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Executives

Robert Warren – President, CEO

Joseph Pointer – Chief Financial Officer

Richard Anderson – Chief Operating Officer

Jason [Hagdal] – Corporate Comptroller

Analysts

Arnold Ursaner – CJS Securities

Frank Magdlen – Robins Group

James Bank – Sidoti & Company

J. Groh – D.A. Davidson

Alan Robinson – Royal Bank of Canada

Schon Williams – BB&T Capital Markets

J. Groh – D.A. Davidson

Cascade Corp. (CASC) F2Q10 Earnings Call September 3, 2009 5:00 PM ET

Operator

Welcome to the Cascade Corporation second quarter fiscal year 2010 earnings call. (Operator Instructions) I would now like to turn the conference over to Robert Warren, President and CEO of Cascade Corporation. Please go ahead.

Robert Warren

Thank you. Good afternoon everyone and welcome to today's call. Andy Anderson, our Chief Financial Officer [sic] and Jason [Hagdal], our Corporate Comptroller are here with me and Joseph Pointer, our Chief Financial Officer is participating on the call but from a different location.

For those of you who are unfamiliar with Cascade, I'd like to give you a brief overview. We operate globally with about 1,900 employees working in 27 facilities in 16 countries. We manufacture devices primarily for industrial trucks, most commonly called lift trucks or forklifts. These products which are used in nearly every industry worldwide that uses lift trucks allow the truck to carry position and deposit various types of loads.

The smaller portion of our products are for construction vehicles such as tool carriers and skid steer loaders. Approximately 55% of our products are sold through retail dealers. The remaining products are sold directly to global manufacturers, names such as Hyster, Toyota, Kion, Mitsubishi, Yale, Komatsu, [Hefay], Ingersoll Rand, Caterpillar and Nissan.

Joe will now provide you an overview of the second quarter.

Joseph Pointer

Thank you Bob. I would like to remind everyone that during the course of this call, we may make forward-looking statements. Participants are cautioned that these forward-looking statements including statements about our anticipated revenue, costs, earnings and cash flows are subject to a number of risks and uncertainties that could cause our actual future results to differ materially.

Additional information regarding these risks and uncertainties are described in our reports on Forms 10-K and 10-Q and other filings with the Securities and Exchange Commission. We cannot provide any assurance that future results will meet expectations. In addition, historical information should not be considered an indicator of future performance. We disclaim any obligation to release any updates to any comments made in this call or reflect any changes in business conditions.

As I walk you through our results please note that our fiscal year ends on January 31st so when we refer to the second quarter of fiscal year 2010 we are actually referring to the quarter that just ended July 31, 2009. Also, all percentage comparisons with prior periods will exclude the impact of changes in foreign currency.

Net sales for the current quarter were $77 million, a decrease of 46% compared to the prior year. Our net loss for the second quarter was $12.3 million compared to net income of $10.5 million for the second quarter of fiscal 2009. Fiscal 2010 results include $11.6 million of restructuring costs primarily as a result of steps initiated to cease production activity at our attachment facility in Almere, The Netherlands. We expect to complete the Almere restructuring by the end of the third quarter fiscal 2010.

Our free cash flow for the quarter was $15 million, a $20 million swing from the negative free cash flow of $5 million in the second quarter of the prior year. I will discuss our free cash flow in further detail a bit later.

Our decrease in sales reflects the continued effect of the global economic downturn and in particular a depressed lift truck market in most regions of the world. Our sales decreases by region are relatively in line with regional lift truck shipment statistics in the second quarter. The only regions that show a variance worth commenting on is the 20% decrease in lift truck shipments in China as compared to a sales decrease of 39%. Lift truck industry shipments for China reflect only domestic lift truck sales. Although published statistics are not available for the export market, our best estimate is that market is down at least 75% from the prior year. Factoring in export shipments of lift trucks the decrease is more in line with our sales decrease which reflects both domestic and export sales.

Our gross profit percentages were lower in most regions primarily as a result of unabsorbed fixed and variable costs due to lower sales volumes. The increase in Asia Pacific gross profit margin from 24% to 26% is due to changes in product mix and fluctuations in foreign currency rates. The increase in China’s gross profit margin from 31% to 35% was due to changes in product mix, some price increases in the prior year and lower intercompany transfers which carry lower gross margins.

