<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission file number 0-17051
Tuscarora Incorporated
(Exact name of registrant as specified in the charter.)
Pennsylvania 25-1119372
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
800 Fifth Avenue
New Brighton, Pennsylvania 15066
(Address of principal executive offices)
(Zip Code)
412-843-8200
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes X No
--- ---
As of July 1, 1996, 6,274,068 shares of Common Stock, without par
value, of the registrant were outstanding.
<PAGE> 2
TUSCARORA INCORPORATED
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
May 31, 1996 and August 31, 1995 3
Condensed Consolidated Statements of
Income - Three and nine month periods
ended May 31, 1996 and May 31, 1995 4
Condensed Consolidated Statements of
Cash Flows - Nine Months ended May 31,
1996 and May 31, 1995 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-10
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Tuscarora Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents $ 818,898 $ 2,659,767
Trade accounts receivable, net of
provision for losses 23,129,616 23,463,267
Inventories 17,383,108 18,018,610
Prepaid expenses and other current assets 2,926,706 1,452,542
------------ ------------
44,258,328 45,594,186
Property, Plant and Equipment, net 76,050,677 67,591,194
Other Assets, net 5,069,555 4,535,879
------------ ------------
Total Assets $125,378,560 $117,721,259
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
----------- --- ------------- ------
Current Liabilities
Current maturities of long-term debt $ 4,828,615 $ 4,819,255
Accounts payable 14,529,721 15,515,024
Accrued income taxes 212,729 365,986
Accrued payroll and related taxes 490,550 490,190
Other current liabilities 544,337 2,013,544
------------ ------------
20,605,952 23,203,999
Long-Term Debt - less current maturities 38,363,084 36,510,150
Deferred Income Taxes 1,723,232 1,849,078
Supplemental Pension Benefits 927,591 976,730
Other Long-Term Liabilities 407,572 407,941
------------ ------------
Total Liabilities 62,027,431 62,947,898
Shareholders' Equity
Preferred Stock - par value $.01 per share;
authorized shares, 1,000,000; none issued --
Common Stock - without par value; authorized
shares, 20,000,000; issued shares, 6,282,955
at May 31, 1996 and 6,200,158 at
August 31, 1995 6,282,955 6,200,158
Capital surplus 3,852,902 2,259,502
Retained earnings 53,500,532 46,799,379
Foreign currency translation adjustment (141,150) (100,460)
------------ ------------
63,495,239 55,158,579
Less cost of reacquired shares of Common Stock;
9,359 at May 31, 1996 and 27,532 at
August 31, 1995 144,110 385,218
------------ ------------
Total Shareholders' Equity 63,351,129 54,773,361
------------ ------------
Total Liabilities and Shareholders' Equity $125,378,560 $117,721,259
============ ============
</TABLE>
Note: The consolidated balance sheet at August 31, 1995 has been taken from
the audited financial statements and condensed.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
Tuscarora Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended May 31, Nine Months Ended May 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 45,113,282 $ 40,969,579 $135,597,020 $117,779,573
Cost of Sales 34,563,391 31,195,128 103,176,672 89,451,180
------------ ------------ ------------ ------------
Gross profit 10,549,891 9,774,451 32,420,348 28,328,393
Selling and Administrative
Expenses 5,903,900 5,267,184 18,003,941 15,497,172
Interest Expense 693,752 647,976 2,087,718 1,679,263
Other (income) Expense 78,323 22,951 46,208 174,553
------------ ------------ ------------ ------------
6,675,975 5,938,111 20,137,867 17,350,988
------------ ------------ ------------ ------------
Income before income
taxes 3,873,916 3,836,340 12,282,481 10,977,405
Provision for Income Taxes 1,502,649 1,491,173 4,770,074 4,291,395
------------ ------------ ------------ ------------
Net income $ 2,371,267 $ 2,345,167 $ 7,512,407 $ 6,686,010
============ ============ ============ ============
Net income per share $.38 $.38 $1.21 $1.09
==== ==== ===== =====
Weighted average number of
shares of Common Stock
outstanding 6,266,136 6,152,569 6,229,896 6,150,454
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
Tuscarora Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended May 31,
1996 1995
------------ -----------
