Our businesses globally manufacture and distribute material handling load engagement products primarily for the lift truck industry and to a lesser extent the construction industry. We operate in four geographic segments: North America, Europe, Asia Pacific and China. All references to fiscal periods are defined as the period ended April 30, 2008 (fiscal 2009) and the period ended April 30, 2009 (fiscal 2010).

Global Economic Conditions

During the first quarter of fiscal 2010, the significant decline in global economic conditions continued, which included depressed demand for lift trucks and our products. Lift truck shipment rates for the current year were down significantly in every region and globally were 45% below the prior year. It is very difficult to estimate the prolonged effect this downturn will have on our future business. We continue to implement actions throughout our operations to deal with this very challenging global business environment. We believe our cash and cash equivalents, existing credit facilities and cash flows from operations will be sufficient to satisfy our expected working capital, capital expenditures and debt retirement requirements for the next twelve months.

European Restructuring

During the first quarter of fiscal 2010, we continued steps to modify the structure of our European operations in light of the current economic environment. We closed our fork manufacturing facility in France in March 2009, at a total cost of $4.4 million. In May 2009, we announced our intention to cease production at our attachment facility in The Netherlands. We have initiated discussions with the local works council. We do not anticipate improved operational results in Europe during the remainder of fiscal 2010 because of these costs, the operational disruption caused by the restructuring activities and the current European economic conditions.

           COMPARISON OF FIRST QUARTER OF FISCAL 2010 AND FISCAL 2009

Executive Summary



                                              Three Months Ended April 30
                                                 2009               2008         Change       Change %
                                              (In thousands except per share amounts)
Net sales                                  $         76,316    $      149,867   $ (73,551 )        (49 %)
Operating income (loss)                    $        (8,999)    $       17,752   $ (26,751 )       (151 %)
Income (loss) before taxes                 $        (9,312)    $       16,607   $ (25,919 )       (156 %)
Provision for income taxes                 $          2,761    $        5,749   $  (2,988 )        (52 %)
Effective tax rate                                    (30%)               35%        (65% )       (186 %)
Net income (loss)                          $       (12,073)    $       10,858   $ (22,931 )       (211 %)
Diluted earnings (loss) per share          $         (1.12)    $         0.98   $   (2.10 )       (214 %)

The following is an overview for the first quarter of fiscal 2010:

• Consolidated net sales decreased 44%, excluding the impact of foreign currencies, as a result of the general economic downturn and a weak lift truck market. Global lift truck shipments were down 45% compared to the prior year.

• Our consolidated gross profit percentage decreased during fiscal 2010, primarily as a result of unabsorbed fixed and variable costs due to lower sales volumes.

• We incurred restructuring costs of $4.8 million during fiscal 2010, primarily as a result of the closure of our fork facility in France.

• Based on cash flow from operations, we were able to pay down outstanding debt by $22 million during the quarter ended April 30, 2009.

• The income tax expense during fiscal 2010 is a result of taxes due in countries where we are generating income. We are currently unable to realize a tax benefit in several European countries where we have incurred losses.

North America



                                                 Three Months Ended April 30
                                               2009         %        2008      %       Change       Change %
                                                       (In thousands)
Net sales                                   $   37,882      94 %   $ 69,320    90 %   $ (31,438 )        (45 %)
Transfers between areas                          2,317       6 %      7,719    10 %      (5,402 )        (70 %)

Net sales and transfers                         40,199     100 %     77,039   100 %     (36,840 )        (48 %)
Cost of goods sold                              29,353      73 %     52,788    69 %     (23,435 )        (44 %)

Gross profit                                    10,846      27 %     24,251    31 %     (13,405 )        (55 %)
Selling and administrative                      10,732      27 %     12,749    16 %      (2,017 )        (16 %)
Loss (gain) on disposition of assets, net           (3 )    -           120    -           (123 )         -
Amortization                                        48      -           597     1 %        (549 )        (92 %)

Operating income                            $       69       0 %   $ 10,785    14 %   $ (10,716 )        (99 %)

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

                                             Amount       Change %
                  Net sales change          $ (30,598 )        (44 %)
                  Foreign currency change        (840 )         (1 %)

                  Total                     $ (31,438 )        (45 %)

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

• Net sales decreased 44% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments decreased 35% for the quarter. We have found that lift truck industry statistics provide an indication of the direction of our business activity. However, changes in our net sales do not correspond directly to the percentages changes in lift truck shipments or orders.