Total SG&A costs have decreased 22% due to a reduction in personnel, marketing and other general costs. Regarding income taxes, even though we recognized a pre-tax loss for the quarter of $11.1 million we had tax expense of $1.2 million. This is consistent with the first quarter due to the fact we owed taxes in countries where we are generating income but not realizing the tax benefit in the European countries where we have incurred losses. In addition, we are incurring taxes on dividends related to the repatriation of cash to the U.S. to pay down our outstanding debt.

Given our continued restructuring efforts in Europe and the continuing economic recession we will likely be in a position throughout the remainder of the year with tax expense that is disproportionate relative to lower levels of income or losses through the rest of the year.

Before I move onto comments about our balance sheet I would like to make some observations about the trends over the last six months. Given the steep declines in business levels in comparison with the prior year the real barometer in evaluating if we and the lift truck industry are coming out of the current economic slump will be reviewing sequential quarterly results.

With regard to lift truck shipments globally second quarter shipments were down 4% compared to the first quarter. Shipments declined in every region except China which has rebounded somewhat from the first quarter. Overall, the shipment trends are still somewhat negative. Regarding our results, sales have remained flat on a consolidated level at about $76 million per quarter. Given current lift truck shipment statistics we don’t expect major changes in sales through the rest of fiscal 2010.

Gross margins have improved primarily due to inventory write downs that occurred in Europe in the first quarter and improved second quarter margins in both Asia Pacific and China as we discussed earlier.

Looking at results at an operating income level, our operating income after excluding the effects of restructuring costs increased $5 million sequentially. This improvement is due to a number of factors. I previously mentioned the gross profit improvements but we have also maintained a tight control on discretionary spending. These efforts have been ongoing to some degree since the fourth quarter of the prior year with the full impact of the financial benefit beginning to be reflected in our second quarter results.

It is difficult to estimate what additional savings can be expected in the remainder of the year but our current estimate is to stay at the current level of spending. Given that the outlook for the business in the near-term is not dramatically different than the current environment, we have taken several steps to put us in a better position in the future.

The first is that one of our top priorities continues to be utilizing cash flow to pay down our long-term debt. Our current debt balance at $65 million is down $37 million from year-end. We mentioned in a prior call we believed there was an opportunity to generate significant free cash flow in the coming year. We measure free cash flow as our cash from operations less capital expenditures. Year-to-date our free cash flow is about $30 million as compared $7 million in the prior year. This increase while incurring a net loss is a result of our continued efforts to reduce working capital levels principally in accounts receivable and inventory. Our biggest opportunity to reduce working capital continues to be through reducing inventories which decreased 14% during the quarter.

We also had lower levels of capital expenditures in the current year. This reflects our efforts to move forward only with those capital expenditures relating to critical projects. At this point we estimate that capital expenditure spending for the remainder of fiscal 2010 to be $4 million.

Our ability to pay down debt has also been helped by repatriating cash back to the U.S. This has reduced our consolidated cash balance to $18 million down from $22 million as of April 30, 2009. The second step was in July 2009 we entered into an amendment of our loan agreement with Bank of America and [E] Bank of California.

The amendment decreases the aggregate amount that may be borrowed under the loan agreement from $144 million to $115 million but provides that we may increase the amount that may be borrowed by up to $30 million subject to the agreement of our lenders. The amendment to the loan agreement grants to the lender a security interest in all of our assets increases the interest rate to 1.5% to 3% over LIBOR depending on our consolidated leverage ratio and modifies certain loan covenants including the consolidated leverage ratio and consolidated fixed charge coverage ratio we are required to maintain.

The last point I would like to make is that the dividend just approved by our Board was reduced from $0.05 per share to $0.01 per share. This was another step we felt was prudent given the uncertainty of future business levels and the liquidity needs of the company in the coming quarters.

Now I would like to turn the call over to Bob for a discussion about the current market trends and some other general comments.