<S> <C> <C>
Operating Activities
Net Income $ 7,512,407 $ 6,686,010
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 9,062,681 7,501,718
Amortization 429,159 474,705
Provision for losses on receivables 360,000 392,820
(Decrease) in deferred income taxes ( 145,402) ( 30,455)
Loss on sale of property, plant
and equipment, net 96,387 43,695
Stock compensation expense 9,122 7,717
Changes in operating assets and liabilities, net
of effects of business acquisitions:
Decrease (increase):
Trade accounts receivable 392,290 ( 835,196)
Inventories 832,991 ( 5,457,903)
Prepaid expenses and other current assets ( 1,463,571) ( 1,001,471)
Other assets ( 178,432) 428,020
Increase (decrease):
Accounts payable ( 1,134,610) 3,173,056
Accrued income taxes ( 222,581) 26,703
Accrued payroll and related taxes ( 1,704) 545,586
Other current liabilities ( 1,509,428) ( 867,425)
Supplemental pension benefits ( 49,139) ( 58,952)
------------ ------------
Net cash provided by operating activities 13,990,170 11,028,628
------------ ------------
Investing Activities
Purchase of property, plant and equipment (17,135,608) (15,097,666)
Business acquisitions, net of cash acquired 89,022 ( 5,679,929)
Proceeds from sale of property, plant and
equipment 12,080 173,937
------------ ------------
Net cash (used for) investing activities (17,034,506) (20,603,658)
------------ ------------
Financing Activities
Proceeds from long-term debt 5,500,000 9,545,000
Payments on long-term debt ( 3,758,638) ( 2,874,079)
Dividends paid ( 811,254) ( 676,594)
Proceeds from sale of Common Stock 277,602 79,064
------------ ------------
Net cash provided by financing activities 1,207,710 6,073,391
------------ ------------
Effects of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents ( 4,243) 32,731
------------ ------------
Net (decrease) in cash and cash equivalents ( 1,840,869) ( 3,468,908)
Cash and Cash Equivalents at Beginning of Period 2,659,767 3,671,490
------------ ------------
Cash and Cash Equivalents at End of Period $ 818,898 $ 202,582
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
Tuscarora Incorporated
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheet at May 31, 1996 and the
consolidated statements of income and consolidated statements of cash
flows for the periods ended May 31, 1996 and May 31, 1995 have been
prepared by the Company, without audit. In the opinion of Management,
all adjustments necessary to present fairly the financial position,
results of operations and changes in cash flows at May 31, 1996 and for
the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's 1995 Annual Report to Shareholders and incorporated by
reference in the Company's annual report on Form 10-K for the fiscal year
ended August 31, 1995.
The results of operations for the period ended May 31, 1996 are not
necessarily indicative of the operating results to be expected for the
full year.
2. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
May 31, August 31,
1996 1995
----------- -----------
<S> <C> <C>
Finished goods $10,632,932 $ 9,317,095
Work in process 363,912 421,524
Raw materials 4,818,061 6,576,578
Supplies 1,568,203 1,703,413
----------- -----------
$17,383,108 $18,018,610
=========== ===========
</TABLE>
3. Acquisition
On December 1, 1995, the Company exchanged 51,177 shares of its
Common Stock and $20,038, having an aggregate value of $1,275,000, for
all the outstanding capital stock of Alpine Packaging, Inc., a designer
and manufacturer of specialty corrugated packaging, custom assembled wood
pallets and technical/military specification packaging in Colorado
Springs, Colorado. The Company agreed to issue additional shares of its
Common Stock and cash to the Alpine shareholders based on the operating
results of the business acquired, accounted for as a separate entity, for
each of the calendar years 1995 through 1998. On March 31, 1996, the
Company issued 16,187 additional shares of its Common Stock and $40,044,
having an aggregate value of $416,000 in payment of its obligation under
the acquisition agreement for 1995. The Company is continuing the
business acquired at the same location under a long-term lease. The
acquisition was accounted for as a purchase transaction. The Condensed
Consolidated Statement of Cash Flows for the nine months ended May 31,
1996 excludes the non-cash consideration related to the acquisition.