• Transfers to other Cascade locations decreased 70% during fiscal 2010 due to lower global customer demand and efforts to reduce inventory on hand.

• Our gross profit percentage decreased due to significantly lower sales volumes which resulted in unabsorbed fixed and variable costs. Most facilities in North America had reduced work schedules during the first quarter of fiscal 2010.

• Selling and administrative costs decreased 14% due to lower personnel, consulting and other general costs, which were partially offset by higher warranty costs.

Europe



                                                  Three Months Ended April 30
                                              2009         %         2008        %        Change       Change %
                                                        (In thousands)
Net sales                                   $  20,877      98 %    $ 49,336      99 %    $ (28,459 )        (58 %)
Transfers between areas                           504       2 %         581       1 %          (77 )        (13 %)

Net sales and transfers                        21,381     100 %      49,917     100 %      (28,536 )        (57 %)
Cost of goods sold                             23,409     109 %      42,525      85 %      (19,116 )        (45 %)

Gross profit (loss)                            (2,028 )    (9 %)      7,392      15 %       (9,420 )       (127 %)
Selling and administrative                      5,202      25 %       7,311      15 %       (2,109 )        (29 %)
Loss (gain) on disposition of assets, net           5       0 %          (1 )    -               6           -
Amortization                                       66      -             78      -             (12 )        (15 %)
Restructuring costs                             4,777      22 %         320       1 %        4,457           -

Operating loss                              $ (12,078 )   (56 %)   $   (316 )    (1 %)   $ (11,762 )         -

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

                                             Amount       Change %
                  Net sales change          $ (24,180 )        (49 %)
                  Foreign currency change      (4,279 )         (9 %)

                  Total                     $ (28,459 )        (58 %)

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

• Net sales decreased 49% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments decreased 55% for the quarter.

• Our gross profit percentage decreased primarily due to significantly lower sales volumes, which resulted in unabsorbed fixed and variable costs. Most facilities in Europe had reduced work schedules during the first quarter of fiscal 2010. In addition, we recorded inventory write downs of $1 million to reflect losses we expect to incur on certain customer orders which will be shipped in subsequent quarters.

• Selling and administrative costs decreased 17% primarily due to lower personnel costs as a result of headcount reductions made during our European restructuring activities.

• Restructuring costs were primarily a result of the closure of our fork manufacturing facility in France. These costs include employee wage and benefit costs of $3.3 million, fixed asset write downs of $912,000 and legal and other restructuring costs of $532,000.

• In May 2009 we initiated discussions with the local works council at our facility in Almere, The Netherlands regarding our intention to cease production operations. Our current plans are to continue to maintain sales and certain administrative functions and our European Parts Depot in The Netherlands and shift production capacity to other Cascade facilities. We intend to continue to provide a full-range of products to our European customers We estimate the costs for the Almere restructuring could be in the range of $8-10 million and will be incurred by the end of fiscal 2010.

Asia Pacific



                                                  Three Months Ended April 30
                                                2009       %        2008        %       Change      Change %
                                                        (In thousands)
Net sales                                    $   10,720   100 %   $ 19,180     100 %   $ (8,460 )        (44 %)
Transfers between areas                               1    -            83      -           (82 )        (99 %)

Net sales and transfers                          10,721   100 %     19,263     100 %     (8,542 )        (44 %)
Cost of goods sold                                8,131    76 %     14,149      74 %     (6,018 )        (43 %)

Gross profit                                      2,590    24 %      5,114      26 %     (2,524 )        (49 %)
Selling and administrative                        1,621    15 %      2,339      12 %       (718 )        (31 %)
Gain on disposition of assets, net                   -     -            (3 )    -             3           -

Operating income                             $      969     9 %   $  2,778      14 %   $ (1,809 )        (65 %)

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

                                             Amount      Change %
                  Net sales change          $ (6,137 )        (32 %)
                  Foreign currency change     (2,323 )        (12 %)

                  Total                     $ (8,460 )        (44 %)

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

• Net sales decreased 32% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments for the quarter decreased 47%.

