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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, 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 April 3, 1995, 6,152,192 shares of Common Stock, without par
value, of the registrant were outstanding.
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Tuscarora Incorporated
INDEX
Page
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Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at
February 28, 1995 and August 31, 1994 3
Condensed Consolidated Statements of
Income - Three and six month periods ended
February 28, 1995 and February 28, 1994 4
Condensed Consolidated Statements of
Cash Flows - Six months ended February 28,
1995 and February 28, 1994 5
Notes to Condensed Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-10
Part II. Other Information:
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Tuscarora Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS
February 28, August 31,
1995 1994
------------- ------------
(Unaudited)
ASSETS
------
Current Assets
Cash and cash equivalents $ 1,073,325 $ 3,671,490
Trade accounts receivable, net of
provision for losses 18,848,532 16,773,835
Inventories 17,280,827 14,270,863
Prepaid expenses and other current assets 1,996,831 919,084
------------- ------------
39,199,515 35,635,272
Property, Plant and Equipment, net 61,093,457 55,356,331
Other Assets, net 4,096,026 3,233,891
------------- ------------
Total Assets $ 104,388,998 $ 94,225,494
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Current maturities of long-term debt $ 3,644,026 $ 3,667,977
Accounts payable 12,391,181 13,350,738
Accrued income taxes 86,131 301,610
Accrued payroll and related taxes 943,042 747,693
Other current liabilities 1,958,081 1,019,436
------------- ------------
19,022,461 19,087,454
Long-Term Debt - less current maturities 31,975,450 25,284,404
Deferred Income Taxes 1,530,963 1,680,889
Supplemental Pension Benefits 955,262 992,798
------------- ------------
Total Liabilities 53,484,136 47,045,545
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, 6,197,134
at February 28, 1995 and 6,193,714 at
August 31, 1994 6,197,134 6,193,714
Capital surplus 2,198,315 2,171,217
Retained earnings 42,898,559 39,234,310
Cumulative foreign currency translation adjustment 21,403 -
------------- ------------
51,315,411 47,599,241
Less cost of reacquired shares of Common Stock;
45,396 at February 28, 1995 and 46,625 at
August 31, 1994 410,549 419,292
------------- ------------
Total Shareholders' Equity 50,904,862 47,179,949
------------- ------------
Total Liabilities and Shareholders' Equity $ 104,388,998 $ 94,225,494
============= ============
Note: The consolidated balance sheet at August 31, 1994 has been taken from
the audited financial statements and condensed.
See notes to condensed consolidated financial statements.
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Tuscarora Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28, February 28, February 28,
1995 1994 1995 1994
------------ ------------ ------------ ------------
Net Sales $ 37,890,171 $ 26,659,953 $ 76,809,994 $ 55,947,532
Cost of Sales 29,114,584 20,852,576 58,256,052 43,032,928
------------ ------------ ------------ ------------
Gross profit 8,775,587 5,807,377 18,553,942 12,914,604
Selling and Administrative Expenses 5,137,071 4,037,199 10,229,988 8,128,973
Interest Expense 569,398 312,397 1,031,287 631,172
Other (Income) Expense 27,798 5,147 151,602 1,947
------------ ------------ ------------ ------------
Total expenses 5,734,267 4,354,743 11,412,877 8,762,092
------------ ------------ ------------ ------------
Income before income taxes 3,041,320 1,452,634 7,141,065 4,152,512
Provision for Income Taxes 1,201,321 549,790 2,800,222 1,601,572
------------ ------------ ------------ ------------
Net income $ 1,839,999 $ 902,844 $ 4,340,843 $ 2,550,940
============ ============ ============ ============
Net income per share $.30 $.15 $.71 $.42
==== ==== ==== ====
Weighted average number of
shares of Common Stock
outstanding 6,150,701 6,120,266 6,149,380 6,117,672
========= ========= ========= =========
See notes to condensed consolidated financial statements.