Robert Warren

Thank you Joe. I would like to start with a brief overview of the lift truck market. Currently the lift truck market is the only direct economic or industrial market we have available for our markets. While this does not correlate exactly to our business levels since various end markets use our products to differing degrees, it does give us some indication of short-term trends.

Joe already noted that global lift truck shipments from the first to the second quarter continued a slight downward trend. The OEMs have been reducing their inventories which explains some of the variation between the drop in industry shipments and our sales levels. Overall, we don’t believe our market share has changed in the current year. In order to try to look forward to the future we monitor changes in the most recent lift truck order rates. On a sequential quarter basis global lift truck order rates have increased somewhat. While this is coming off of historical lows in most regions it does give us some reason to think the overall decline in the market might be ending.

The question is when we will begin to see any recovery. We continue to plan on capital goods markets lagging past the end of our fiscal 2010 and into fiscal 2011 before a real recovery begins to take shape. We previously announced estimated restructuring costs for fiscal 2010 to be in a range of $20-25 million. Through the first six months of the year we have incurred costs of just over $16 million all of which related to our European operations. We still expect our costs for the year to fall within the previously disclosed range.

Breaking down the restructuring costs, approximately 65% are cash costs and 35% are non-cash such as write downs on fixed assets. As we move forward we will be evaluating other opportunities throughout our global operations to better position ourselves for the future. There will be an ongoing process throughout the current recession as we assess the pace of any market recovery.

In developing these plans I want to emphasize we are very cognizant of the need to maintain our core enterprise including human resources and capital assets to put ourselves in a position to respond to market demand when it ultimately improves. As those of you who have worked with us in the past remember we have a long standing policy of not making forward financial projections.

This concludes our remarks and we are now ready to open the call to your questions.

Question-and-Answer Session

Operator

(Operator Instructions) The first question comes from the line of Arnold Ursaner – CJS Securities.

Arnold Ursaner – CJS Securities

My first question is a mechanical question on the back of your press release. Your goodwill this quarter jumped by almost $12 million. Can you comment on that given the goodwill impairment charge that you took?

Robert Warren

That was all currency. It was our Canadian and goodwill in Europe. The Canadian dollar and the Euro created all of that gain. There was nothing else.

Arnold Ursaner – CJS Securities

Utilization in the last quarter you had been running about 35% which makes it virtually impossible to do very well. Can you give us a feel for where we stand now on utilization and based on backlog what your best view is over the next few months in terms of utilization?

Robert Warren

Clearly as we haven’t really reduced capacity in the U.S. we are not going to see too much better utilization out of the North American market. The increase in some of the business out of Asia which seems to have taken most of the global increase we saw sequentially on shipment is helping their utilization. I don’t have an exact figure for Asia. Europe is still going to see a better utilization only because we have been shutting down those facilities.

Arnold Ursaner – CJS Securities

Taking a step back one of the goals I think you discussed previously was you thought you might be able to achieve profitability by the end of the year or in next year. Do you still feel given all the actions you have taken that is a reasonable assumption?

Robert Warren

We are still anticipating at the levels of business we now see we should be profitable with our sales next year in Europe.

Arnold Ursaner – CJS Securities

Can you give us any feel for your inventories finished goods versus work in process?

Robert Warren

We are scrambling for that. We will come back and give you that in a second.

Arnold Ursaner – CJS Securities

When you do that also some sense of the costs of your raw materials within that inventory versus selling price. In other words where are you in terms of things like steel which has had a lot of variability versus current market price?

Robert Warren

We probably still have a higher, we have as you have seen an inventory write down in Europe based on some of the selling prices we had in Europe compared to our inventory costs. I would say while we are still holding inventory globally on some of our rolled steel products at above current market, not enough on our price to cause any write down.

Jason

The end of July the inventory balance was 37% finished goods roughly and 63% is raw materials and components. That equates to about $28 million of finished goods and about $47 million of raw materials.

Operator

The next question comes from the line of Frank Magdlen – Robins Group.

Frank Magdlen – Robins Group

What is left in your restructuring plans now? You have maybe what $8 million to go?

Robert Warren

That is still what we have in our range. That is correct.

