<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 February 28, 1998
[ ] 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 April 1, 1998, 9,487,469 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
February 28, 1998 and August 31, 1997 3
Condensed Consolidated Statements of
Income - Three and six month periods ended
February 28, 1998 and February 28, 1997 4
Condensed Consolidated Statements of
Cash Flows - Six months ended February 28,
1998 and February 28, 1997 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 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TUSCARORA INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, AUGUST 31,
1998 1997
-------------- --------------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 695,639 $ 5,095,149
Trade accounts receivable, net of provision for losses 33,358,747 31,667,668
Inventories 21,933,895 18,238,886
Prepaid expenses and other current assets 3,980,832 1,592,284
------------ ------------
59,969,113 56,593,987
PROPERTY, PLANT AND EQUIPMENT, net 95,572,984 93,114,834
OTHER ASSETS
Goodwill 8,511,312 8,540,479
Other non-current assets 3,818,122 4,138,260
------------ -----------
Total Assets $167,871,531 $162,387,560
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 5,133,332 $ 5,133,332
Accounts payable 17,562,582 16,714,670
Accrued income taxes -- 390,008
Accrued payroll and related taxes 925,831 910,090
Other current liabilities 4,277,532 3,661,408
------------ ------------
27,899,277 26,809,508
LONG-TERM DEBT - less current maturities 60,540,193 57,166,326
DEFERRED INCOME TAXES 1,339,401 2,417,725
OTHER LONG-TERM LIABILITIES 3,226,854 3,176,653
------------ ------------
Total Liabilities 93,005,725 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, 9,491,293 at February 28,
1998 and 9,479,241 at August 31, 1997 9,491,293 9,479,241
Capital surplus 1,191,106 1,071,878
Retained earnings 64,132,239 62,291,940
Foreign currency translation adjustment 128,115 49,999
------------ ------------
74,942,753 72,893,058
Less cost of reacquired shares of Common Stock;
4,620 shares at February 28, 1998 and
August 31, 1997 (76,947) (75,710)
------------ ------------
Total Shareholders' Equity 74,865,806 72,817,348
------------ ------------
Total Liabilities and Shareholders' Equity $167,871,531 $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
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TUSCARORA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Net Sales $ 55,919,163 $48,976,541 $ 117,211,469 $102,417,245
Cost of Sales 44,515,644 37,454,546 90,709,009 77,189,649
------------ ----------- ------------- ------------
Gross profit 11,403,519 11,521,995 26,502,460 25,227,596
Selling and Administrative Expenses 8,164,765 7,061,198 16,030,718 13,923,466
Restructuring Costs 3,495,336 -- 3,495,336 --
Interest Expense 1,176,773 885,317 2,333,940 1,722,679
Other (Income) Expense (36,866) 147,238 (55,506) 105,728
------------ ----------- ------------- ------------
Total expenses 12,800,008 8,093,753 21,804,488 15,751,873
------------ ----------- ------------- ------------
Income (loss) before income taxes (1,396,489) 3,428,242 4,697,972 9,475,723
Provision (Benefit) for Income Taxes (507,204) 1,354,556 1,814,786 3,710,363
------------ ----------- ------------- ------------
Net income (loss) $ (889,285) $ 2,073,686 $ 2,883,186 $ 5,765,360
============ =========== ============= ============
Basic net income (loss) per share $(.09) $.22 $.31 $.61
===== ==== ==== ====
Diluted net income (loss) per share $(.09) $.21 $.30 $.60
===== ==== ==== ====
Weighted average number of shares
of Common Stock outstanding
Basic 9,482,331 9,449,003 9,445,777 9,436,502
============ =========== ============= ============
Diluted 9,482,331 9,656,845 9,642,152 9,607,684
============ =========== ============= ============
</TABLE>
See notes to condensed consolidated financial statements.
