacturing—Mr. Nickoloff, 47, was appointed to his current position in 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 the Company in 1979.

        Joseph G. Pointer, Vice President—Finance—Mr. Pointer, 42, has served as Vice President—Finance since 2000. Prior to joining the Company in 2000, Mr. Pointer was a Partner at PricewaterhouseCoopers LLP in Portland, Oregon.

        Anthony F. Spinelli, Vice President—OEM Products—Mr. Spinelli, 60, has served as Vice President—OEM Products, since 2001. Prior to 2001, he was Managing Director, Canadian Operations. Mr. Spinelli joined Cascade in 1997 when the Company purchased Kenhar Corporation where he had served as President, Kenhar Americas.

Forward-looking Statements

        Forward-looking statements throughout this report are based upon assumptions involving a number of risks and uncertainties. Factors which could cause actual results to differ materially from these forward-looking statements include, but are not limited to, competitive factors in, and the cyclical nature of, the materials handling industry; fluctuations in lift truck orders or deliveries, availability and cost of raw materials; general business and economic conditions in North America, Europe, Australia and Asia; foreign currency fluctuations; pending litigation; environmental matters; and the effectiveness of the Company's capital expenditures and cost reduction initiatives.

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Item 2.    Properties

        The Company owns and leases various types of properties located throughout the world. The Company's executive offices are located in Fairview, Oregon. The Company generally considers the productive capacity of its manufacturing facilities to be adequate and suitable to meet its requirements.

Item 3.    Legal Proceedings

        Neither the Company nor any of its subsidiaries are involved in any material pending legal proceedings other than litigation related to environmental matters discussed below. The Company and its subsidiaries are insured against product liability, personal injury and property damage claims, which may occasionally arise.

        On November 6, 2002, the Company and The Boeing Company entered into a settlement agreement with the City of Portland, Oregon (City) resolving litigation brought by the City in 1999 alleging damages arising from the proximity of groundwater contamination in the area of their respective Portland plants to a City water well field. The defendants agreed to pay the City $6.2 million, of which the Company's share is $3.6 million. The Company accrued a $1.5 million charge related to the litigation during the year ended January 31, 2002, and has recorded a charge of approximately $2.1 million in the year ended January 31, 2003, related to the settlement. The Company paid the $3.6 million settlement in November 2002.

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        On April 22, 2002, the Circuit Court of the State of Oregon for Multnomah County entered judgment in the Company's favor for approximately $1.6 million in an action originally brought in 1992 against several insurers to recover various expenses incurred in connection with environmental litigation and related proceedings. The judgment is against two non-settling insurers. Additionally, the judgment requires one of the insurers to defend the Company in suits alleging liability because of groundwater contamination emanating from its Fairview plant and requires the two insurers to pay approximately 4% of any liability imposed against the Company by judgment or settlement on or after March 1, 1997 on account of such contamination. The Company and the insurers have appealed the judgment. The Company has not recorded any amounts that may be recovered from the two insurers in its consolidated financial statements.

Item 4.    Submission of Matters to a Vote of Security Holders

        None

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PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

        As of January 31, 2003, there were 261 holders of the Company's common stock including blocks of shares held by various depositories. It is the Company's belief that when the shares held by the depositories are attributed to the beneficial owners, the total exceeds 2,200.

        During the year ended January 31, 1998, a Canadian subsidiary of the Company issued 1,100,000 exchangeable preferred shares in connection with the acquisition of Kenhar Corporation. The exchangeable preferred shares were issued in an exempt private offering transaction and a Registration Statement on Form S-3 covering common shares issuable upon conversion of these shares became effective in October 1998. If preferred shares are tendered, the Company at its option may make a cash payment based upon the current market value of an equal number of common shares or may exchange an equal number of common shares for the preferred shares. A subsidiary of the Company repurchased 300,000 of these shares in connection with the sale of the mast business unit in January, 1999. During the year ended January 31, 2003, the holder of the preferred shares tendered 200,000 shares, for which the Company exchanged an equal number of common shares. A total of 600,000 exchangeable preferred shares remained outstanding at January 31, 2003.