6
<PAGE> 7
4. Claims and Contingencies
Three lawsuits are pending against the Company involving claims of
sexual discrimination and harassment in which compensatory and punitive
damages are sought. The Company is vigorously contesting these lawsuits
and believes that, consistent with a policy in place for many years, it
promptly, reasonably and effectively responded to all incidents alleged.
Other employment related claims are pending before Federal and State
agencies.
The Company is also involved in certain legal and administrative
proceedings, including one with respect to a Superfund site, which may
result in the Company becoming liable for a portion of certain
environmental cleanup costs. With respect to these matters, the Company
believes that its share of the costs should not be significant. The
Company has accrued for its estimated share of the costs resulting from
the environmental claims.
In the opinion of Management, the disposition of the employment and
environmental claims should not have a material adverse effect on the
Company's financial position.
5. Reclassification
Certain amounts in the Consolidated Statements of Cash Flows for the
nine months ended May 31, 1995 have been reclassified to be consistent
with the presentation for the nine months ended May 31, 1996.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - THIRD QUARTER FISCAL 1996
COMPARED TO THIRD QUARTER FISCAL 1995
Net sales for the quarter ended May 31, 1996 were $45.1 million,
representing an increase of $4.1 million, or 10.1%, over the same quarter of
fiscal 1995. Approximately 19.4% of the increase in net sales was due to the
acquisition of the similar business of Alpine Packaging, Inc. in Colorado
Springs, Colorado in December 1995. The balance of the increase was due to
increased sales in most of the Company's key markets for both custom molded and
integrated materials products. The sales increase was achieved despite a
reduction in selling prices to most of the Company's custom molded customers
commencing in December 1995.
Notwithstanding the above, shipping rates slowed during the third
quarter, particularly toward the end of the period, as many of the Company's
large industrial customers reduced their production rates in order to adjust
their finished goods inventories. The Company expects that fourth quarter
shipments will be similarly affected.
Gross profit for the quarter ended May 31, 1996 was $10.5 million, a 7.9%
increase from $9.8 million in the third quarter of fiscal 1995. The gross
profit margin decreased to 23.4% from 23.9% primarily as a result of the lower
selling prices which were only partially offset by lower EPS resin costs. The
decrease in gross profit margin occurred despite gross margin improvement in
the Company's UK operations as well as in its integrated materials business.
Selling and administrative expenses increased $637,000 or 12.1% for the
quarter ended May 31, 1996 and increased slightly as a percentage of net sales
to 13.1% compared to 12.9% in the same period of fiscal 1995. The dollar
increase is due primarily to increased employee costs and increased
professional fees.
Interest expense for the quarter ended May 31, 1996 was $694,000 compared
to $648,000 in the third quarter of fiscal 1995. The increase of $46,000, or
7.1%, is due to an increase in long-term debt most of which occurred in fiscal
1995.
Income before income taxes for the quarter ended May 31, 1996 increased to
$3.9 million from $3.8 million in the same period of fiscal 1995, an increase
of $38,000 or 1.0%. The provision for income taxes for the quarter ended May
31, 1996 increased due to the increased income before income taxes.
Net income for the quarter ended May 31, 1996 was $2.4 million, an
increase of 1.1% from the $2.3 million earned in the same quarter of fiscal
1995. The increase was due primarily to the increases in net sales and gross
profit.