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Tuscarora Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
February 28, February 28,
1995 1994
------------ ------------
Operating Activities
Net Income $ 4,340,843 $ 2,550,940
Adjustments to Reconcile Net Income to Cash
Provided by Operations:
Depreciation 4,888,635 4,688,891
Amortization 324,114 274,859
Provision for losses on receivables 290,000 165,000
Decrease in deferred income taxes (149,926) (314,369)
Loss on sale of property, plant
and equipment, net 21,440 18,721
Stock compensation expense 5,051 5,556
Changes in Operating Assets and Liabilities:
Decrease (increase):
Trade accounts receivable (2,364,697) (882,412)
Inventories (3,009,964) (713,809)
Prepaid expenses and other current assets (1,058,995) (458,379)
Other assets (1,186,249) (357,495)
Increase (decrease):
Accounts payable (959,557) 123,933
Accrued income taxes (215,479) -
Accrued payroll and related taxes 195,349 (104,710)
Other current liabilities 938,645 96,780
Supplemental pension benefits (37,536) -
------------ -----------
Net cash provided by operating activities 2,021,674 5,093,506
------------ -----------
Investing Activities
Purchase of property, plant and equipment (10,803,916) (5,670,822)
Proceeds from sale of property, plant and
equipment 156,715 33,083
------------ -----------
Net cash (used for) investing activities (10,647,201) (5,637,739)
------------ -----------
Financing Activities
Proceeds from long-term debt 8,711,500 1,500,000
Payments on long-term debt (2,044,405) (1,984,764)
Dividends paid (676,594) (611,641)
Proceeds from sale of Common Stock 34,210 45,730
------------ -----------
Net cash provided by (used for)
financing activities 6,024,711 (1,050,675)
------------ -----------
Effects of foreign currency translation adjustment
on cash and cash equivalents 2,651 -
------------ -----------
Net (decrease) in cash and cash equivalents (2,598,165) (1,594,908)
Cash and Cash Equivalents at Beginning of Period 3,671,490 2,030,021
------------ -----------
Cash and Cash Equivalents at End of Period $ 1,073,325 $ 435,113
============ ===========
See notes to condensed consolidated financial statements.
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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, 1995 and the
consolidated statements of income and consolidated statements of cash
flows for the periods ended February 28, 1995 and February 28, 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 February 28,
1995 and for all 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 1994 Annual Report to Shareholders. The results of
operations for the period ended February 28, 1995 are not necessarily
indicative of the operating results for the full year.
2. INVENTORIES
Inventories are summarized as follows:
February 28, August 31,
1995 1994
------------ ------------
Finished goods $ 9,183,840 $ 6,851,928
Work in process 368,774 300,414
Raw materials 6,282,982 6,050,686
Supplies 1,445,231 1,067,835
------------ ------------
$ 17,280,827 $ 14,270,863
============ ============
3. ACQUISITIONS
On September 6, 1994, the Company purchased substantially all the assets
and assumed substantially all the liabilities of Astrofoam, Inc., a
manufacturer of precision fabricated foam products, specialty corrugated
paperboard products and plastic cushion packaging products in Holden,
Massachusetts, for approximately $2,200,000. The Company is continuing
the business acquired at the same location under a lease from the seller.
A portion of the purchase price has been allocated to a covenant not to
compete and goodwill. The Company also agreed to pay additional
consideration to the seller based on sales realized from the business
acquired.
On February 3, 1995, the Company purchased substantially all the assets
and assumed substantially all the liabilities of the custom molding
business of M.Y. Trondex Limited in Northampton, England and Glasgow,
Scotland for approximately $2,700,000. The Company is operating the
Northampton facility under a lease from the seller and the Glasgow
facility under a lease from a third party. The Company will also pay
additional consideration to the seller based on the sales realized from
the business acquired.
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4. CLAIMS AND CONTINGENCIES
The Company is involved in certain legal and administrative proceedings,
including one proceeding 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 the Superfund site, the
Company believes that its share of the cleanup costs should not be
significant. The aggregate amount of the cleanup costs from these
proceedings, which should be payable over several years, cannot be
reasonably estimated. In the opinion of Management, the disposition of
these matters should not have a material adverse effect on the Company's
financial position.
5. FOREIGN CURRENCY TRANSLATION
The financial statements of the Company's United Kingdom subsidiary (see
Note 3) are maintained in their functional currency (British pound
sterling) and translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards No. 52. Assets and liabilities are
translated at current exchange rates in effect at the balance sheet date
and shareholders' equity is translated at historical exchange rates.
Revenues and expenses are translated at the average exchange rate for
each period. Translation adjustments, which result from the process of
translating British pound sterling financial statements into U.S.
dollars, are accumulated in a separate component of stockholders' equity
in accordance with Statement No. 52.
6. OTHER INFORMATION
In November 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits". This statement requires
recognition of benefits provided by an employer to former or inactive
employees after employment but before retirement. The statement must be
implemented prior to the end of the 1995 fiscal year. Management
believes that the impact of SFAS No. 112 will not be material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER FISCAL 1995
COMPARED TO SECOND QUARTER FISCAL 1994
Net sales for the quarter ended February 28, 1995 totaled $37,890,000, an
increase of 42.1% from net sales of $26,660,000 for the same period in fiscal
1994. The increase is due to continued strong growth in virtually all
geographic and end-use markets that the Company serves and reflects an increase
in selling prices to customers for custom molded products which became
effective during the first fiscal quarter. Substantial sales increases from
the second quarter of fiscal 1994 were experienced in both the Company's custom
molded and integrated materials operations. Approximately 42% of the sales
increase was attributable to the acquisition of a similar business in April
1994 and to the Astrofoam, Inc. and M.Y. Trondex acquisitions in September 1994
and February 1995, respectively (see Note 3 of the Notes to Consolidated
Condensed Financial Statements). The M.Y Trondex acquisition was the Company's
first acquisition of a custom molding business in a foreign country (see also
Note 5 of the Notes to Consolidated Financial Statements). Sales gains are
expected to be favorable for the remainder of fiscal 1995 based on current
customer order placement rates and prospects for continued strength in the
economy.
