PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings.
	Item 6. Exhibits and Reports on Form 8-K.
	Item 6. Exhibits and Reports on Form 8-K
EXHIBIT 4
FINANCIAL DATA SCHEDULE

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 ~~May~~November 3130, 2000

[ ] 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 000-17051

Tuscarora Incorporated (Exact name of registrant as specified in ~~the~~ its charter.)


Pennsylvania (State or other jurisdiction of incorporation or organization)		25-1119372 (IRS Employer Identification No.)

800 Fifth Avenue
New Brighton, Pennsylvania 15066
(Address of principal executive offices)
(Zip Code)

724-843-8200
(Registrant’s telephone number, including area code)

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 __X__ No ____

As of ~~July~~January 1, ~~2000~~2001, 9,~~304~~306,~~485~~985 shares of Common Stock, without par value, of the registrant were outstanding.

Tuscarora Incorporated

INDEX

			~~Page~~	Page
Part I. Financial Information
	~~Item 1. Financial Statements.~~	Item 1. Financial Statements.
	Condensed Consolidated Balance Sheets at May 31, 2000 (Unaudited) and August 31, 1999			3
		Condensed Consolidated Balance Sheets at November 30, 2000 (Unaudited) and August 31, 2000			3
	Condensed Consolidated Statements of Income (Unaudited) – Three and nine month periods ended May 31, 2000 and May 31, 1999			4
		Condensed Consolidated Statements of Income (Unaudited) – Three months ended November 30, 2000 and November 30, 1999			4
	Condensed Consolidated Statements of Cash Flows (Unaudited) – Nine months ended May 31, 2000 and May 31, 1999			5
		Condensed Consolidated Statements of Cash Flows (Unaudited) – Three months ended November 30, 2000 and November 30, 1999			5
	~~Notes to Condensed Consolidated Financial Statements (Unaudited)~~	Notes to Condensed Consolidated Financial Statements (Unaudited)		~~6 - 9~~	6 — 10
	~~Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition~~	Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition		~~10 - 14~~	11 — 13
Part II. Other Information
	~~Item 1. Legal Proceedings~~	Item 1. Legal Proceedings		15	14
	~~Item 6. Exhibits and Reports on Form 8-K~~	Item 6. Exhibits and Reports on Form 8-K		15	14

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Tuscarora Incorporated

CONDENSED CONSOLIDATED BALANCE SHEETS

May 31,

August 31,

2000

1999

(Unaudited)

ASSETS

November 30,

August 31,

2000

ASSETS

Current Assets

Cash and cash equivalents

52,~~850~~197,~~854~~787

67,~~090~~377,~~066~~860

Trade accounts receivable, net of provision for losses

4548,~~435~~640,~~148~~031

3348,~~427~~457,~~529~~015

Inventories

3936,~~308~~468,~~550~~813

2233,~~490~~962,~~918~~576

Prepaid expenses and other current assets

43,~~381~~710,~~008~~666

23,~~425~~801,~~187~~453

94,975,560

64,433,700

91,017,297

93,598,904

Property, Plant and Equipment, net

~~101~~105,~~976~~573,~~264~~172

~~101~~102,~~054~~495,~~887~~992

Other Assets

Goodwill, net

810,~~634~~163,~~982~~512

8,~~667~~371,~~816~~686

Other non-current assets, net

46,~~712~~030,~~897~~847

35,~~229~~053,~~120~~772

Total Assets

~~Total Assets~~

~~210~~212,~~299~~784,~~703~~828

~~177~~209,~~385~~520,~~523~~354

~~LIABILITIES AND SHAREHOLDERS’ EQUITY~~

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

Current maturities of long-term debt

5,~~280~~200,~~201~~183

5,~~113~~195,~~972~~494

Accounts payable

2313,~~000~~536,~~846~~657

1519,~~133~~994,~~063~~070

Accrued income taxes

~~980~~2,~~315~~087,606

~~276,112~~—

Accrued payroll and related taxes

1,~~286~~895,~~186~~265

1,~~518~~608,~~769~~630

Other current liabilities

68,~~732~~187,~~162~~838

56,~~017~~332,~~092~~526

37,279,710

27,059,008

30,907,549

33,130,720

Long-term Debt — less current maturities

7780,~~202~~559,~~012~~077

6078,~~064~~763,~~673~~774

Deferred Income Taxes

~~350~~559,~~595~~269

1579,~~123,373~~076

Other Long-term Liabilities

2,~~315~~372,~~158~~206

2,~~454~~322,~~547~~821

Total Liabilities

~~Total Liabilities~~

~~117~~114,~~147~~398,~~475~~101

90114,~~701~~796,~~601~~391

Shareholders’ Equity

Preferred Stock – par value $.01 per share: authorized shares, 2,000,000; none issued

—

Preferred Stock — par value $.01 per share: authorized shares, 2,000,000; none issued

—

Common Stock – without par value: authorized shares, 50,000,000; issued shares, 9,582,386 at May 31, 2000 and 9,568,343 at August 31, 1999