Market Information

        The high and low sales prices of the common stock of Cascade Corporation were as follows:

Common Stock Dividends

        The Company declared no common stock dividends in the year ended January 31, 2002. The common stock dividends declared by the Company in the year ended January 31, 2003 were as follows:

Stock Exchange Listing and Transfer Agent

        The Company's stock is traded on the New York Stock Exchange under the symbol CAE.

        The Company's registrar and transfer agent is Mellon Shareholder Services, L.L.C., Shareholder Relations, P.O. Box 3315, South Hackensack, N.J., 07606, (800) 522-6645.

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Item 6.    Selected Financial Data

(1)

Except net income, excludes for all periods the data for the Company's hydraulic cylinder division, which was sold in January 2002.

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        As discussed in Note 3 to the consolidated financial statements, the Company sold its hydraulic cylinder division in January 2002. The Company's consolidated statements of income and cash flows for the years ended January 31, 2002 and 2001 separately present the historical results of the hydraulic cylinder division as a discontinued operation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        Management's discussion and analysis of its financial position and results of operations are based on the Company's 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 the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Management evaluates its estimates and judgments on an on-going basis, including those related to uncollectible receivables, inventories, goodwill and long-lived assets, warranty obligations, environmental liabilities and deferred taxes. The Company bases its estimates on 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. The Company believes the following critical accounting policies reflect its more significant judgments and estimates in the preparation of its consolidated financial statements.

Allowances for Doubtful Accounts

        The Company maintains allowances for doubtful accounts for estimated losses on accounts and notes receivable resulting from the inability of its customers and note holders to make required payments. Such allowances are based on an ongoing review of customer and note holder payments against terms and a review of customer and note holder financial statements and financial information. If the financial condition of customers or the note holders 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. The Company maintains reserves to write down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value 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 statement of income being greater than expected in the period in which more information becomes available.

Intangible Assets

        The Company adopted the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets" on accounting for business combinations and goodwill as of the beginning of fiscal 2003. Accordingly, the Company no longer amortizes goodwill from acquisitions. The Company continues to amortize other acquisition-related intangibles, which are not significant to the Company's consolidated balance sheet. As of January 31, 2003 the Company has $59.4 million of goodwill.

        In conjunction with the implementation of SFAS 142, the Company completed a transitional impairment test in the quarter ended April 30, 2002 and found no impairment. As required by SFAS 142, the Company must perform a similar impairment test annually, or earlier if indicators of potential impairment exist. Certain factors the Company considers important which could trigger an

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impairment 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 the Company's overall business and significant industry or economic trends. The impairment review is based on a discounted cash flow approach that uses estimates of future sales, sales growth rates, gross margins, expense and capital expenditure levels, the discount rate and estimated terminal values to determine the fair value of the operating entities should an impairment exist. Changes in these and other factors could result in impairments in the carrying value of goodwill, which would require a write down or further write downs to the asset's fair value. The Company performed the annual impairment test in the fourth quarter of fiscal 2003 and found no impairment.

Warranty Obligations

        The Company offers certain warranties with the sales of its products. 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 changes in statutory requirements for product warranties in markets in which the Company sells its products would require an adjustment to the recorded warranty obligations.

Environmental Liabilities

        The Company accrues 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. 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. The Company adjusts its liabilities as new remediation requirements are defined, as information becomes available permitting reasonable estimates to be made and to reflect new facts.

Deferred Taxes

        The Company's provision for income taxes and the determination of the resulting deferred tax assets and liabilities involves a significant amount of management judgment. The Company is 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. The Company records a valuation allowance to reduce its 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. As of January 31, 2003 the Company has established a valuation allowance against various deferred tax assets. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. The Company continually evaluates strategies that could allow the future utilization of its deferred tax assets.