Frank Magdlen – Robins Group

The target before you talked about the plant in France and now the Netherlands. What is really left out there that you are working on?

Robert Warren

I am restricted on all sorts of levels from talking about what we are planning on other than talking about there will be further restructuring. I would just as soon not get into specifics until it is announced with our facilities.

Frank Magdlen – Robins Group

If I look at your reported results today and I back out the restructuring charge you have maybe $700,000 pre-tax loss on $1.2 million of taxes. So is a better way of looking at it on an operating basis you lost about $1.9 million?

Joseph Pointer

$1.9 million? We had operating income, I am doing this from memory, but about $10.6 to $10.7 and restructuring of about $11.6 so I think we were about $900,000 to the negative on an operating income line.

Frank Magdlen – Robins Group

Also then you take your taxes in there of $1.2 million.

Operator

The next question comes from the line of James Bank – Sidoti & Company.

James Bank – Sidoti & Company

I’m trying to add back the restructuring charge. I think on the operating line it looks like you were positive $961,000. I was wondering if you could just walk through the non-GAAP measure, pull out the restructuring and if I could have the operating income and separately what tax rate would that have been at? Normalized maybe 30-36% or should I use the 11% to get to the non-GAAP earnings adjusted?

Joseph Pointer

You are right. I did invert it. That is the problem of doing it from memory. I did invert it. You are right it was on the positive.

James Bank – Sidoti & Company

So then when I take the $11.6 million restructuring I want to put that back in should I use an 11% tax rate or should I use a normalized tax rate because it is a difference between roughly a $0.27 loss once you get below the line and you do the tax and the interest expense and all that stuff.

Robert Warren

What you need to do, as odd as it sounds is not change the absolute tax at all because that restructuring was in Europe. We get no credit back for it. It probably still would be $1.2 million of tax provision. Would you agree with that Joe?

Joseph Pointer

That is probably the simplest way to look at it.

Robert Warren

We get no benefit from it one way or the other so take it out or leave it in. It is still $1.2 million whatever that ratio comes out to.

James Bank – Sidoti & Company

Maybe I can circle back to you. I am still a bit lost in terms of what the adjusted non-GAAP earnings would be this year or loss in July quarter. I will just jump forward to my other questions. The sustainability of our COGS as a percentage of sales. If you could quickly run through each region and give out what is going to be sustainable and what isn’t. For example, North America dropped 56% as a percentage of COGS in the July quarter versus the 71% is where it was in the first.

Robert Warren

State the question again?

James Bank – Sidoti & Company

The question is what is sustainable and what isn’t going forward through the rest of the year?

Robert Warren

I think I would use this quarter as your guidance for the coming quarters. I don’t think we have seen any significant changes that would change these levels. Do you Joe?

Joseph Pointer

No.

James Bank – Sidoti & Company

On the SG&A line in the press release there was just a lot of mention of selling and admin costs, reduction of personnel, advertising and other general costs. If we want to assume volumes come back even slightly next year what percentage of SG&A would also come back next year that you are able to pull out this year?

Joseph Pointer

That would be slower coming back because I believe the ramp on the recovery is not going to be acute. It is going to be fairly gradual. So we are going to be very reluctant to take back on SG&A costs.

Robert Warren

There will be some though. There is inflation happening essentially in our SG&A area. Our personnel costs which are a significant part of that have not changed and through some incentives and so forth have actually gone down now pushing a year and a half down and it will have been two years by the end of this year. So we undoubtedly will have to take a look at that. It is a few percentage points but it is probably single digit percentage points.

James Bank – Sidoti & Company

In regard to China what size of the forklift truck market now in relative terms to Europe and North America?

Joseph Pointer

I think they were before and I believe right now they are in our sit down powered trucks a lot of our attachments are implied. They are the largest market in the world.

James Bank – Sidoti & Company

Is there any way…

Joseph Pointer

There is quite a bit of difference in application rate right now. There are much broader industries that use our type of equipment in North America and Europe than in China but paper, textiles, tobacco are very heavy in attachments now.