4
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TUSCARORA INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Operating Activities
Net Income $ 2,883,186 $ 5,765,360
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 7,982,665 7,445,766
Amortization 568,378 387,881
Write down of assets due to restructuring 2,085,774 --
Provision for losses on receivables 118,457 322,352
(Decrease) increase in deferred income taxes (1,080,320) 260,992
Loss on sale of property, plant and equipment, net 84,260 177,303
Stock compensation expense 7,063 6,602
Changes in operating assets and liabilities,
net of effects of business acquisitions:
Decrease (increase):
Trade accounts receivable (1,331,388) (484,041)
Inventories (3,673,335) (2,943,308)
Prepaid expenses and other current assets (1,862,623) (1,151,524)
Other non-current assets (143,462) --
Increase (decrease):
Accounts payable 793,468 (2,875,334)
Accrued income taxes (909,092) (259,538)
Accrued payroll and related taxes 11,508 62,324
Other current liabilities 375,685 (1,616,916)
Other long-term liabilities (18,061) 58,777
------------ ------------
Net cash provided by operating activities 5,892,163 5,156,696
------------ ------------
Investing Activities
Purchase of property, plant and equipment (12,973,758) (10,519,944)
Business acquisitions, net of cash acquired (87,882) (4,807,343)
Proceeds from sale of property, plant and equipment 476,477 793,666
------------ ------------
Net cash used for investing activities (12,585,163) (14,533,621)
------------ ------------
Financing Activities
Proceeds from long-term debt 6,000,000 10,700,000
Payments on long-term debt (2,812,093) (3,412,928)
Dividends paid (1,042,887) (881,558)
Proceeds from sale of Common Stock 122,980 182,861
------------ ------------
Net cash provided by financing activities 2,268,000 6,588,375
------------ ------------
Effect of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents 25,490 (83,778)
------------ ------------
Net decrease in cash and cash equivalents (4,399,510) (2,872,328)
Cash and Cash Equivalents at Beginning of Period 5,095,149 3,379,776
------------ ------------
Cash and Cash Equivalents at End of Period $ 695,639 $ 507,448
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
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TUSCARORA INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheet at February 28, 1998 and
the consolidated statements of income and consolidated statements of cash
flows for the periods ended February 28, 1998 and February 28, 1997 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 February 28, 1998 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 February 28, 1998
are not necessarily indicative of the operating results to be expected for
the full year.
2. Inventories
Inventories are summarized as follows:
February 28, August 31,
1998 1997
---- ----
Finished goods $ 11,871,558 $ 10,511,267
Work in process 189,124 154,962
Raw materials 7,827,030 5,820,100
Supplies 2,046,183 1,752,557
-------------- --------------
$ 21,933,895 $ 18,238,886
============ ============
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. 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. Restructuring Costs
On February 2, 1998, the Company initiated a restructuring plan
to reduce costs and increase future financial performance through a
workforce reduction, consolidation of certain product design centers and
the write-down of certain buildings and equipment that will no longer be
employed in the Company's operations. The total restructuring costs
amounted to approximately $3.5 million. The principal component of the
restructuring plan was a charge of approximately $2.1 million to cover the
write-down of the carrying values of the property and equipment.
In addition, the restructuring costs included estimated employee
termination costs of $1.0 million, of which approximately $257,000 was paid
as of February 28, 1998. In connection with the restructuring plan,
approximately 30 employees have been terminated or accepted an early
retirement package. These employees are or have been associated with the
Company's field sales, design, manufacturing and marketing activities and
general corporate overhead. The balance of the charge, approximately
$400,000, relates to other restructuring costs associated with the plan.
5. Other Information
During the quarter ended February 28, 1998, the Company adopted
the provisions of the Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share". SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with a calculation of basic
and diluted earnings per share. Basic earnings per share computations are
based on the weighted average number of shares of common stock outstanding.
Diluted earnings per share computations reflect the assumed exercise of
employee stock options. All earnings per share amounts for all periods
presented have been restated to conform to SFAS No. 128 requirements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Accounting Standards (SFAS) No. 130, "Reporting of
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". These statements which must be adopted
by the Company by the end of its 1999 fiscal year, 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 - SECOND QUARTER FISCAL 1998
COMPARED TO SECOND QUARTER FISCAL 1997
Net sales for the three months ended February 28, 1998 were $55.9
million, an increase of $6.9 million, or 14.2%, over the same period of fiscal
1997. Approximately 55.4% of the increase in net sales was due to the
acquisitions of Thermoformers Plus, Allgood Industries and Arrowtip Group Ltd.
in April, May and August 1997, respectively. The balance of the increase was due
primarily to higher sales in the Company's core custom molding operations.
Gross profit for the three months ended February 28, 1998 was $11.4
million, a 1.0% decrease from $11.5 million in the same period of fiscal 1997.