9,582,386

9,568,343

Common Stock — without par value: authorized shares, 50,000,000; issued shares, 9,619,991 at November 30, 2000 and 9,602,418 at August 31, 2000

9,619,991

9,602,418

Capital surplus

12,~~824~~051,~~134~~199

1,~~696~~964,~~670~~514

Retained earnings

8793,~~024~~512,~~871~~179

7789,~~680~~370,~~902~~918

Accumulated other comprehensive income (loss)

(12,~~817~~824,~~720~~842

)

(~~481~~2,~~262~~314,459

)

96,613,671

88,464,653

102,358,527

98,623,391

Less cost of reacquired shares of Common Stock:

278,768 shares at May 31, 2000 and 138,468 shares at August 31, 1999

(3,461,443

)

(1,780,731

)

313,868 shares at November 30, 2000 and 309,268 shares at August 31, 2000

(3,971,800

)

(3,899,428

)

Total Shareholders’ Equity

~~Total Shareholders’ Equity~~

9398,~~152~~386,~~228~~727

8694,~~683~~723,~~922~~963

Total Liabilities and Shareholders’ Equity

~~Total Liabilities and Shareholders’ Equity~~

~~210~~212,~~299~~784,~~703~~828

~~177~~209,~~385~~520,~~523~~354

Note: The consolidated balance sheet at August 31, ~~1999~~2000 has been taken from the audited financial statements and condensed.

See notes to ~~unaudited~~ condensed consolidated financial statements (unaudited).

Tuscarora Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three Months Ended						Nine Months Ended
		Three Months Ended November 30,
		May 31,						May 31,
		2000			1999
		2000			1999			2000			1999
Net Sales		$	76,088,019		$	64,717,803
Net Sales		$	72,465,046		$	59,703,336		$	198,483,734		$	173,809,651
Cost of Sales			58,239,233			48,392,760
Cost of Sales			55,413,074			46,008,568			151,146,357			133,013,945
	Gross profit		17,848,786			16,325,043
	Gross profit		17,051,972			13,694,768			47,337,377			40,795,706
Selling and Administrative Expenses			10,050,307			8,232,837
Selling and Administrative Expenses			9,368,985			7,984,533			26,648,270			23,385,059
Interest Expense			1,652,217			1,192,236
Interest Expense			1,543,982			1,078,593			4,056,039			3,472,509
Other (Income) Expense – net			(531,966	)		(168,734	)
Other (Income) Expense – net			(146,170	)		(135,473	)		(478,334	)		(265,703	)
	Total expenses		11,170,558			9,256,339
	Total expenses		10,766,797			8,927,653			30,225,975			26,591,865
	Income before income taxes		6,678,228			7,068,704
	Income before income taxes		6,285,175			4,767,115			17,111,402			14,203,841
Provision for Income Taxes			2,536,967			2,651,657
Provision for Income Taxes			2,386,770			1,768,152			6,477,195			5,348,236
	Net income	$	4,141,261		$	4,417,047
	Net income	$	3,898,405		$	2,998,963		$	10,634,207		$	8,855,605
Basic net income per share of Common Stock		$	0.45		$	0.47
Basic net income per share of Common Stock		$	0.42		$	0.32		$	1.14		$	0.93
Diluted net income per share of Common Stock		$	0.44		$	0.47
Diluted net income per share of Common Stock		$	0.42		$	0.31		$	1.13		$	0.92
Dividend declared and paid per share of Common Stock		$	0.00		$	0.00		$	0.135		$	0.12

See notes to ~~unaudited~~ condensed consolidated financial statements (unaudited).