Benefit Plans

        The Company makes a number of assumptions with regard to both future financial conditions and future actions by participants to calculate on an actuarial basis the amount of income or expense and

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assets and liabilities recognized in association with the Company's defined benefit and postretirement benefit plans. These assumptions include the expected return on plan assets, discount rate, health care cost trend rates and expected rates of retirement for plan participants. The Company reviews the assumptions on an annual basis and makes changes to reflect market conditions and the administration of the plans. While the Company believes the current assumptions are appropriate in the circumstances, actual results and changes in these assumptions in the future will result in adjustments which impact the income or expense recognized in future years in relation to these plans.

COMPARISON OF FISCAL 2003 AND FISCAL 2002

        The Company's consolidated net sales for the year ended January 31, 2003 (fiscal 2003) increased 2.4% to $258.8 million as compared to $252.7 million in the year ended January 31, 2002 (fiscal 2002). This increase reflects slightly higher sales in all markets. In fiscal 2002 the lift truck industry in North America, the Company's largest market, experienced significant declines in orders and shipments. During fiscal 2003 the North American market seems to have stabilized and shown a slowly increasing level of activity during much of the year. Sales in Europe have continued to be negatively impacted by weak economic conditions. Overall sales in Europe have increased due to foreign currency changes. The Company's sales in other parts of the world have increased primarily due to strong sales and economic conditions in China. While it is the Company's fastest growing market, China only represented approximately 3% of consolidated net sales in fiscal 2003.

        The Company's overall gross margin of 34.4% in fiscal 2003 has increased 2.7% over the 33.5% gross margin for fiscal 2002. This increase reflects the Company's continued focus to implement cost management initiatives started in fiscal 2002.

        Selling and administrative expenses as a percentage of net sales were 21.9% in fiscal 2003 as compared to 21.0% in fiscal 2002. In fiscal 2002, due to the downturn in the lift truck industry, the Company had implemented aggressive measures, such as pay freezes and hiring restrictions, reductions in incentive pay and reduced overall spending levels. As sales levels increased somewhat in fiscal 2003, the Company eliminated many of the spending restrictions and moved forward with various projects expected to impact future operations. These projects included information systems conversions in Canada and a realignment of the Company's business structure in Europe to operate more effectively in the European Union countries. In addition, the Company's incentive pay to senior management increased approximately $950,000 due to improved operating results in fiscal 2003.

        During fiscal 2003, the Company and The Boeing Company entered into a settlement agreement with the City of Portland, Oregon (City) regarding litigation brought by the City in 1999 alleging damages arising from the proximity of the groundwater contamination in the area of their respective plants to a City water well field. The Company's share of the $6.2 million settlement was $3.6 million. The Company had recorded a $1.5 million charge related to the settlement in fiscal 2002 and recorded additional environmental expenses of $2.1 million during fiscal 2003. The full settlement was paid in fiscal 2003.

        During fiscal 2002, the Company recorded $4.4 million of goodwill amortization expense. The Company no longer amortizes goodwill under SFAS 142, which was adopted at the beginning of fiscal 2003. In addition, the Company recorded a $5.1 million goodwill impairment charge in fiscal 2002 related to its operations in Australia.

        The Company recorded a $7.3 million allowance in fiscal 2002 related to a note receivable from Maine Rubber Company (Maine Rubber), which related to the Company's sale of its tire business to Maine Rubber in fiscal 2000. The Company had recorded the allowance after receiving notification from Maine Rubber in January 2002 that certain principal payments due to the Company in April 2002 would not be made. Maine Rubber later terminated additional interest payments to the Company under the note receivable. During fiscal 2003, the Company and Maine Rubber reached a settlement

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regarding the outstanding principal and interest due under the note receivable. Under the terms of the settlement, the Company received $2.5 million as payment in full for the release of any remaining liability of Maine Rubber under the note receivable. The Company recorded the $2.5 million cash payment as income in fiscal 2003.