James Bank – Sidoti & Company

I guess the question really is how quickly would you assume China being 10% of your sales right now could grow to the equivalent of what North America is, towards 50%?

Robert Warren

Decades. Don’t plus that one in. The application rate on that will take a long time to ramp up to the North American or European application rate. Japan, which is a highly industrialized country doesn’t have close to the application rate of the United States or Europe so it is a ways off.

Operator

The next question comes from the line of J. Groh – D.A. Davidson.

J. Groh – D.A. Davidson

I think I heard you right when you were speaking of the restructuring in Europe there is no associated tax benefit is that correct?

Joseph Pointer

Not until we have improved our profitability over there and then those valuation allowances will be reversed.

J. Groh – D.A. Davidson

So if I subtract that out and I don’t change the taxes at all it looks like a loss of $0.06 and I don’t see a similar number but that is what I come out with. In terms of the working capital work you have been doing a great job on that. How much further is there to go in terms of how skinny can you get on inventory in the steel and those sorts of things?

Robert Warren

We are estimating about another $10-15 million.

J. Groh – D.A. Davidson

By fiscal year end?

Robert Warren

By fiscal year end.

J. Groh – D.A. Davidson

I think you addressed the CapEx you said would be roughly $4 million over the next two quarters. That looks like a little bit of an acceleration. Are those projects you had planned? What are those?

Joseph Pointer

Those are projects in the work right now.

Robert Warren

They have already been approved and we still have some further work to make sure Verona is up to the full product plan we have with them now.

Joseph Pointer

We are also slowly taking advantage at a couple of factories where the load is so low we can do some things now you couldn’t do if we were running even close to full capacity.

J. Groh – D.A. Davidson

I think you mentioned last quarter you had some high cost steel on the books. Have you worked through that? How should we think of that in terms of how it impacts if the profit margins are going to remain the same is it safe to assume you have kind of worked through that higher cost raw material?

Joseph Pointer

We are working our way through it. We are also transplanting that type of rolled section globally to make sure we use that up as quickly as possible. It becomes a lot harder when the OEMs basically are purchasing all of their own inventory so the numbers from the larger volume OEM sales are further off than the market as a whole so it is harder to do. We are not purchasing steel. We are working through it as fast as we can.

J. Groh – D.A. Davidson

Lastly, it looks like the sequential order numbers are pretty good. I am presuming that is something you are going to report each quarter and that will give us some help in terms of figuring what is the bottom, etc.?

Joseph Pointer

Certainly that is our plan going forward. It is our best way of trying to determine…we believe we hit bottom to understand what kind of level of a recovery, which I think is going to be fairly moderate going forward into the next year. We are not expecting anything different this year. We are going to be trying to show you the sequential numbers for shipments and orders.

Robert Warren

Just a cautionary note on the way we look at that, fortunately or unfortunately by far the largest gain was in the Asia region which as we discussed moments ago has the lowest application rate for our products particularly our attachment products. So the growth factor is going to be impacted by that.

Operator

The next question comes from the line of Alan Robinson – Royal Bank of Canada.

Alan Robinson – Royal Bank of Canada

Just to follow on that question a little, what is your best guess right now of the lag between orders and shipments in the lift truck market? Is it still about a quarter or so?

Joseph Pointer

It is about a quarter. Their lead times have come down, the factor order lead times. They were out to 90 days or greater during last year and the year before. They are closer to 5-6 weeks now. It is certainly, the orders we are seeing now. Some of that increase on the order rate we got part of it in the second quarter because their lead times are shorter now.

Alan Robinson – Royal Bank of Canada

It seems to me that you should start to enjoy a currency tailwind in the second half. Am I reading that correctly?

Joseph Pointer

When you say tailwind…

Alan Robinson – Royal Bank of Canada

It seems given where current FX rates are in the currency you transact compared to the year-ago period you should start to see a benefit in terms of currency rates to your year-over-year sales comparisons where previously the last few quarters obviously currency weakness has been a dis-benefit to yourselves comparable.

