<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, 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 January 2, 1997, 9,445,260 shares of Common Stock, without par
value, of the registrant were outstanding after giving effect to the 50% share
distribution declared on December 18, 1996 payable on January 13, 1997 to
holders of record on December 27, 1996.
<PAGE> 2
Tuscarora Incorporated
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
November 30, 1996 and August 31, 1996 3
Condensed Consolidated Statements of
Income - Three months ended November 30,
1996 and November 30, 1995 4
Condensed Consolidated Statements of
Cash Flows - Three months ended November 30,
1996 and November 30, 1995 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-9
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Tuscarora Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, August 31,
1996 1996
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents $ 316,218 $ 3,379,776
Trade accounts receivable, net of
provision for losses 30,981,214 26,094,406
Inventories 17,629,474 15,666,880
Prepaid expenses and other current assets 3,187,525 1,771,694
------------ ------------
52,114,431 46,912,756
Property, Plant and Equipment, net 83,033,222 78,709,646
Other Assets
Goodwill 4,697,946 3,406,779
Other non-current assets 2,237,841 2,140,261
------------ ------------
Total Assets $142,083,440 $131,169,442
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
----------- --- ------------- ------
Current Liabilities
Current maturities of long-term debt $ 5,315,974 $ 5,346,335
Accounts payable 13,866,851 16,416,387
Accrued income taxes 2,313,903 153,930
Accrued payroll and related taxes 594,981 595,282
Other current liabilities 2,205,200 1,176,918
------------ ------------
24,296,909 23,688,852
Long-Term Debt - less current maturities 44,717,092 39,249,136
Deferred Income Taxes 2,091,495 2,069,988
Other Long-Term Liabilities 2,215,414 1,334,577
------------ ------------
Total Liabilities 73,320,910 66,342,553
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, 9,449,817
at November 30, 1996 and 9,426,923 at
August 31, 1996 9,449,817 9,426,923
Capital surplus 753,113 740,818
Retained earnings 58,516,722 54,825,048
Foreign currency translation adjustment 129,764 (38,690)
------------ ------------
68,849,416 64,954,099
Less cost of reacquired shares of Common Stock; 5,330 shares
at November 30, 1996 and 12,351 at August 31, 1996 86,886 127,210
------------ ------------
Total Shareholders' Equity 68,762,530 64,826,889
------------ ------------
Total Liabilities and Shareholders' Equity $142,083,440 $131,169,442
============ ============
</TABLE>
Note: The consolidated balance sheet at August 31, 1996 has been taken from
the audited financial statements and condensed. Share numbers and the
Common Stock and Capital Surplus accounts have been adjusted to
reflect the 50% share distribution declared on December 18, 1996
payable on January 13, 1997 to holders of record in December 27,
1996.
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,
1996 1995
------------ ------------
<S> <C> <C>
Net Sales $ 53,440,704 $ 47,295,716
Cost of Sales 39,735,103 35,338,756
------------ ------------
Gross profit 13,705,601 11,956,960
Selling and Administrative Expenses 6,862,268 6,114,268
Interest Expense 837,362 708,067
Other (Income) (41,510) (8,821)
------------ ------------
Total expenses 7,658,120 6,813,514
------------ ------------
Income before income taxes 6,047,481 5,143,446
Provision for Income Taxes 2,355,807 1,989,001
------------ ------------
Net income $ 3,691,674 $ 3,154,445
============ ============
Net income per share $.39 $.34
==== ====
Weighted average number of shares of
Common Stock outstanding 9,424,139 9,272,427
========= =========
</TABLE>
The per share and share numbers have been adjusted to reflect the 50% share
distribution declared on December 18, 1996 payable on January 13, 1997 to
holders of record on December 27, 1996.
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,
1996 1995
----------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 3,691,674 $ 3,154,445
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 3,679,605 2,799,084
Amortization 176,110 145,225
Provision for losses on receivables 166,547 120,521
Increase (decrease) in deferred income taxes (106,867) 6,193
Gain on sale of property, plant and
equipment, net (3,457) (5,755)
Stock compensation expense 3,183 2,840
Supplemental retirement plan 26,168 --
Changes in operating assets and liabilities, net of
effects of business acquisitions:
Decrease (increase):
Trade accounts receivable (922,691) (675,543)
Inventories (1,049,103) 704,190
Prepaid expenses and other current assets (1,299,833) (841,380)
Other non-current assets -- (65,466)
Increase (decrease):
Accounts payable (4,084,417) (3,670,349)
Accrued income taxes 2,053,001 1,648,582
Accrued payroll and related taxes (303,719) (29,855)
Other current liabilities (275,934) (289,915)
Other long-term liabilities -- (49,139)
----------- -----------
Net cash provided by operating activities 1,750,267 2,953,679
----------- -----------
Investing Activities
Purchase of property, plant and equipment (4,659,002) (3,346,623)
Business acquisitions, net of cash acquired (5,278,480) --
Proceeds from sale of property, plant and
equipment 6,750 5,755
----------- -----------
Net cash (used for) investing activities (9,930,732) (3,340,868)
----------- -----------
Financing Activities
Proceeds from long-term debt 6,700,000 --
Payments on long-term debt (1,625,783) (1,099,186)
Proceeds from sale of Common Stock 72,330 42,058
----------- -----------
Net cash provided by (used for)
financing activities 5,146,547 (1,057,128)
----------- -----------
Effect of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents (29,640) (3,982)
Net decrease in cash and
cash equivalents (3,063,558) (1,448,299)
Cash and Cash Equivalents at Beginning of Period 3,379,776 2,659,767
----------- -----------
Cash and Cash Equivalents at End of Period $ 316,218 $ 1,211,468
=========== ===========
</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, 1996 and
the consolidated statements of income and consolidated statements of cash
flows for the periods ended November 30, 1996 and November 30, 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 November 30,
1996 and for the periods presented have been made.