The gross profit margin decreased to 20.4% from 23.5% in the previous fiscal
year. The decrease in gross profit margin was attributable primarily to
continued well below objective margins in the Company's United Kingdom and
custom thermoforming operations.
Net sales and gross profit for the three months ended February 28,
1998 were also adversely affected by an unexpectedly severe post-Christmas
slowdown in some of the Company's more mature markets in both the United States
and the United Kingdom. This seasonal slowdown was most marked in the Company's
electronics sector, the largest and fastest growing market for the Company's
custom molded products. The tendency of the Company's high technology and
consumer electronics customers to skew their output toward the calendar year-end
and then slow production in the early part of the new year was more pronounced
this year than in prior years.
Selling and administrative expenses for the three months ended
February 28, 1998 were $8.2 million, a 15.6% increase over $7.1 million in the
same period of fiscal 1997. Selling and administrative expenses increased
slightly to 14.6% of net sales compared to 14.4% of net sales in fiscal 1997.
The dollar increase is due primarily to increased employee costs, including
those added as a result of the acquisitions in May and August 1997, and higher
travel costs.
Net sales and operating income (loss) for the U.K. operations for the
three months ended February 28, 1998 were $6.1 million and $(753,000)
respectively, compared with $5.3 million and $95,000, respectively, in the same
period of fiscal 1997.
Interest expense for the three months ended February 28, 1998 amounted
to $1.2 million compared to $900,000 in the same period of fiscal 1997. The
increase of $291,000 or 32.9%, is due to increases in long-term debt incurred in
connection with the acquisitions in May and August 1997 as well as additional
borrowings in the current fiscal quarter (see "Liquidity and Capital Resources"
below).
On February 2, 1998, the Company announced that it would take a $3.5
million restructuring charge in the quarter ended February 28, 1998.
Approximately $1.0 million of the restructuring charge represents the cost of
employee terminations and early retirements; approximately $2.1 million relates
to the write-down of obsolete or impaired assets and the balance of $400,000
relates to other restructuring costs associated with the plan. As part of the
restructuring, certain product design centers in the United States were
consolidated. $411,000 of the restructuring charge relates to the U.K.
operations. As a result of these initiatives, the Company expects to achieve
annualized pre-tax net savings of approximately $1.5 million.
8
<PAGE> 9
After taking the restructuring charge into account, the loss before
income taxes for the three month period ended February 28, 1998 amounted to $1.4
million compared to income before income taxes of $3.4 million in the same
period of fiscal 1997. The effective tax rate decreased to 36.3% in the current
period from 39.5% in the prior year primarily due to lower effective state tax
rates.
The net loss for the three months ended February 28, 1998 was $900,000
compared to net income of $2.1 million earned in the same period of fiscal 1997.
The decrease is attributable primarily to the restructuring charge taken in the
current quarter.
RESULTS OF OPERATIONS - SIX MONTHS ENDED FEBRUARY 28, 1998
COMPARED TO SIX MONTHS ENDED FEBRUARY 28, 1997
Net sales for the six months ended February 28, 1998 were $117.2
million, an increase of $14.8 million, or 14.4%, over the same period of fiscal
1997. Approximately 60.5% of the increase in net sales was due to the
acquisitions of EPS (Moulders) Ltd. in October 1996 and Thermoformers Plus,
Allgood Industries and Arrowtip Group Ltd. in April, May and August 1997,
respectively. The balance of the increase was due primarily to higher sales in
the Company's core custom molding operations. The sales increase was achieved
despite reductions in some selling prices primarily in the first fiscal quarter.
Gross profit for the six months ended February 28, 1998 was $26.5
million, a 5.1% increase from $25.2 million in the same period of fiscal 1997.
The gross profit margin decreased to 22.6% from 24.6% in the previous year. The
decrease in gross profit margin was attributable primarily to well
below-objective margins in the Company's United Kingdom and custom thermoforming
operations throughout the six month period. The gross profit margin was also
negatively impacted by the reductions in selling prices offered as a result of
reduced EPS resin costs.
Net sales and gross profit for the six months ended February 28, 1998
were also adversely affected by the seasonal slowdown referred to in the prior
discussion regarding the second fiscal quarter results.