Robert Warren

I think maybe the way to look at that would be with the weak dollar and the strong Euro is when we start making money in Europe the currency will give us the springboard on that situation. We get some benefit from the weak dollar into some of the Asian regions because they are importing virtually all of their product from either China or the United States and the Yuan is still pretty close to the dollar so we are getting some benefit from that. Is that what you are…

Alan Robinson – Royal Bank of Canada

Exactly. That is useful.

Joseph Pointer

For Canada it is almost a direct mix of what they get in buying with the stronger Canadian dollar product buying out of us is showing [ports] in the U.S. It pretty much balances out.

Operator

The next question comes from the line of Schon Williams – BB&T Capital Markets.

Schon Williams – BB&T Capital Markets

Good job on the debt reduction this quarter. As a tagalong to the working capital question would I expect all of that $10-15 million reduction to go towards debt in the second half of the year? Do you have a target for where you want to see debt kind of play out here over the next couple of months?

Joseph Pointer

I am not going to be forecasting out to that. Obviously as we do reduce our working capital it has been to pay down debt. You could by inference say the $10-15 million we are hoping to exceed as further reductions in our inventory and working capital would go towards paying down debt.

Robert Warren

Unfortunately some of that reduction in working capital is in countries where it is not quite as easy to repatriate the cash out. I wouldn’t put it at 1 to 1 on that.

Schon Williams – BB&T Capital Markets

Any comment, it looks like the Jungheinrich Mitsubishi Caterpillar deal that just got announced from North America. They are going to be bringing some manufacturing capacity into Texas and I just wondered, I believe Jungheinrich is a customer you are already serving in Europe. I am wondering if that opens up some opportunities for you within North America or if that would simply be a mix shift from Europe to North America. Any comments there?

Robert Warren

It is a good move for Jungheinrich. They are teaming up with a much stronger partner here. They have less than 2% market share in North America. It could be an opportunity as we have a good working relationship with them in Europe. Is it an expanded opportunity? I don’t think it is really going to affect us at all. We have a very good relationship with Mitsubishi already. We have good relations in the market sectors that Jungheinrich is focused on. We already have good relations with their competitors. It could just be a shift of potential market share and that is certainly what Jungheinrich is aiming for. We would expect to get market share from that.

Schon Williams – BB&T Capital Markets

I just want to come back to the sustainability of the gross margin. Wouldn’t I expect assuming orders pick up in Europe and some of these other importing regions wouldn’t I expect the intersegment sales out of China to actually pick up in the second half of the year? Then that would actually be a negative to gross margin in China? Or am I thinking wrong about that?

Joseph Pointer

That would be correct. If we can pick up additional business in Japan, Korea and Europe for our core products that would have a drag on gross margin mix for China.

Robert Warren

What we said earlier about taking a look at this quarter and saying that is the level was assuming what Bob mentioned earlier that next quarter looks like this quarter. You are right in if you have a material shift in that intercompany. It shifts the gross margin accordingly.

Schon Williams – BB&T Capital Markets

What about the inter-segment in North America? It looks like it went from $2 million in the first quarter to $4 million in the second quarter. Was there any benefit or detriment from that to the gross margin in that region?

Joseph Pointer

Much of that shift was in preparation and in support of the closure of the [inaudible] facility to make sure we had product on the ground in Europe so that during that transition period when one factory was going dark and we weren’t quite up and running in the other one. I don’t think you should look for an abnormal bump in margin in another region for that.

Schon Williams – BB&T Capital Markets

Wouldn’t that have increased the margins in North America because we have got more volume running through the North American facilities than we otherwise would have? I would expect that number to come back down once we have kind of settled things in Europe. I am just wondering if that comes back off would I expect to see the gross margin tick back down just because you have lower volumes to spread your fixed costs over?

Joseph Pointer

I don’t think you are going to see that have a material impact. Clearly we are looking at what we have in capacity in North America to assist Europe’s transition in the restructuring but also going forward through a recovery in Europe we have held more capacity in the U.S. than the North American market requires primarily as that cushion for the upswing. As they are taking on more of the work in Verona there could be some more absorption for U.S. sales here. I don’t think it is a material amount you should see in the gross profit.

Operator

The next question comes from the line of Arnold Ursaner – CJS Securities.