The accompanying condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions for Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required for complete financial statements
prepared in accordance with generally accepted accounting principles. 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 1996 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, 1996.
The results of operations for the period ended November 30, 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>
November 30, August 31,
1996 1996
------------ ------------
<S> <C> <C>
Finished goods $ 10,300,468 $ 9,739,590
Work in process 182,807 215,475
Raw materials 5,462,266 4,233,990
Supplies 1,683,933 1,477,825
------------ ------------
$ 17,629,474 $ 15,666,880
============ ============
</TABLE>
3. Acquisitions
On September 10, 1996, the Company acquired the custom thermoforming
business of FormPac Corporation in Sandusky, Ohio. On October 4, 1996, the
Company acquired all the outstanding capital stock of EPS (Moulders) Ltd.,
a custom molding business in Livingston, Scotland. The aggregate purchase
price booked for these acquisitions was approximately $6.5 million, of
which approximately $5.7 million was paid in cash. Part of the purchase
price in the FormPac acquisition was allocated to covenants not to compete
and part of the purchase price in the EPS (Moulders) Ltd. acquisition was
allocated to goodwill. The Company has also agreed to pay additional
consideration based on the operating performance of FormPac's business
during the three-year period following this acquisition.
Both acquisitions have been accounted for as purchases; operations of
the businesses acquired have been included in the accompanying financial
statements from their respective dates of acquisition. The combined
operating results, including the results from the acquired businesses had
they been included at the beginning of the fiscal period, would not be
materially different from the results of operations as reported.
6
<PAGE> 7
4. Claims and Contingencies
Two 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 alleged incidents.
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.
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 or results of operations.
5. Subsequent Event
On December 18, 1996, the Company's Board of Directors declared a
50% share distribution on the Company's Common Stock payable on January
13, 1997 to shareholders of record on December 27, 1996. In connection
with the distribution, $1.00 has been transferred from the Company's
Capital Surplus account to the Company's Common Stock account for each
share issued. All per share and share numbers have been adjusted to
reflect the 50% share distribution.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER FISCAL 1997
COMPARED TO FIRST QUARTER FISCAL 1996
Net sales for the quarter ended November 30, 1996 were $53.4 million, an
increase of $6.1 million, or 13.0%, over the same quarter of fiscal 1996.
Approximately 65.4% of the increase in net sales was due to the acquisitions of
Alpine Packaging Inc. in Colorado Springs, Colorado in December 1995, FormPac
Corporation in Sandusky, Ohio in September 1996 and EPS (Moulders) Ltd. in
Livingston, Scotland in October 1996. The balance of the increase was due to
increased demand in the Company's core custom molding operations. The sales
increase was achieved despite lower sales at the Company's integrated materials
facilities and a reduction in selling prices in December 1995.
Gross profit for the quarter ended November 30, 1996 was $13.7 million, a
14.6% increase from $12.0 million in the first quarter of fiscal 1996. The
gross profit margin increased to 25.6% from 25.3% primarily due to the higher
sales volume and gross margin improvement at the UK and integrated materials
facilities.
Selling and administrative expenses increased $750,000 or 12.2% for the
quarter ended November 30, 1996 but decreased slightly as a percentage of net
sales to 12.8% from 12.9% in same period of fiscal 1996. The dollar increase is
due primarily to increased employee costs and other costs added as a result
of the business acquisitions.
Interest expense for the quarter ended November 30, 1996 was $837,000
compared to $708,000 in the same period of fiscal 1996. The increase of
$129,000, or 18.3%, is due to long-term debt incurred in connection with the
acquisitions in September and October 1996.
Income before income taxes for the quarter ended November 30, 1996
increased to $6.0 million from $5.1 million for the same period of fiscal 1996,
an increase of $900,000 or 17.6%. The provision for income taxes for the
quarter ended November 30, 1996 increased due to the increased income before
income taxes.
Net income for the quarter ended November 30, 1995 was $3.7 million, an
increase of 17.0% from the $3.2 million earned in the same quarter of fiscal
1996. The increase was due primarily to the increases in net sales and gross
profit.
Net sales and net income were Company records for a first fiscal quarter.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended
November 30, 1996 amounted to $1.8 million compared to $3.0 million for the
same period in fiscal 1996. Depreciation and amortization for the same
three-month periods amounted to $3.9 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.
