<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 November 30, 1995
[ ] 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 January 2, 1996, 6,239,913 shares of Common Stock, without par
value, of the registrant were outstanding.
<PAGE> 2
TUSCARORA INCORPORATED
INDEX
Page
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
November 30, 1995 and August 31, 1995 3
Condensed Consolidated Statements of
Income - Three months ended November 30,
1995 and November 30, 1994 4
Condensed Consolidated Statements of
Cash Flows - Three months ended November 30,
1995 and November 30, 1994 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
--------------------
Tuscarora Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, August 31,
1995 1995
------------ ------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,211,468 $ 2,659,767
Trade accounts receivable, net of
provision for losses 23,997,346 23,463,267
Inventories 17,304,209 18,018,610
Prepaid expenses and other current assets 2,291,627 1,452,542
------------ ------------
44,804,650 45,594,186
Property, Plant and Equipment, net 68,090,822 67,591,194
Other Assets, net 4,462,574 4,535,879
------------ ------------
Total Assets $117,358,046 $117,721,259
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
----------- --- ------------- ------
Current Liabilities
Current maturities of long-term debt $ 4,821,571 $ 4,819,255
Accounts payable 11,825,408 15,515,024
Accrued income taxes 2,014,563 365,986
Accrued payroll and related taxes 459,343 490,190
Other current liabilities 1,678,390 2,013,544
------------ ------------
20,799,275 23,203,999
Long-Term Debt - less current maturities 35,408,647 36,510,150
Deferred Income Taxes 1,855,271 1,849,078
Supplemental Pension Benefits 927,591 976,730
Other Long-Term Liabilities 403,267 407,941
------------ ------------
Total Liabilities 59,394,051 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, 6,201,460
at November 30, 1995 and 6,200,158 at
August 31, 1995 6,201,460 6,200,158
Capital surplus 2,115,205 2,259,502
Retained earnings 49,953,824 46,799,379
Foreign currency translation adjustment (109,170) (100,460)
------------ ------------
58,161,319 55,158,579
Less cost of reacquired shares of Common Stock;
13,177 shares at November 30, 1995 and 27,532
at August 31, 1995 197,324 385,218
------------ ------------
Total Shareholders' Equity 57,963,995 54,773,361
------------ ------------
Total Liabilities and Shareholders' Equity $117,358,046 $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 November 30,
1995 1994
------------ ------------
<S> <C> <C>
Net Sales $ 47,295,716 $ 38,919,823
Cost of Sales 35,338,756 29,141,468
------------ ------------
Gross profit 11,956,960 9,778,355
Selling and Administrative Expenses 6,114,268 5,092,917
Interest Expense 708,067 461,889
Other (Income) Expense (8,821) 123,804
------------ ------------
Total expenses 6,813,514 5,678,610
------------ ------------
Income before income taxes 5,143,446 4,099,745
Provision for Income Taxes 1,989,001 1,598,901
------------ ------------
Net income $ 3,154,445 $ 2,500,844
============ ============
Net income per share $.51 $.41
==== ====
Weighted average number of shares of
Common Stock outstanding 6,181,618 6,148,073
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
Tuscarora Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended November 30,
1995 1994
----------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 3,154,445 $ 2,500,844
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 2,799,084 2,429,463
Amortization 145,225 177,750
Provision for losses on receivables 120,521 170,000
Increase (decrease) in deferred income taxes 6,193 (76,211)
Gain on sale of property, plant and
equipment, net (5,755) (6,357)
Stock compensation expense 2,840 2,512
Changes in operating assets and liabilities, net
of effects of business acquisition:
Decrease (increase):
Trade accounts receivable (675,543) (1,655,146)
Inventories 704,190 (68,974)
Prepaid expenses and other current assets (841,380) (1,124,581)
Other assets (65,466) 128,216
Increase (decrease):
Accounts payable (3,670,349) (3,614,813)
Accrued income taxes 1,648,582 1,256,500
Accrued payroll and related taxes (29,855) (1,613)
Other current liabilities (289,915) 845,694
Supplemental pension benefits (49,139) (34,154)
Other long-term liabilities - -
----------- -----------
Net cash provided by operating activities 2,953,679 929,130
----------- -----------
Investing Activities
Purchase of property, plant and equipment (3,346,623) (3,515,659)
Business acquisition, net of cash acquired - (2,226,438)
Proceeds from sale of property, plant and
equipment 5,755 11,000
----------- -----------
Net cash (used for) investing activities (3,340,868) (5,731,097)
----------- -----------
Financing Activities
Proceeds from long-term debt - 3,000,000
Payments on long-term debt (1,099,186) (812,047)
Proceeds from sale of Common Stock 42,059 25,124
----------- -----------
Net cash provided by (used for) financing activities (1,057,128) 2,213,077
----------- -----------
Effects of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents (3,982) -
Net (decrease) in cash and cash equivalents (1,448,299) (2,588,890)
Cash and Cash Equivalents at Beginning of Period 2,659,767 3,671,490
----------- -----------
Cash and Cash Equivalents at End of Period $ 1,211,468 $ 1,082,600
=========== ===========
</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 November 30, 1995 and
the consolidated statements of income and consolidated statements of cash
flows for the periods ended November 30, 1995 and November 30, 1994 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 November 30,
1995 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 November 30, 1995 are
not necessarily indicative of the operating results to be expected for
the full year.
2. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
November 30, August 31,
1995 1995
------------ ------------
<S> <C> <C>
Finished goods $ 10,036,308 $ 9,317,095
Work in process 516,975 421,524
Raw materials 5,086,865 6,576,578
Supplies 1,664,061 1,703,413
------------ ------------
$ 17,304,209 $ 18,018,610
============ ============
</TABLE>
6
<PAGE> 7
3. Claims and Contingencies
Two lawsuits are pending against the Company involving claims of
sexual discrimi-nation 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 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.
4. Reclassification
Certain amounts in the Consolidated Statements of Cash Flows for the
three months ended November 30, 1994 have been reclassified to be
consistent with the presentation for the three months ended November 30,
1995.
5. Subsequent Event
On December 1, 1995, the Company exchanged 51,177 shares of its
Common Stock and a small amount of cash 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 specifica-tion
packaging in Colorado Springs, Colorado. The Company will issue
additional shares of its Common Stock to the Alpine shareholders based on
the operating results of the business acquired, accounted for as a
separate entity, for each of the years 1995 through 1998. The Company
will continue the business acquired at the same location under a
long-term lease. The acquisition will be accounted for as a purchase
transaction.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER FISCAL 1996
COMPARED TO FIRST QUARTER FISCAL 1995
Net sales for the quarter ended November 30, 1995 totaled $47.3 million,
an increase of 21.5% from net sales of $38.9 million for the same quarter of
fiscal 1995. Approximately 62% of the increase in net sales was attributable
to continued growth in most of the markets and geographic regions which the
Company serves. The balance of the increase in net sales is a result of the
acquisition of M. Y. Trondex Ltd., a similar business in Northampton, England
and Glasgow, Scotland in February 1995. Based on current customer order
placement rates and anticipated continued economic strength, sales gains are
expected to be favorable for the balance of fiscal 1996.
Gross profit for the quarter ended November 30, 1995 was $12.0 million, a
22.3% increase from $9.8 million in the first quarter of fiscal 1995. The
gross profit margin increased to 25.3% from 25.1% primarily due to the
increased sales level which resulted in improvements in manufacturing
efficiency in both the Company's custom molding and integrated materials
operations and to a lesser extent, lower EPS raw material costs per pound
throughout the quarter. This improvement in the gross profit margin was
achieved despite below-average profit margins at the UK operations.
Selling and administrative expenses increased $1.0 million or 20.1% for
the quarter ended November 30, 1995, but decreased as a percentage of net sales
to 12.9% compared to 13.1% for the same period in fiscal 1995. The dollar
increase was primarily due to the expenses added as a result of the acquisition
in February 1995.
Interest expense for the quarter ended November 30, 1995 was $708,000
compared to $462,000 in the first quarter of fiscal 1995. The increase of
$246,000 or 53.2% was due to an increase in long-term debt incurred in fiscal
1995 and to higher interest rates throughout the quarter than in the first
quarter of fiscal 1995.
Income before income taxes for the quarter ended November 30, 1995
increased to $5.1 million from $4.1 million for the same period of fiscal 1995,
an increase of $1.0 million or 25.5%. The provision for income taxes for the
quarter ended November 30, 1995 increased due to the increased income before
income taxes.
Net income for the quarter ended November 30, 1995 was $3.2 million, an
increase of 26.1% from $2.5 million for 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 for the three months ended November 30, 1995
were Company records for a first fiscal quarter.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended
November 30, 1995 amounted to $3.0 million compared to $929,000 for the same
period in fiscal 1995. Depreciation and amortization for the same three-month
periods amounted to $2.8 million and $2.4 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.