Gross profit for the quarter ended February 28, 1995 was $8,776,000, a
51.1% increase from $5,807,000 in the same quarter of fiscal 1994. The gross
profit margin increased to 23.2% from 21.8% primarily due to the increase in
net sales which resulted in a more efficient use of the Company's manufacturing
capacity in both the Company's custom molded and integrated materials
operations.
Selling and administrative expenses increased $1,100,000 or 27.2% for the
quarter ended February 28, 1995 but decreased as a percentage of net sales to
13.6% from 15.1% in the same period of the prior fiscal year. The dollar
increase was due primarily to added employee costs in connection with the
acquisitions of similar businesses in April and September 1994 and February
1995, and increased commissions associated with the higher sales level.
Interest expense for the quarter ended February 28, 1995 was $569,000
compared to $312,000 in the second quarter of fiscal 1994. The increase of
$257,000 was due to a higher level of outstanding debt coupled with higher
interest rates.
Income before income taxes for the quarter ended February 28, 1995
increased to $3,041,000 from $1,453,000 for the same period of fiscal 1994, an
increase of 109.4%.
The provision for income taxes for the quarter ended February 28, 1995
increased due to the increased income before income taxes.
Net income for the quarter ended February 28, 1995 was $1,840,000, an
increase of 103.8% from $903,000 for the same period of fiscal 1994. The
increase was due primarily to the increase in net sales and gross profit.
The net sales and net income for the three months ended February 28,
1995 are Company records for a second fiscal quarter.
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RESULTS OF OPERATIONS - SIX MONTHS ENDED FEBRUARY 28, 1995
COMPARED TO SIX MONTHS ENDED FEBRUARY 28, 1994
Net sales for the six months ended February 28, 1995 totaled $76,810,000,
an increase of 37.3% from net sales of $55,948,000 for the same period in
fiscal 1994. The increase is attributable to the same factors as resulted in
the increase for the quarter ended February 28, 1995 and also reflects
substantial sales increases from the first six months of fiscal 1994 in both
the Company's custom molded and integrated materials operations. Approximately
44% of the sales increase was attributable to the acquisition of a similar
business in April 1994 and to the Astrofoam, Inc. and M.Y. Trondex acquisitions
in September 1994 and February 1995, respectively.
Gross profit for the six months ended February 28, 1995 was $18,554,000, a
43.7% increase from $12,915,000 in the same quarter of fiscal 1994. The gross
profit margin increased to 24.2% from 23.1% primarily due to the increase in
net sales which resulted in a more efficient use of the Company's manufacturing
capacity in both the Company's custom molded and integrated materials
operations and to the consumption in the first quarter of raw materials
purchased by the Company prior to a price increase from the Company's
suppliers.
Selling and administrative expenses increased $2,101,000 or 25.8% for the
six months ended February 28, 1995 but decreased as a percentage of net sales
to 13.3% from 14.5% in the same period of the prior fiscal year. The dollar
increase was due primarily to increased employee costs and travel expenses in
connection with the acquisitions of similar businesses in April and September
1994 and February 1995 and increased commissions associated with the higher
sales level.
Interest expense for the six months ended February 28, 1995 was $1,031,000
compared to $631,000 in the first six months of fiscal 1994. The increase of
$400,000 was due to a higher level of outstanding debt coupled with higher
interest rates.
Income before income taxes for the six months ended February 28, 1995
increased to $7,141,000 from $4,153,000 for the same period of fiscal 1994, an
increase of 72.0%.
The provision for income taxes for the six months ended February 28, 1995
increased due to the increased income before income taxes.
Net income for the six months ended February 28, 1995 was $4,341,000, an
increase of 70.2% from $2,551,000 for the same period of fiscal 1994. The
increase was due primarily to the increase in net sales and gross profit.
The net sales and net income are Company records for a six-month period.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended February 28, 1995 net cash provided by operating
activities amounted to $2,022,000 compared to $5,094,000 for the same period of
fiscal 1994. Depreciation and amortization for the periods ended February 28,
1995 and 1994 amounted to $5,213,000 and $4,964,000 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.
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As of February 28, 1995, the Company's accounts receivable and inventories
increased due to the increased sales levels and the Astrofoam, Inc. and M.Y.