Selling and administrative expenses for the six months ended February
28, 1998 were $16.0 million, a 15.1% increase over $13.9 million in the same
period of fiscal 1997. Selling and administrative expenses increased slightly to
13.7% of net sales compared to 13.6% of net sales in fiscal 1997. 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.
Net sales and operating income (loss) for the U.K. operations for the
six months ended February 28, 1998 were $13.9 million and $($690,000) million,
respectively, compared with $10.6 million and $595,000 respectively, in the same
period of fiscal 1997.
Interest expense for the six months ended February 28, 1998 amounted
to $2.3 million compared to $1.7 million in the same period of fiscal 1997. The
increase of $611,000 or 35.5%, is due to increases in long-term debt incurred in
connection with the acquisitions in October 1996 and May and August 1997 as well
as additional borrowing in the current fiscal quarter (see "Liquidity and
Capital Resources" below).
9
<PAGE> 10
Income before income taxes for the six months ended February 28, 1998
decreased to $4.7 million from $9.5 million in the same period of fiscal 1997, a
decrease of $4.8 million, or 50.4%. The decrease is attributable primarily to
the restructuring charge referred to in the prior discussion regarding the
second fiscal quarter results. The effective tax rate decreased to 38.6%
compared to 39.2% in the same period of fiscal 1997 due primarily to lower
effective state income tax rates.
Net income for the six months ended February 28, 1998 was $2.9
million, a decrease of 50.0% from the $5.8 million earned in the same period of
fiscal 1997. The decrease is due primarily to the restructuring charge.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended
February 28, 1998 amounted to $5.9 million compared to $5.2 million for the same
period in fiscal 1997. Depreciation and amortization for the same six-month
periods amounted to $8.6 and $7.8 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.
During the six months ended February 28, 1998, the Company's accounts
receivable and inventories increased as a result of the increased sales level.
Cash and cash equivalents as of February 28, 1998 amounted to $696,000 compared
to $5,095,000 at August 31, 1997.
Capital expenditures for property, plant and equipment during the six
months ended February 28, 1998 amounted to $12.7 million, including
approximately $1.1 million for environmental control equipment. The largest
portion of the capital expenditures was for molding presses and related
equipment, including equipment at new manufacturing facilities in Brenham, Texas
and Tijuana, Mexico. The Company made no business acquisitions during the
six-month period; however, it will continue to look for acquisitions which will
mesh well with the Company's business.
Total long-term debt amounted to $60.5 million at February 28, 1998,
of which $57.7 million was borrowed under a credit agreement with the Company's
principal bank, including $32.2 million out of an available $40.0 million under
a revolving credit facility. During the six months ended February 28, 1998, $6.0
million was borrowed under the revolving credit facility, primarily to fund
current operating requirements, including requirements of the U.K. operations,
and capital expenditures. 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.
OTHER
The Company has assessed the impact of the Year 2000 issue and has
begun the installation of new computer software that is Year 2000 capable. The
project will be completed in the fourth quarter of fiscal 1998. The total cost
of the project is not material.
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 1. Legal Proceedings
Since February 1992, the Company has been involved in cost recovery
litigation with the United States Environmental Protection Agency ("USEPA") and
other parties over cleanup costs at the Smith's Farm Superfund Site in Bullitt
County, Kentucky. The litigation is in the United States District Court for the
Western District of Kentucky under the caption AKZO Coatings, Inc. et al. v.
AC&S, Inc., et al. It was reported in the Company's annual report on Form 10-K
for the fiscal year ended August 31, 1997 that in May 1996 the USEPA negotiated
a settlement with certain de minimis parties including the Company. A Consent
Order signed by the Company and the other de minimis parties, after publication
of notice and a comment period, became final during the second fiscal quarter
ended February 28, 1998. Accordingly, the litigation has been terminated insofar
as the Company is concerned. The Company paid $57,173 in cleanup costs under the
Consent Order.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on December 18,
1997. The holders of 8,163,873 shares of the Company's Common Stock
(approximately 86.1% of the shares entitled to be voted) were present at the
meeting in person or by proxy. The matters voted upon at the meeting were (i)
the election of four persons to serve as directors for a three-year term
expiring at the annual meeting of shareholders in 2000, (ii) the approval of the
adoption of the 1997 Stock Incentive Plan and (iii) the ratification of the
appointment of Ernst & Young, LLP as the independent public accountants to audit
the financial statements of the Company and its subsidiaries for the 1998 fiscal
year.