During the three months ended November 30, 1995, 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. The Company's accounts
receivable increased slightly as a result of the higher manufacturing activity.
Capital expenditures during the three months ended November 30, 1995
amounted to $3.3 million, including capital expenditures for environmental
equipment of $183,000. Approximately two thirds of the capital expenditures
during the quarter was for machinery and equipment and approximately one third
of the capital expenditures during the quarter was for land, buildings and
improvements. Subsequent to the end of the quarter, the Company exchanged
51,177 shares of its Common Stock and a small amount of cash having an
aggregate value of $1.3 million for all the outstanding capital stock of Alpine
Packaging, Inc. (see Note 5 to the Condensed Consolidated Financial
Statements). The Company has also announced that it will establish custom
molding manufacturing facilities in Spennymoor in northeast England and in
Storm Lake, Iowa.
Total debt of the Company amounted to $40.2 million at November 30, 1995,
of which $35.3 million was borrowed under a credit agreement with the Company's
principal bank, including $5.5 million out of an available $14.0 million under
a revolving credit agreement. Total debt amounted to $41.3 million at August
31, 1995. No borrowings were made during the three months ended November 30,
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. A cash dividend of $.11 per share was paid in January
1995.
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 3 to the Condensed Consolidated Financial
Statements. The Company will continue to look for the acquisition 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.
9
<PAGE> 10
PART II. OTHER INFORMATION
Item. 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
Exhibit No. Document
----------- --------
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
A Form 8-K, dated August 21, 1995, containing a description of the
registrant's Common Stock, without par value, was filed on August 22, 1995.
The filing of the description was reported under Item 5 and the actual
description filed as Exhibit 99 to the Form 8-K. The description, which
contains the information required by Item 202 of Regulation S-K, replaces the
description of the registrant's Common Stock contained in a Form 8-K dated
August 26, 1991 and filed September 4, 1991.
10
<PAGE> 11
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)
Tuscarora Incorporated
(Registrant)
Date: January , 1996 By /s/ JOHN P. O'LEARY, JR.
--------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: January , 1996 By /s/ BRIAN C. MULLINS
--------------------------
Brian C. Mullins,
Vice President and
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
11
<PAGE> 12
Tuscarora Incorporated
FORM 10-Q FOR QUARTER ENDED NOVEMBER 30, 1995
EXHIBIT INDEX
The following exhibits are filed as a part of this quarterly report
on Form 10-Q.
Exhibit
No. Document
------- --------
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
12
<PAGE> 1
Tuscarora Incorporated
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended November 30,
-------------------------------------
1995 1994
----- -----
(In thousands, except per share data)
<S> <C> <C>
PRIMARY
Weighted average number of shares of
Common Stock outstanding 6,182 6,148
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 135 85
----- -----
TOTAL 6,317 6,233
===== =====
Net income 3,154 2,501
===== =====
Per share amount $ .50 $ .40
===== =====
FULLY DILUTED
Weighted average number of shares of
Common Stock outstanding 6,182 6,148
Net effect of dilutive stock options -
based on the treasury stock method
using greater of average market price
or closing market price 136 94
----- -----
TOTAL 6,318 6,242
===== =====
Net income 3,154 2,501
===== =====
Per share amount $ .50 $ .40
===== =====
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000821538
<NAME> TUSCARORA INC. 10-Q
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 1,211,468
<SECURITIES> 0
<RECEIVABLES> 24,796,745
<ALLOWANCES> 799,399
<INVENTORY> 17,304,209
<CURRENT-ASSETS> 44,804,650
<PP&E> 139,636,312
<DEPRECIATION> 71,545,490
<TOTAL-ASSETS> 117,358,046
<CURRENT-LIABILITIES> 20,799,275
<BONDS> 35,408,647
<COMMON> 6,201,460
0
0
<OTHER-SE> 51,762,535
<TOTAL-LIABILITY-AND-EQUITY> 117,358,046
<SALES> 47,295,716
<TOTAL-REVENUES> 47,295,716
<CGS> 35,338,756
<TOTAL-COSTS> 35,338,756
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 120,521
<INTEREST-EXPENSE> 708,067
<INCOME-PRETAX> 5,143,446
<INCOME-TAX> 1,989,001
<INCOME-CONTINUING> 3,154,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,154,445
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