8
<PAGE> 9
During the three months ended November 30, 1996, the Company's inventories
and accounts receivable increased as a result of the increased sales level and
the acquisitions in September and October 1996.
Capital expenditures for property, plant and equipment during the three
months ended November 30, 1996 amounted to $4.7 million, including
approximately $257,000 for environmental control equipment. Most of the capital
expenditures were for machinery and equipment.
In September 1996, the Company acquired the custom thermoforming business
of FormPac Corporation in Sandusky, Ohio and in October 1996 the Company
acquired the custom molding business of EPS (Moulders) Ltd. in Livingston
Scotland. An aggregate of approximately $5.7 million was paid at the closings of
these transactions (see Note 3 to the Condensed Consolidated Financial
Statements). The Company will continue to look for acquisitions which will mesh
well with the Company's business.
Total long-term debt of the Company amounted to $44.7 million at November
30, 1996, of which $41.1 million was borrowed under a credit agreement with the
Company's principal bank, including $9.9 million out of an available $40.0
million under a revolving credit agreement. During the three months ended
November 30, 1996, $6.7 million was borrowed under the revolving credit
agreement in connection with the acquisitions in September and October 1996.
Total long-term debt amounted to $39.2 million at August 31, 1996.
On December 18, 1996, the Company declared its regular semiannual cash
dividend of $.14 per share payable on January 6, 1997 to shareholders of record
on December 27, 1996. The Company also declared a 50% share distribution
payable on January 13, 1997 to shareholders of record on December 27, 1996.
Cash dividends of $.13 per share were paid in January and July 1996.
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 needs, capital requirements and
dividend payments.
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
The exhibits listed below are filed as a part of this quarterly report.
<TABLE>
<CAPTION>
Exhibit No. Document
----------- -------------------------------------
<S> <C>
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
</TABLE>
Certain documents as amended or adopted during the fiscal quarter ended
November 30, 1996 were previously filed as exhibits to the Company's annual
report on Form 10-K for its fiscal year ended August 31, 1996. These were:
(i) the Company's Common Stock Purchase Plan for Salaried Employees, as
amended effective October 11, 1996, filed as Exhibit 10.5 to the
Form 10-K;
(ii) a First Amendment to the Tuscarora Incorporated and Subsidiary
Companies Salaried Employees' Money Purchase Pension Plan,
effective September 1, 1996, filed as Exhibit 10.9 to the Form
10-K; and
(iii) the Tuscarora Incorporated Supplemental Executive Retirement Plan
and related documents designating certain of the Company's
executive officers as Plan participants effective September 1,
1996, filed as Exhibit 10.10 to the Form 10-K.
(b) Reports on Form 8-K
The Company reported a change in independent accountants under Item 4 of
a current report on Form 8-K which was filed on November 14, 1996. A similar
report on Form 8-K with respect to the appointment of Ernst & Young LLP as
independent accountants to audit the financial statements of the Company and
its subsidiaries for the fiscal year ended August 31, 1997 had previously been
filed on February 16, 1996 (see the quarterly report on Form 10-Q for the
fiscal quarter ended February 29, 1996).
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)
Date: January 14, 1997 By /s/ JOHN P. O'LEARY, JR.
--------------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: January 14, 1997 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, 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>
12
<PAGE> 1
Tuscarora Incorporated
EXHIBIT 11 - COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended November 30,
1996 1995
----- -----
(In thousands, except per share data)
<S> <C> <C>
PRIMARY
Weighted average number of shares of
Common Stock outstanding 9,424 9,272
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 159 203
----- -----
TOTAL 9,583 9,475
===== =====
Net income 3,692 3,154
===== =====
Per share amount $ .39 $ .33
===== =====
FULLY DILUTED
Weighted average number of shares of
Common Stock outstanding 9,424 9,272
Net effect of dilutive stock options -
based on the treasury stock method
using greater of average market price
or closing market price 160 204
----- -----
TOTAL 9,584 9,476
===== =====
Net income 3,692 3,154
===== =====
Per share amount $ .39 $ .33
===== =====
</TABLE>
The per share and share numbers have been adjusted to reflect the 50% share
distribution declared on December 18, 1996 payable on January 13, 1997 to
holders of record on December 27, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 316,218
<SECURITIES> 0
<RECEIVABLES> 31,908,446
<ALLOWANCES> 927,232
<INVENTORY> 17,629,474
<CURRENT-ASSETS> 52,114,431
<PP&E> 168,649,500
<DEPRECIATION> 85,616,278
<TOTAL-ASSETS> 142,083,440
<CURRENT-LIABILITIES> 24,296,909
<BONDS> 44,717,092
0
0
<COMMON> 9,449,817
<OTHER-SE> 59,312,713
<TOTAL-LIABILITY-AND-EQUITY> 142,083,440
<SALES> 53,440,704
<TOTAL-REVENUES> 53,440,704
<CGS> 39,735,103
<TOTAL-COSTS> 39,735,103
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 166,547
<INTEREST-EXPENSE> 837,362
<INCOME-PRETAX> 6,047,481
<INCOME-TAX> 2,355,807
<INCOME-CONTINUING> 3,691,674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,691,674
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