Arnold Ursaner – CJS Securities

Can you give us the CapEx number for the remainder of 2010? I know you gave it, I just didn’t get it.

Joseph Pointer

$4 million.

Arnold Ursaner – CJS Securities

The amendment you mentioned 1.5 over LIBOR to 3 over LIBOR. Is that the move that it had or is it a range?

Joseph Pointer

That is depending upon where we fall with the ratio. It could be at the low end 1.5% to 3%.

Arnold Ursaner – CJS Securities

What was your debt before that over LIBOR?

Joseph Pointer

Take out where the ranges are. We were at 1.5 and now at 3.5 so it raises it up two percentage points.

Arnold Ursaner – CJS Securities

In terms of the amendment what flexibility did you gain if anything from it?

Joseph Pointer

The flexibility we gained was the prior agreement had no allowance for any restructuring costs so given the level of restructuring costs we are incurring we would clearly have violated the covenants. So that was one relaxation of the covenant. The second one was there was a fixed maintenance CapEx number of $15 million so if we spent less than that it was what we were credited against. That number was reduced to $8 million and the other concession we got was a change in the covenant beginning with this quarter and through I think the next 3-4 quarters, I can’t remember, but kind of an allowance assuming lower levels of business and then a pick up some time in the latter half of next year.

Robert Warren

The EBITDA ratio went from three times to four times.

Arnold Ursaner – CJS Securities

The finished goods inventory, the 37% of your inventory that is finished goods, I assume most of that is basic commodity forks or did you have customer cancellations on any finished goods of more customized equipment?

Robert Warren

Very little customized equipment. A lot of forks. As you know we took a fair number of forks into Europe that we are still sitting on in inventory. We did have some build up in the first quarter of some finished standardized product but we have worked through most of that so very little finished product in the attachment side.

Arnold Ursaner – CJS Securities

A more general question, one of the keys to your efficiencies in manufacturing is having a little backlog and having the ability to schedule work in an orderly manner. Can you give us any kind of feel for the trends of when an order comes in and your backlog versus when you manufacture on the more customized products?

Robert Warren

We have had a little bit of a backlog build up over the last month or two but our ability to process that through is really good right now so keeping that pretty low. We are processing them as they come.

Arnold Ursaner – CJS Securities

Is that still true in August and into early September?

Robert Warren

Still true.

Operator

The next question comes from the line of J. Groh – D.A. Davidson.

J. Groh – D.A. Davidson

On the remaining restructuring you have which if my arithmetic is correct is $4-9 million. I know you don’t want to get into specifics as to when and where that occurs, but can we make the assumption there is not going to be any tax benefit associated with that or is that not the case?

Joseph Pointer

You may make that assumption.

J. Groh – D.A. Davidson

Looking at this relative to past lift truck cycles what are the things you look at in terms of macro indicators that sort of help you indicate a turn? Other than what is going on with the lift truck orders, are there things traditionally you look at that are a good harbinger?

Robert Warren

We have never found one. Clearly from how our main customers forecast they have never found one.

J. Groh – D.A. Davidson

Is it safe to say this one feels a little bit different than prior downturns in terms of the speed and the intensity of it?

Robert Warren

We have never seen global markets lock up in march step they way they had in September.

Joseph Pointer

The duration here is very different. Usually it hits, stays down for a couple of months or something and you start to see the glimmer almost immediately starting. This one you just look at it and it is really flat. When you look at some of these lift trucks rates it almost begs the statistical variance of the thing.

J. Groh – D.A. Davidson

L shaped.

Joseph Pointer

We want a hockey stick. What we have got is a table top.

Operator

I show no further questions at this time. Please continue with any closing remarks.

Robert Warren

Thanks again for your time in participating today. We appreciate your interest in Cascade. Please don’t hesitate to call if we can be of any assistance.

Operator

Ladies and gentlemen that does conclude our conference for today. If you would like to listen to a replay of today’s conference please dial 303-590-3030 or 800-406-7325 followed by the access code of 4136947#. Thank you for your participation. You may now disconnect.

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Source: Cascade Corp. F2Q10 (Qtr End 07/31/09) Earnings Call Transcript
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