<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, 1997
[ ] 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, 1998, 9,481,509 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
November 30, 1997 and August 31, 1997 3
Condensed Consolidated Statements of
Income - Three months ended November 30,
1997 and November 30, 1996 4
Condensed Consolidated Statements of
Cash Flows - Three months ended November 30,
1997 and November 30, 1996 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,
1997 1997
------------ ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 333,106 $ 5,095,149
Trade accounts receivable, net of provision for losses 37,552,505 31,667,668
Inventories 20,098,856 18,238,886
Prepaid expenses and other current assets 2,588,323 1,592,284
------------ ------------
60,572,790 56,593,987
PROPERTY, PLANT AND EQUIPMENT, net 95,032,945 93,114,834
OTHER ASSETS
Goodwill 8,712,925 8,540,479
Other non-current assets 4,013,412 4,138,260
------------ ------------
Total Assets $168,332,072 $162,387,560
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 5,133,332 $ 5,133,332
Accounts payable 17,175,775 16,714,670
Accrued income taxes 2,016,882 390,008
Accrued payroll and related taxes 978,210 910,090
Other current liabilities 4,690,528 3,661,408
------------ ------------
29,994,727 26,809,508
LONG-TERM DEBT - less current maturities 55,993,298 57,166,326
DEFERRED INCOME TAXES 2,272,697 2,417,725
OTHER LONG-TERM LIABILITIES 3,248,430 3,176,653
------------ ------------
Total Liabilities 91,509,152 89,570,212
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, 9,481,360 at November 30,
1997 and 9,479,241 at August 31, 1997 9,481,360 9,479,241
Capital surplus 1,108,013 1,071,878
Retained earnings 66,064,411 62,291,940
Foreign currency translation adjustment 244,846 49,999
------------ ------------
76,898,630 72,893,058
Less cost of reacquired shares of Common Stock;
4,620 shares at November 30, 1997 and
August 31, 1997 (75,710) (75,710)
------------ ------------
Total Shareholders' Equity 76,822,920 72,817,348
------------ ------------
Total Liabilities and Shareholders' Equity $168,332,072 $162,387,560
============ ============
</TABLE>
Note: The consolidated balance sheet at August 31, 1997 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,
1997 1996
----------- -----------
<S> <C> <C>
Net Sales $61,292,306 $53,440,704
Cost of Sales 46,193,365 39,735,103
----------- -----------
Gross profit 15,098,941 13,705,601
Selling and Administrative Expenses 7,865,953 6,862,268
Interest Expense 1,157,167 837,362
Other (Income) (18,640) (41,510)
----------- -----------
Total expenses 9,004,480 7,658,120
----------- -----------
Income before income taxes 6,094,461 6,047,481
Provision for Income Taxes 2,321,990 2,355,807
----------- -----------
Net income $ 3,772,471 $ 3,691,674
=========== ===========
Net income per share $ .40 $ .39
=========== ===========
Weighted average number of shares of
Common Stock outstanding 9,475,833 9,424,139
=========== ===========
</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,
1997 1996
----------- -----------
<S> <C> <C>
Operating Activities
Net Income $ 3,772,471 $ 3,691,674
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 3,903,109 3,679,605
Amortization 277,946 176,110
Provision for losses on receivables (13,246) 166,547
Decrease in deferred income taxes (148,936) (106,867)
Loss (gain) on sale of property, plant and equipment, net 16,059 (3,457)
Stock compensation expense 3,475 3,183
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Decrease (increase):
Trade accounts receivable (5,627,547) (922,691)
Inventories (1,798,016) (1,049,103)
Prepaid expenses and other current assets (980,167) (1,299,833)
Other non-current assets (3,206) --
Increase (decrease):
Accounts payable 365,723 (4,084,417)
Accrued income taxes 1,631,597 2,053,001
Accrued payroll and related taxes 52,348 (303,719)
Other current liabilities 411,009 (275,934)
Other long-term liabilities 43,670 26,168
----------- -----------
Net cash provided by operating activities 1,906,289 1,750,267
----------- -----------
Investing Activities
Purchase of property, plant and equipment (5,830,907) (4,659,002)
Business acquisitions, net of cash acquired (116,775) (5,278,480)
Proceeds from sale of property, plant and equipment 464,784 6,750
----------- -----------
Net cash (used for) investing activities (5,482,898) (9,930,732)
----------- -----------
Financing Activities
Proceeds from long-term debt -- 6,700,000
Payments on long-term debt (1,177,082) (1,625,783)
Proceeds from sale of Common Stock 34,779 72,330
----------- -----------
Net cash provided by (used for)
financing activities (1,142,303) 5,146,547
----------- -----------
Effect of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents (43,131) (29,640)
Net decrease in cash and cash equivalents (4,762,043) (3,063,558)
Cash and Cash Equivalents at Beginning of Period 5,095,149 3,379,776
----------- -----------
Cash and Cash Equivalents at End of Period $ 333,106 $ 316,218
=========== ===========
</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, 1997 and the
consolidated statements of income and consolidated statements of cash flows
for the periods ended November 30, 1997 and November 30, 1996 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, 1997 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 1997 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, 1997.