        The Company's interest expense in fiscal 2003 decreased 10.3% in comparison to fiscal 2002. The decrease is due to the Company's efforts to reduce its overall debt levels. See "Liquidity and Capital Resources" for additional discussion of Company debt levels and payments.

        Interest income increased in fiscal 2003 as compared to fiscal 2002 due to the Company's higher cash balances throughout the year and interest earned on notes receivable related to the sale of the Company's hydraulic cylinder division in January 2002.

        The Company's effective tax rate for fiscal 2003 increased to 37.2% in comparison with 35.4% in fiscal 2002. This increase is due to higher levels of pre-tax income in fiscal 2003 over fiscal 2002, which diluted the benefit of certain tax attributes. The Company also had increased foreign earnings in higher tax rate jurisdictions than the previous year.

        Other expense relates primarily to net losses on foreign currency translation. The Company maintains a foreign currency risk-management strategy to mitigate the impact of unanticipated fluctuations in earnings caused by changes in foreign currency exchange rates. See Note 13 to the consolidated financial statements.

        The Company's North American operations have continued in fiscal 2003 to generate the highest levels of income from continuing operations. Operations in Europe have been significantly impacted by weak economic conditions throughout the region. In particular, sales decreases in Germany and France have had a significant contribution to the loss from continuing operations in Europe during fiscal 2003. The Company expects these conditions to continue through the remainder of fiscal 2004. The Company's strong results in other parts of the world are primarily the result of profits generated in China and Australia. The Company has continued to experience strong growth in China, which is consistent with the overall economy, and is pursuing opportunities to increase production capacity in this market. Operations in Australia returned to profitability in fiscal 2003 as a result of the Company's restructuring efforts in prior years.

COMPARISON OF FISCAL 2002 AND FISCAL 2001

        Consolidated net sales for fiscal 2002 decreased 16.1% in comparison with consolidated net sales for the fiscal 2001. This decline reflects the reduced order rates for lift trucks throughout the world. The lift truck industry in North America for 2002 experienced declines in orders and shipments of 40% and 25%, respectively, in comparison with the prior year. Approximately 30% of the Company's consolidated net sales were to OEM customers for the year ended January 31, 2002, which is consistent with prior years. Sales to unaffiliated customers in North America, which accounts for 64% of the Company's total sales, decreased 17.3% in fiscal 2002. Sales to unaffiliated customers in Europe and the Rest of World (primarily Australia and Asia) experienced decreases of 13.3% and 15.1%, respectively.

        The Company initiated aggressive cost management initiatives in fiscal 2002 in order to mitigate the effect of decreased sales levels. These initiatives included aggressive material cost reductions, reduced work schedules and staff reductions in both production and administrative staff. A worldwide pay freeze was initiated in October 2001, which remained in effect the first half of fiscal 2003. The Company's overall work force was reduced by 13% to 1,400 employees at January 31, 2002, excluding reductions due to the sale of the Company's hydraulic cylinder division in January 2002. The majority of the work force reduction occurred in North America.

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        The Company's overall gross margin of 33.5% in fiscal 2002 increased 3.1% from 32.5% in fiscal 2001. During the industry downturn, the Company has focused its efforts to aggressively reduce operating inefficiencies and overall manufacturing costs. The Company has also increased selling prices on select products in certain parts of the world to adjust to customer demand.

        Selling and administrative costs as a percentage of net sales were 21.0% and 20.9% in fiscal 2002 and 2001, respectively. Due to lower sales levels in fiscal 2002, the Company initiated various cost control measures, including reduced spending and staffing levels, to reduce overall selling and administrative expenses. Fiscal 2001 expenses include costs related to restructuring activities in Europe and Australia and Special Board Committee activities of $4.2 million. Selling and administrative costs in fiscal 2002 decreased 9.8% in comparison with fiscal 2001, excluding the restructuring and board costs. As a percentage of sales the adjusted fiscal 2001 selling and administrative costs were 19.5%.