While the net sales and net income were Company records for a third
fiscal quarter, the growth rate in both sales and net income was less than in
the prior 1996 fiscal quarters.
8
<PAGE> 9
RESULTS OF OPERATIONS - NINE MONTHS ENDED MAY 31, 1996
COMPARED TO THE NINE MONTHS ENDED MAY 31, 1995
Net sales for the nine months ended May 31, 1996 were $135.6 million,
representing an increase of $17.8 million, or 15.1%, over the same period of
fiscal 1995. Approximately 37.2% of the sales increase was attributable to the
M.Y. Trondex Ltd. and Alpine Packaging, Inc. acquisitions in February 1995 and
December 1995, respectively. The balance of the increase is attributable to
higher sales of both custom molded and integrated materials products in most
major markets that the Company serves, particularly the major appliance and
automotive markets. The increase was achieved despite the reduction in selling
prices commencing in December 1995.
Gross profit for the nine months ended May 31, 1996 was $32.4 million, a
14.4% increase from $28.3 million in the same period of fiscal 1995. The gross
profit margin for the current nine-month period decreased to 23.9% compared to
24.1% in the same period of fiscal 1995. The gross profit margin decrease is
due primarily to lower selling prices which were only partially offset by
reduced EPS resin costs.
Selling and administrative expenses increased $2.5 million or 16.2% for
the nine months ended May 31, 1996 and increased slightly as a percentage of
net sales to 13.3% compared to 13.2% in the same period of fiscal 1995. The
dollar increase is due primarily to the expenses added as a result of the
acquisition in February 1995, other increased employee costs and increased
professional fees.
Interest expense for the nine months ended May 31, 1996 was $2.1 million
compared to $1.7 million in the first nine months of fiscal 1995. The increase
of $408,000, or 24.3%, is due to the increase in long-term debt and to
slightly higher interest rates during the first nine months of fiscal 1996.
Income before income taxes for the nine months ended May 31, 1996
increased to $12.3 million from $11.0 million in the same period of fiscal
1995, an increase of $1.3 million or 11.9%. The provision for income taxes for
the nine months ended May 31, 1996 increased due to the increased income before
income taxes.
Net income for the nine months ended May 31, 1996 was $7.5 million, an
increase of 12.4% from the $6.7 million earned in the same period of fiscal
1995. The increase was due primarily to the increases in net sales and gross
profit.
The net sales and net income were Company records for a nine-month period.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the nine months ended May
31, 1996 amounted to $14.0 million compared to $11.0 million for the same
period in fiscal 1995. Depreciation and amortization for the same nine month
periods amounted to $9.5 million and $8.0 million, respectively. Because a
substantial portion of cash flow provided from operations results from
depreciation and amortization, the Company believes that its liquidity would
not be adversely affected should a period of reduced earnings occur.
9
<PAGE> 10
During the nine months ended May 31, 1996, the Company's inventories and
accounts payable decreased despite the higher manufacturing activity, primarily
due to the Company maintaining minimum raw material inventory levels as raw
material prices trended lower during the period.
Capital expenditures for property, plant and equipment during the nine
months ended May 31, 1996 amounted to $17.1, including approximately $580,000
for environmental equipment. In December 1995 and March 1996, the Company
exchanged a total of 67,364 shares of its Common Stock and paid $60,082 in cash
having an aggregate value of $1.7 million in connection with the acquisition of
all the outstanding capital stock of Alpine Packaging, Inc. (see Note 3 to the
Condensed Consolidated Financial Statements).
Total long-term debt of the Company amounted to $43.2 million at May 31,
1996, of which $40.7 million was borrowed under a credit agreement with the
Company's principal bank, including $11.0 million out of an available $14.0
million under a revolving credit agreement. During the nine months ended May
31, 1996, $5.5 million was borrowed under the revolving credit agreement.
Total long-term debt amounted to $41.3 million at August 31, 1995.