• Our gross profit percentage decreased due to lower sales volumes and fluctuations in foreign currency rates.

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

China



                                                  Three Months Ended April 30
                                               2009        %        2008        %       Change      Change %
                                                        (In thousands)
Net sales                                    $   6,837     75 %   $ 12,031      66 %   $ (5,194 )        (43 %)
Transfers between areas                          2,311     25 %      6,150      34 %     (3,839 )        (62 %)

Net sales and transfers                          9,148    100 %     18,181     100 %     (9,033 )        (50 %)
Cost of goods sold                               6,087     67 %     12,590      69 %     (6,503 )        (52 %)

Gross profit                                     3,061     33 %      5,591      31 %     (2,530 )        (45 %)
Selling and administrative                       1,001     11 %      1,087       6 %        (86 )         (8 %)
Loss (gain) on disposition of assets, net           19     -            (1 )    -            20           -

Operating income                             $   2,041     22 %   $  4,505      25 %   $ (2,464 )        (55 %)

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

                                             Amount      Change %
                  Net sales change          $ (5,428 )        (45 %)
                  Foreign currency change        234            2 %

                  Total                     $ (5,194 )        (43 %)

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

• Net sales decreased 45% primarily due to lower sales volumes as a result of the general economic downturn and a weak lift truck market. Lift truck industry shipments for the quarter decreased 29%. We do not feel we have lost market share even with the disparity between our shipments and industry shipments. This is due to two factors. First, industry shipments do not include lift trucks exported outside of China. Lift truck exports decreased 63% in the current year. Chinese lift truck manufacturers also continued to work down existing inventories which has slowed the rate of our orders.

• Transfers to other Cascade locations decreased 62% during fiscal 2010 due to lower customer demand in Europe and Asia Pacific and efforts to reduce on-hand inventory.

• Our gross profit percentage increased due to product mix, price increases implemented in the prior year and lower intercompany transfers, which carry lower gross margins.

• Selling and administrative costs decreased 11% due to lower personnel and other general costs.

Non-Operating Items

The following are financial highlights for non-operating items during the first quarter of fiscal 2010:

• Interest expense decreased $705,000 during fiscal 2010 primarily due to lower long-term debt levels and lower interest rates in the current year.

• The effective tax rate was (30%) compared to 35% for the first quarter of fiscal 2009. The provision for income taxes in the first quarter of fiscal 2010 is primarily related to an increase in valuation allowances for pre-tax losses in Europe where no benefit can be realized in the foreseeable future.

Lift Truck Market Outlook

Global lift truck shipments are at their lowest levels since the early 1980's. The uncertainty around the depth and duration of this recession makes it very difficult to estimate the effect on the global lift truck market in the future. However we are anticipating that the decline in global demand for lift trucks will continue through the remainder of fiscal 2010 and into 2011.

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

CASH FLOWS

Free Cash Flow

We believe free cash flow, a non-GAAP measure defined as cash from operating
activities less capital expenditures, is an important metric when measuring the
cash required to operate our business. The following table presents a summary of
our free cash flow generated during the three months ended April 30, 2009 and
April 30, 2008.



                                                Three Months Ended April 30
                                                 2009                 2008
                                                      (In thousands)
      Cash flow from operating activities           15,071               15,485
      Capital expenditures                            (784 )             (3,903 )

      Free cash flow                        $       14,287       $       11,582

Statements of Cash Flows

The statements of cash flows reflect the changes in cash and cash equivalents for the three months ended April 30, 2009 and April 30, 2008 by classifying transactions into three major categories of activities: operating, investing and financing.

The following table presents a summary of our cash flows for the first three months of fiscal 2010 and 2009.