        Due to substantial and continuing operating losses at the Company's Australian subsidiary between 1998 and 2001 the Company initiated a significant restructuring effort to consolidate manufacturing facilities, reduce its overall sales and distribution network and eliminate unprofitable product lines. While these activities were substantially completed in fiscal 2001, the Company continued to experience declining sales levels throughout fiscal 2002. The Company made additional management changes and reduced its overall work force in Australia by 40% (38 employees) in the last half of fiscal 2002. The reduction in work force brought expense levels into line with projected sustainable sales levels going forward. Additional restructuring costs incurred in fiscal 2002 were not material. In light of the significant trends impacting our Australian operations and expected future growth rates, the Company performed an assessment of the carrying value of goodwill and long-lived assets in Australia as part of our review of financial results in the fourth quarter of fiscal 2002. The conclusion of the assessment was that the decline in the Australian operations was significant and other than temporary. As a result, the Company recorded a $5.1 million write down of goodwill in the fourth quarter of fiscal 2002 related to its operations in Australia. After the write down, the Company had $3.1 million of goodwill remaining on its consolidated balance sheet at January 31, 2002 related to Australia.

        In April 1999, the Company sold its tire business to Maine Rubber Company (Maine Rubber) for $26.9 million payable in cash and a $7.3 million note receivable. The note receivable was not collateralized, with interest at 8%, interest payable quarterly and principal installments of $1 million, $2.1 million and $4.2 million due in April 2002, 2003 and 2004, respectively. Through January 31, 2002, the Company received all interest payments on the Maine Rubber note receivable on a quarterly basis since April 1999. With the significant decline in industry order rates in fiscal 2002, Maine Rubber's operating results were negatively impacted. Maine Rubber notified the Company in January 2002 that it was in violation of financial covenants related to its senior notes and revolving credit agreement. As a result of the covenant violations, Maine Rubber's senior lender restricted all of Maine Rubber's scheduled future interest or principal payments, including the $1 million payment due to the Company in April 2002, until Maine Rubber could prepare a restructuring plan suitable to their senior lender. The Company obtained recent Maine Rubber financial information. Based on the Company's review of this information, an allowance of $7.3 million was recorded in the fourth quarter of fiscal 2002 against the balance of the Maine Rubber note receivable.

        Amortization expense for fiscal 2002 was $4.4 million as compared to $5.4 million in fiscal 2001. The Company recorded a write-off of certain goodwill balances due to the closure of a facility in Sweden and other minor operations. Excluding these write-offs the amortization expense in each year was consistent.

        Environmental expenses decreased in fiscal 2002 to $1.5 million in comparison with $4.9 million in expenses in fiscal 2001. The fiscal 2002 expenses, recorded in the fourth quarter, relate to an estimate of the Company's allocable share of any eventual liability related to the City of Portland litigation.

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Fiscal 2001 expenses included $3.1 million related to legal fees from environmental legal proceedings and $1.8 million to adjust cost estimates for ongoing remediation activities.

        Interest expense in fiscal 2002 decreased 21.6% in comparison to fiscal 2001 due to the Company's efforts to reduce overall debt levels. See "Liquidity and Capital Resources" for further discussion of Company debt levels and payments.

        Other income in fiscal 2002 includes a pension refund received from the closure of a manufacturing facility in Sweden, offset by foreign currency losses. The change from fiscal 2001 relates primarily to a reduction in foreign currency losses.

        The Company's effective tax rate in fiscal 2002 was 35.4% as compared to 43.4% in fiscal 2001. The reduction in the overall effective tax rate is due to benefits of foreign taxes in low rate jurisdictions and international financing activities, which was offset by an increase in the valuation allowance related to foreign tax credits.