On December 14, 1995, the Company declared its regular semiannual cash
dividend of $.13 per share payable on January 5, 1996 to shareholders of record
on December 26, 1995. On June 14, 1996, the Company declared its regular
semiannual cash dividend of $.13 per share payable on July 5, 1996 to
shareholders of record on June 25, 1996. Cash dividends of $.11 and $.12 per
share were paid in January and July 1995, respectively.
Cash provided by operating activities as supplemented by the amount
available under the bank credit agreement should be sufficient to enable the
Company to continue to fund its operating requirements, capital expenditures
and cash dividends, as well as any payments required to satisfy any claims and
contingencies referred to under Note 4 to the Condensed Consolidated Financial
Statements. The Company will continue to look for acquisitions of similar or
related businesses.
INFLATION
The impact of inflation on the Company's financial position and results of
operations has not been significant during the periods discussed.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following exhibits are filed as a part of this report:
<TABLE>
<CAPTION>
Exhibit No. Document
----------- ----------------------------------------------------
<S> <C>
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
</TABLE>
(b) REPORTS ON FORM 8-K
No events which resulted in the filing of a current report on Form
8-K occurred during the fiscal quarter ended May 31, 1996.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tuscarora Incorporated
(Registrant)
Date: July 15, 1996 By /s/ John P. O'Leary, Jr.
---------------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: July 15, 1996 By /s/ Brian C. Mullins
---------------------------------
Brian C. Mullins,
Vice President and
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
12
<PAGE> 13
Tuscarora Incorporated
FORM 10-Q FOR QUARTER ENDED MAY 31, 1996
EXHIBIT INDEX
The following exhibits are filed as a part of this quarterly report on
Form 10-Q.
<TABLE>
<CAPTION>
Exhibit
No. Document
- ----------- ------------------------------------------
<S> <C>
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
</TABLE>
13
<PAGE> 1
Tuscarora Incorporated
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 31, May 31,
1996 1995 1996 1995
----- ----- ----- -----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
PRIMARY
Weighted average number of
shares of Common Stock
outstanding 6,266 6,153 6,230 6,150
Net effect of dilutive stock
options - based on the
treasury stock method using
average market price 128 124 127 106
----- ----- ----- -----
TOTAL 6,394 6,277 6,357 6,256
===== ===== ===== =====
Net income 2,371 2,345 7,512 6,686
===== ===== ===== =====
Per share amount $ .37 $ .37 $1.18 $1.07
===== ===== ===== =====
FULLY DILUTED
Weighted average number of
shares of Common Stock
outstanding 6,266 6,153 6,230 6,150
Net effect of dilutive stock
options - based on the
treasury stock method using
greater of average market
price or closing market price 130 124 130 123
----- ----- ----- -----
TOTAL 6,396 6,277 6,360 6,273
===== ===== ===== =====
Net income 2,371 2,345 7,512 6,686
===== ===== ===== =====
Per share amount $ .37 $ .37 $1.18 $1.07
===== ===== ===== =====
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 818,898
<SECURITIES> 0
<RECEIVABLES> 23,998,615
<ALLOWANCES> 868,999
<INVENTORY> 17,383,108
<CURRENT-ASSETS> 44,258,328
<PP&E> 153,403,486
<DEPRECIATION> 77,352,809
<TOTAL-ASSETS> 125,378,560
<CURRENT-LIABILITIES> 20,605,952
<BONDS> 38,363,084
0
0
<COMMON> 6,282,955
<OTHER-SE> 57,068,174
<TOTAL-LIABILITY-AND-EQUITY> 125,378,560
<SALES> 135,597,020
<TOTAL-REVENUES> 135,597,020
<CGS> 103,176,672
<TOTAL-COSTS> 103,176,672
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 360,000
<INTEREST-EXPENSE> 2,087,718
<INCOME-PRETAX> 12,282,481
<INCOME-TAX> 4,770,074
<INCOME-CONTINUING> 7,512,407
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,512,407
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