Karen L. Farkas, Robert W. Kampmeinert, David C. O'Leary, and Harold F.
Reed, Jr., the nominees of the Company's Board of Directors, were elected to
serve as directors until 2000. There were no other nominees. Shares were voted
as follows:
Withhold
Name For Vote For
---- --- --------
Karen L. Farkas 8,137,600 26,273
Robert W. Kampmeinert 8,152,302 11,571
David L. O'Leary 8,154,377 9,496
Harold F. Reed, Jr. 8,136,900 26,973
The adoption of the 1997 Stock Incentive Plan was approved; affirmative
votes 7,028,028 shares, negative votes, 122,535 shares; and abstained, 67,708
shares.
The appointment of Ernst & Young, LLP as the independent public
accountants for the 1998 fiscal year was ratified: affirmative votes, 8,136,563
shares; negative votes, 9,070 shares; and abstained, 18,240 shares.
11
<PAGE> 12
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
----------- --------
4.1 First Amendment, dated as of February 20, 1998,
to the Loan Agreement, dated as of August 14,
1996, between the Company and Mellon Bank, N.A.
11 Computation of Diluted Net Income Per Share.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on February 2, 1998. Under
Item 5, the Company announced an anticipated shortfall in earnings for the
second fiscal quarter ended February 28, 1998 and the approximately $3.5 million
restructuring charge which was taken during the second fiscal quarter (See Note
4 of the Notes to Condensed Consolidated Financial Statements included in Part I
of this quarterly report). The Company filed a press release and announcement to
employees with respect to these matters, both dated February 2, 1998, as
exhibits to the Form 8-K.
12
<PAGE> 13
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: April 13, 1998 By /s/ JOHN P. O'LEARY, JR.
-------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: April 13, 1998 By /s/ BRIAN C. MULLINS
---------------------
Brian C. Mullins,
Vice President and
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
13
<PAGE> 14
TUSCARORA INCORPORATED
FORM 10-Q FOR QUARTER ENDED FEBRUARY 28, 1998
EXHIBIT INDEX
The following exhibits are filed as a part of this quarterly
report on Form 10-Q.
Exhibit
No. Document
--- --------
4.1 First Amendment, dated as of February 20, 1998, to the Loan
Agreement, dated as of August 14, 1996, between the Company
and Mellon Bank, N.A.
11 Computation of Diluted Net Income Per Share.
27 Financial Data Schedule.
14
<PAGE> 1
Exhibit 4.1
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT dated as of February 20, 1998,
(the "First Amendment") by and between TUSCARORA INCORPORATED, a Pennsylvania
corporation (the "Borrower"), and MELLON BANK, N.A., a national banking
association, (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank entered into a Loan Agreement (the
"Agreement") dated as of August 14, 1996; and
WHEREAS, the Bank and the Borrower have agreed to amend certain
provisions of the Agreement for the purpose of, inter alia, extending the
Revolving Credit Expiry Date.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Section 1.01 of the Agreement is hereby amended by deleting the
definition "Revolving Credit Expiry Date" and restating it as follows:
"Revolving Credit Expiry Date" shall mean August 31, 2000, or
such earlier date on which the Revolving Credit Facility Commitment
shall have been terminated pursuant to this Agreement.
2. This First Amendment does not evidence or represent in any way new
indebtedness or satisfaction of the indebtedness evidenced by the Note.
3. Borrower hereby represents and warrants to Bank that:
(a) Borrower has and will continue to have corporate power and
authority to execute, deliver and perform the provisions of this First
Amendment, the Revolving Credit Note, the Term Note and all other
agreements executed and delivered by Borrower in connection with the
Agreement (the "Loan Documents");
(b) The execution and delivery of this First Amendment and the
carrying out of the Agreement and the other Loan Documents will not violate
any provisions of law or any instrument, agreement, order, decree, writ or
ruling to which such Borrower is a party or by which it is bound or to
which it is subject;
(c) This First Amendment, which has been duly and validly executed
and delivered by such Borrower, and the other Loan Documents constitute
legal, valid and binding obligations of such Borrower enforceable in
accordance with the terms hereof and thereof;
(d) The representations and warranties of Borrower contained in the
Agreement, as amended by this First Amendment and the other Loan Documents
are correct and accurate on and as of the date hereof; and
(e) The Bank has acted in good faith in the performance and
enforcement of its rights under the Loan Documents and the negotiation of
this First Amendment.