        The Company recognized an after tax loss of $1.7 million in the fourth quarter of fiscal 2002 related to the sale of its hydraulic cylinder division and $485,000 of income from discontinued operations. See "Liquidity and Capital Resources" and "Recent Accounting Pronouncements" for further discussion of the sale.

        As presented in Note 18 to the consolidated financial statements, the Company's profitability for fiscal 2002 in North America was negatively impacted by the $7.3 million reserve against the Maine Rubber note receivable and lower sales levels, which fell 17.3% below fiscal 2001 levels. North American gross margins were consistent between years and comparable to the Company's overall gross margin. European operations realized a higher level of net income in fiscal 2002 also with lower sales levels. Fiscal 2001 included a $2.1 million restructuring charge and an overall net loss. The Company's remaining operations, primarily Australia and Asia, were negatively impacted by the $5.1 million of goodwill impairment in Australia. Excluding the goodwill adjustment, the overall profitability of these operations increased in comparison with fiscal 2001.

LIQUIDITY AND CAPITAL RESOURCES

        The Company's debt agreements contain covenants relating to net worth and leverage ratios. Borrowing arrangements currently in place with commercial banks provide lines of credit totaling $32.0 million, none of which were being used at January 31, 2003. Average interest rates on short-term borrowings were 1.38% at both January 31, 2003 and 2002.

        Total outstanding debt, long-term and short-term notes payable, at January 31, 2003 was $63.9 million in comparison with $79.7 million at January 31, 2002. The Company's debt to equity ratio improved to .44 to 1 at January 31, 2003 from .70 to 1 at January 31, 2002.

        Working capital at January 31, 2003 was $71.2 million as compared to $66.0 million of working capital at January 31, 2002. The Company's current ratio at January 31, 2003 was 2.66 to 1 in comparison to 2.65 to 1 at January 31, 2002.

        The Company declared dividends of $.10 per share in fiscal 2003. No dividends were declared in fiscal 2002. Dividends of $.20 per share were declared in fiscal 2001.

        The Company's balance of cash and cash equivalents increased to $29.5 million at January 31, 2003 from $25.6 million at January 31, 2002. Net cash provided by operating activities from continuing operations was $23.9 million in fiscal 2003, compared to $31.7 million and $22.2 million in fiscal 2002 and 2001, respectively. The decrease in cash provided by operations is due to increases in accounts receivable and income taxes receivable and decreases in accrued environmental expenses. These changes are offset by an increase in accounts payable and other accrued expenses. Changes in accounts receivable, accounts payable and other accrued expenses are related to the increased level of business

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activity in the fourth quarter of fiscal 2003 as compared to fiscal 2002. The increase in income taxes receivable is primarily due to the recording of the write-off of the Maine Rubber note receivable for tax purposes in the fourth quarter of fiscal 2003 in relation to the settlement discussed previously. Accrued environmental expenses have continued to decrease due to ongoing remediation activities and payment of the City of Portland litigation settlement in fiscal 2003.

        During the fourth quarter of fiscal 2002, the Company sold its hydraulic cylinder division to Precision Hydraulic Cylinders, Inc. (Precision) for approximately $13 million, for which the Company received $3.25 million in cash, $9 million of notes receivable and a $700,000 receivable subject to adjustment for working capital levels at the sale date. The Company received payment for the $700,000 of receivables during fiscal 2003. Under the terms of sale, the Company made interim operating capital advances to Precision of $2.1 million in fiscal 2003. These advances were repaid to the Company by January 31, 2003. The Company's commitment to provide advances to Precision expired during fiscal 2003. The remaining proceeds from notes receivable related to the $2.5 million settlement of the Maine Rubber note receivable.

        Net cash used in financing activities increased in fiscal 2003 to $18.1 million as compared to $16.4 million in fiscal 2002. The Company continued with its planned reduction of debt balances in fiscal 2003 with long-term debt payments of $15.8 million. The Company had no additional borrowings in fiscal 2003 and 2002. As of January 31, 2003, the Company had made all scheduled debt payments. Any additional payments to