Trondex acquisitions.
Capital expenditures during the six months ended February 28, 1995
amounted to $10,804,000. Of this amount $8,942,816 related to machinery and
equipment, including equipment acquired in the acquisitions. Capital
expenditures for environmental control equipment amounted to $698,000.
As of February 28, 1995, the Company had borrowed $30,402,000 under a
credit agreement with its principal bank, including $10,162,000 out of
$12,000,000 under a revolving credit facility. During the six months ended
February 28, 1995, the Company increased its borrowing under the revolving
credit facility by $8,712,000, including $1,500,000 to finance a substantial
portion of the purchase price of the Astrofoam, Inc. acquisition and
$2,712,000 to finance the M.Y. Trondex acquisition.
Total long-term debt increased from $25,284,000 at August 31, 1994 to
$31,975,000 at February 28, 1995 as a result of the increased borrowing under
the revolving credit facility. The Company expects to convert $10,000,000 of
the amount borrowed under the revolving credit facility to a term loan under
the credit agreement with its principal bank so as to substantially increase
the amount available under the revolving credit facility.
Cash provided by operating activities as supplemented by the amount
available under the revolving credit agreement should be sufficient to enable
the Company to continue to fund its operating requirements, capital
expenditures and dividend payments.
INFLATION
The impact of inflation on the Company's financial position and results of
operations during the period discussed was not significant.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on December 15,
1994. The holders of 5,568,637 shares of the Company's Common Stock
(approximately 90.59% 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 1997, (ii) the approval of
the amendment of the Company's 1989 Stock Incentive Plan to increase the total
number of shares of the Company's Common Stock which may be issued thereunder
by an additional 300,000 shares and (iii) the ratification of the appointment
of S. R. Snodgrass, A.C. as the independent public accountants to audit the
financial statements of the Company and its subsidiaries for the 1995 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 1997. There were no other nominees. Shares were
voted as follows:
Withhold
Name For Vote For
---------------------- ----------- --------
Karen L. Farkas 5,520,205 48,432
Robert W. Kampmeinert 5,532,005 36,632
David C. O'Leary 5,546,597 22,040
Harold F. Reed, Jr. 5,540,597 28,040
The amendment of the Company's 1989 Stock Incentive Plan to increase the
total number of shares of the Company's Common Stock which may be issued
thereunder by an additional 300,000 shares was approved: affirmative votes,
5,358,057 shares; negative votes, 90,844 shares; and abstained, 119,736 shares.
The appointment of S. R. Snodgrass, A.C. as the independent public
accountants for the 1995 fiscal year was ratified: affirmative votes,
5,553,097 shares; negative votes, 7,860 shares; and abstained, 7,680 shares.
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
- - ----------- -------------------------------------------------------
3.(ii) By-laws, as amended and restated effective December 15,
1994, filed herewith.
10.6 Deferred Compensation Plan for Non-Employee Directors,
as adopted by the Company's Board of Directors on
December 14, 1994, filed herewith.*
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10.7 Retirement Policy and Plan for Non-Employee Directors,
as amended by the Company's Board of Directors on
December 14, 1994, filed herewith.*
11 Computation of Net Income Per Share, filed herewith.
27 Financial Data Schedule, filed herewith.
____________
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.
(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 February 28, 1995.
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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, 1995 By /s/ John P. O'Leary, Jr.
--------------------------
John P. O'Leary, Jr.,
President and
Chief Executive Officer
Date: April 13, 1995 By /s/ Brian C. Mullins
--------------------------
Brian C. Mullins,
Vice President and
Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)
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Tuscarora Incorporated
FORM 10-Q FOR QUARTER ENDED FEBRUARY 28, 1995
EXHIBIT LIST
The following exhibits are required to be filed with this quarterly report
on Form 10-Q. Exhibits are incorporated herein by reference to other documents
pursuant to Rule 12b-23 under the Securities Exchange Act of 1934, as amended,
as indicated in the index. Exhibits not incorporated herein by reference
follow this index.
Exhibit
No. Document
- - ----------- -------------------------------------------------------
3.(ii) By-laws, as amended and restated effective December 15,
1994, filed herewith.
10.6 Deferred Compensation Plan for Non-Employee Directors,
as adopted by the Company's Board of Directors on
December 14, 1994, filed herewith.*
10.7 Retirement Policy and Plan for Non-Employee Directors,
as amended by the Company's Board of Directors on
December 14, 1994, filed herewith.*
11 Computation of Net Income Per Share, filed herewith.
27 Financial Data Schedule, filed herewith.
_________
* Management contract or compensatory plan, contract or arrangement
required to be filed by Item 601(b)(10)(iii) of Regulation S-K.