4. The effective date of this First Amendment shall be October 28,
1997.
5. The provisions of the Notes shall remain in full force and effect
except as modified hereby. All representations, warranties and covenants
contained herein or made in writing by Borrower in connection herewith shall
apply to the borrowings and shall survive the execution and delivery of this
First Amendment, and will bind and inure to the benefit of the successors and
assigns of the parties hereto, provided that, without the prior written consent
of Bank, Borrower may not assign any of its obligations under the Agreement or
any of the other Loan Documents, and any such attempted assignment shall be
null and void.
<PAGE> 2
6. Borrower's obligations under the Agreement, as amended by this First
Amendment and under the Revolving Credit Note and the Term Note, as amended,
modified or supplemented from time to time, (collectively, the "Notes"), are
and will continue to be secured by the security interest granted to Bank by
Borrower under the Notes, as the same may be amended, modified or supplemented
from time to time, and such obligations are and will continue to be a part of
the "Obligations" (as that term is defined in the Notes) which is secured by
the security interests granted in the Notes.
7. The Borrower hereby reaffirms the Notes and the Agreement and all
obligations and liabilities of the Borrower to the Bank thereunder, and
warrants to the Bank that as of the date hereof the Borrower has no defense or
counterclaim whatsoever to any action or proceeding that may be brought to
enforce the Bank's rights and remedies under the Notes or the Agreement.
8. This First Amendment and the Agreement shall be governed in all
respects by and construed in accordance with the laws of the Commonwealth of
Pennsylvania, except the rules applicable to the conflicts of law.
9. Except as stated in this First Amendment, the terms, covenants,
conditions and provisions of the Agreement shall remain in full force and
effect.
10. The Borrower hereby directs the Bank to affix this First Amendment to
the Agreement, whereupon the Agreement and this First Amendment will become and
constitute a single instrument.
11. All terms used in this First Amendment and not otherwise defined
herein shall have the meanings ascribed to them in the Agreement, unless the
context clearly indicates otherwise.
WITNESS the due execution and delivery of this First Amendment on behalf
of the Bank and the Borrower as of the date first above written.
ATTEST: TUSCARORA INCORPORATED
By: /s/ CHRISTINA A. STARCHER By: /s/ BRIAN C. MULLINS
------------------------- -------------------------------
Title: Secretary to the CEO Title: Vice President and Treasurer
SIGN & ATTEST MELLON BANK, N.A.
By: /s/ BRIAN V. CIAVERELLA
------------------------------
Title: Vice President
---------------------------
-2-
<PAGE> 1
TUSCARORA INCORPORATED
EXHIBIT 11 - COMPUTATION OF DILUTED NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Weighted average number of shares
of Common Stock outstanding 9,482 9,449 9,446 9,437
Net effect of dilutive stock options -
based on the treasury stock method
using the average market price for
the period -- 208 196 171
------- ------ ------ ------
TOTAL 9,482 9,657 9,642 9,608
======= ====== ====== ======
Net income $ (889) $2,074 $2,883 $5,765
======= ====== ====== ======
Per share amount $ (.09) $ .21 $ .30 $ .60
======= ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<CASH> 695,639
<SECURITIES> 0
<RECEIVABLES> 33,358,747
<ALLOWANCES> 0
<INVENTORY> 21,933,895
<CURRENT-ASSETS> 59,969,113
<PP&E> 95,572,984
<DEPRECIATION> 0
<TOTAL-ASSETS> 167,871,531
<CURRENT-LIABILITIES> 27,899,277
<BONDS> 60,540,193
0
0
<COMMON> 9,491,293
<OTHER-SE> 65,374,513
<TOTAL-LIABILITY-AND-EQUITY> 167,871,531
<SALES> 117,211,469
<TOTAL-REVENUES> 117,211,469
<CGS> 90,709,009
<TOTAL-COSTS> 90,709,009
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 118,457
<INTEREST-EXPENSE> 2,333,940
<INCOME-PRETAX> 4,697,972
<INCOME-TAX> 1,814,786
<INCOME-CONTINUING> 2,883,186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,883,186
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
</TABLE>