The results of operations for the period ended November 30, 1997 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,
1997 1997
------------ -----------
<S> <C> <C>
Finished goods $11,295,961 $10,511,267
Work in process 226,261 154,962
Raw materials 6,560,190 5,820,100
Supplies 2,016,444 1,752,557
----------- -----------
$20,098,856 $18,238,886
=========== ===========
</TABLE>
3. Claims and Contingencies
A lawsuit seeking substantial compensatory and punitive damages as a
result of the alleged wrongful death of an employee was filed against the
Company in December 1996. In addition, several legal and administrative
proceedings against the Company involving claims of employment
discrimination are pending and the Company is 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. In the opinion of Management, the disposition
of the proceedings should not have a material adverse effect on the
Company's financial position or results of operations.
6
<PAGE> 7
4. Other Information
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Accounting Standard ("SFAS") No. 128, "Earnings Per
Share" which must be adopted by the Company in its fiscal quarter ended
February 28, 1998. This Statement generally requires the presentation of
basic and diluted earnings per share on the face of the Consolidated
Statements of Income. In the opinion of Management, the amount of basic
earnings per share which will be reported will not be materially different
from the income per share currently reported on the Consolidated Statements
of Income nor will the amount of diluted earnings per share be materially
different from the basic earnings per share.
SFAS No. 130, "Reporting of Comprehensive Income"; and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" were
also issued in 1997. These statements must be adopted by the Company by
the end of its 1999 fiscal year, and are not expected to have a material
effect on the consolidated financial statements.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER FISCAL 1998
COMPARED TO FIRST QUARTER FISCAL 1997
Net sales for the three months ended November 30, 1997 were $61.3 million,
an increase of $7.9 million, or 14.7%, over the same period of fiscal 1997.
Approximately 65.0% of the increase in net sales was due to the acquisitions of
EPS (Moulders) Ltd. in October 1996 and Thermoformers Plus, Allgood Industries,
Inc. and Arrowtip Group Ltd. in April, May and August 1997, respectively. The
balance of the increase was due primarily to higher sales at the Company's core
custom molding operations. The sales increase was achieved despite reductions in
some selling prices.
Gross profit for the three months ended November 30, 1997 was $15.1
million, a 10.2% increase from $13.7 million in the first three months of fiscal
1997. The gross profit margin decreased to 24.6% from 25.6% in the previous
fiscal year. The decrease in gross profit margin was attributable primarily to
well below-objective margins at the Company's United Kingdom operations as well
as its expanding custom thermoforming operations. The gross profit margin was
also negatively impacted by the reductions in some selling prices although these
were partially offset by lower EPS resin prices.
Selling and administrative expenses for the current three-month period were
$7.9 million, a 14.6% increase over $6.9 million in the previous period. Selling
and administrative expenses remained steady as a percent of sales at 12.8%. The
dollar increase is due primarily to increased employee costs, including those
added as a result of the acquisitions in October 1996 and May and August 1997.
Interest expense for the three months ended November 1997 amounted to $1.2
million compared to $837,000 in the same period of fiscal 1997. The increase of
$320,000, or 38.2%, is due primarily to increases in long-term debt incurred in
connection with the acquisitions in October 1996 and May and August 1997.
Income before income taxes for the three months ended November 30, 1997
increased to $6.1 million from $6.0 million in the same period of fiscal 1997,
an increase of $47,000 or 0.8%. The effective tax rate decreased to 38.1%
compared to 39.0% in the same period of fiscal 1997 due primarily to lower
effective state income tax rates.
Net income for the three months ended November 30, 1997 was $3.8 million,
an increase of 2.2% from the $3.7 million earned in the same period of fiscal
1997. The increase was due primarily to the increase in net sales.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended
November 30, 1997 amounted to $1.9 million compared to $1.8 million for the same
period in fiscal 1997. Depreciation and amortization for the same three-month
periods amounted to $4.2 and $3.9 million, respectively. Because a substantial
portion of the Company's operating expenses are attributable to 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, 1997, the Company's accounts
receivable and inventories increased as a result of the increased sales level.
Capital expenditures for property, plant and equipment during the three
months ended November 30, 1997 amounted to $5.8 million, including approximately
$290,000 for environmental control equipment. The largest portion of the capital
expenditures was for molding presses and related equipment, including equipment
at the new manufacturing facilities in Brenham, Texas and Tijuana, Mexico. The
Company made no acquisitions during the quarter, however, it will continue to
look for acquisitions which will mesh well with the Company's business.
Total long-term debt of the Company amounted to $56.0 million at November
30, 1997, of which $52.8 million was borrowed under a credit agreement with the
Company's principal bank, including $26.2 million out of an available $40.0
million under a revolving credit agreement. There were no additional borrowings
under the revolving credit agreement during the three months ended November 30,
1997. Total long-term debt amounted to $57.2 million at August 31, 1997.
On December 18, 1997, the Company declared a regular semiannual cash
dividend of $0.11 per share payable on January 6, 1998 to shareholders of record
on December 27, 1997. Cash dividends of $0.09 and $0.10 per share were paid in
January and July 1997, 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.
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.
Exhibit No. Document
----------- --------
11 Computation of Net Income Per Share.
27 Financial Data Schedule.
(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 November 30, 1997.
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, 1998 By /s/ John P. O'Leary, Jr.
-- ------------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: January 14, 1998 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, 1997
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,
-------------------------------
1997 1996
------ ------
(In thousands, except per share data)
<S> <C> <C>
PRIMARY
Weighted average number of shares of
Common Stock outstanding 9,476 9,424
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 225 159
------ ------
TOTAL 9,701 9,583
====== ======
Net income $3,772 $3,692
====== ======
Per share amount $ .39 $ .39
====== ======
FULLY DILUTED
Weighted average number of shares of
Common Stock outstanding 9,476 9,424
Net effect of dilutive stock options -
based on the treasury stock method
using greater of average market price
or closing market price 225 160
------ ------
TOTAL 9,701 9,584
====== ======
Net income $3,772 $3,692
====== ======
Per share amount $ .39 $ .39
====== ======
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 333,106
<SECURITIES> 0
<RECEIVABLES> 38,202,236
<ALLOWANCES> 649,731
<INVENTORY> 20,098,856
<CURRENT-ASSETS> 60,572,790
<PP&E> 191,358,199
<DEPRECIATION> 96,325,254
<TOTAL-ASSETS> 168,332,072
<CURRENT-LIABILITIES> 29,994,727
<BONDS> 55,993,298
0
0
<COMMON> 9,481,360
<OTHER-SE> 67,341,560
<TOTAL-LIABILITY-AND-EQUITY> 168,332,072
<SALES> 61,292,306
<TOTAL-REVENUES> 61,292,306
<CGS> 46,193,365
<TOTAL-COSTS> 46,193,365
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (13,246)
<INTEREST-EXPENSE> 1,157,167
<INCOME-PRETAX> 6,094,461
<INCOME-TAX> 2,321,990
<INCOME-CONTINUING> 3,772,471
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,772,471
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