Tuscarora Incorporated

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

				Nine Months Ended May 31,
				Three Months Ended November 30,
				2000			1999
Operating Activities
	Net Income			$	104,~~634~~141,~~207~~261		$	84,~~855~~417,~~605~~047
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation			124,~~592~~395,~~509~~555			114,~~980~~141,~~162~~588
		Amortization			1335,~~002,054~~645			~~910~~331,~~636~~317
		Provision for losses on receivables			~~117~~79,~~662~~837			~~123~~28,~~584~~204
		Decrease in deferred income taxes			(~~805~~19,~~894~~807	)		(~~436~~329,~~863~~865	)
		Net gain on sales, abandonment or write-down of assets			(183,990	)		(104,109	)
		Gain on disposition of property, plant and equipment, net			(28,490	)		(1,567	)
		Stock compensation expense			9,061			9,090
		Gain on disposition of investments			(460,254	)		—
		Loss of 50% owned affiliate			9,813			—
		Stock compensation expense			3,239			3,003
	Changes in operating assets and liabilities, net of effects of business acquisitions:
		Decrease (increase):
			Trade accounts receivable		(11370,~~814,177~~662	)		(14,~~739~~241,~~750~~033	)
			Inventories		(162,~~417~~477,~~673~~909	)		(13,~~651~~680,~~362~~212	)
			Prepaid expenses and other current assets		(149,~~815,564~~198	)		(219,~~768,498~~185	)
			Other non-current assets		(~~434~~215,~~679~~110	)		(84196,~~678~~935	)
		Increase (decrease):
			Accounts payable		7(6,~~689~~373,~~028~~647	)		21,~~396~~703,~~594~~487
			Accrued income taxes		~~704~~2,~~203~~118,255			~~(901~~2,~~730~~469,105	)
			Accrued payroll and related taxes		~~(219~~292,~~650~~586	)		(~~202~~11,~~451~~046	)
			Other current liabilities		1,~~597~~872,~~318~~580			(1111,~~735,575~~095	)
			Other long-term liabilities		(~~123~~24,~~340~~903	)		(~~303~~62,~~975~~379	)
			Cash provided by operating activities		23,~~531~~327,~~075~~187			144,~~346~~662,~~680~~624
Investing Activities
	Purchase of property, plant and equipment				(155,~~194~~889,~~896~~041	)		(124,~~692~~065,~~624~~290	)
	Business acquisitions, net of cash acquired				(45,~~143~~001,~~791~~614	)		(23,~~422~~483,~~169~~510	)
	Proceeds from sale of property, plant and equipment				335,~~241,506~~000			~~760~~50,~~798~~401
	Increase in long-term receivables				(757,070	)		—
	Other investing activities, net				576,254			—
			Cash used for investing activities		(1610,~~854~~279,~~251~~401	)		(147,~~353~~498,~~995~~399	)
Financing Activities
	Proceeds from long-term debt				853,~~030~~000,000			367,~~500~~530,000
	Payments on long-term debt				(671,~~927~~196,~~929~~984	)		(465,~~120~~070,~~281~~095	)
	Dividends paid				(1,290,238	)		(1,143,735	)
	Proceeds from sale of Common Stock				92,471			30,057
	Proceeds from sale of Common Stock				132,447			107,053
	Payments to reacquire Common Stock				(63,825	)		(567,413	)
	Payments to reacquire Common Stock				(1,680,713	)		(737,050	)
			Cash provided by financing activities		1,831,662			1,922,549
			Cash provided by (used for) financing activities		14,263,567			(2,394,013	)
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents					(59,521	)		981
Effect of Foreign Currency Exchange Rate Changes on Cash and Cash Equivalents					(179,603	)		20,236
			Net decrease in cash and cash equivalents		(5,180,073	)		(912,245	)
			Net decrease in cash and cash equivalents		(239,212	)		(2,381,092	)
Cash and Cash Equivalents at Beginning of Period					7,377,860			6,090,066
Cash and Cash Equivalents at Beginning of Period					6,090,066			5,452,281
Cash and Cash Equivalents at End of Period				$	2,197,787		$	5,177,821
Cash and Cash Equivalents at End of Period				$	5,850,854		$	3,071,189

See notes to ~~unaudited~~ condensed consolidated financial statements (unaudited).

Tuscarora Incorporated

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Condensed Consolidated Financial Statements

The condensed consolidated balance sheet at ~~May~~November 3130, 2000 and the consolidated statements of income and consolidated statements of cash flows of Tuscarora Incorporated (the Company) for the three ~~and~~months ~~nine month periods~~ ended ~~May~~November 3130, 2000 and ~~May~~November 3130, 1999 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 ~~May~~November 3130, 2000 and for the periods presented have been made and are of a normal recurring nature.

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 ~~1999~~2000 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, ~~1999~~2000.

The results of operations for the three ~~and~~months ~~nine month periods~~ ended ~~May~~November 3130, 2000 are not necessarily indicative of the operating results to be expected for the full year.

2. Inventories


	Inventories are summarized as follows:

	May 31,		August 31,
	November 30,		August 31,
	2000		~~1999~~2000
Finished goods	$	1112,~~906~~406,~~749~~692	$	1012,~~606~~099,~~473~~704
Work in process		~~148~~236,~~020~~695		~~198~~118,~~093~~190
Raw materials		2521,~~201~~888,~~458~~414		1019,~~326~~938,~~444~~692
Supplies		21,~~052~~937,~~323~~012		1,~~359~~805,~~908~~990
	$	3936,~~308~~468,~~550~~813	$	2233,~~490~~962,~~918~~576

3. Adoption of FASB No. ~~Comprehensive~~133, ~~Income~~Accounting for Derivative Instruments and Hedging Activities

~~Total~~In ~~comprehensive~~June ~~income~~1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for ~~the~~Derivative ~~three~~Instruments and ~~nine~~Hedging ~~months~~Activities. ~~ended~~The ~~May~~Statement 31requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, ~~2000~~depending ~~and~~on ~~1999~~the ~~was~~nature asof ~~follows:~~the hedge, changes in its fair value are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.

	Three Months Ended					Nine Months Ended
	May 31,					May 31,
	2000			1999		2000			1999
Net Income	$	3,898,405		$	2,998,963	$	10,634,207		$	8,855,605
Foreign currency translation (loss) gain		(1,117,625	)		78,739		(1,336,458	)		(719,168	)
Comprehensive income	$	2,780,780		$	3,077,702		9,297,749		$	8,136,437

At September 1, 2000 the Company had an existing interest-rate swap agreement (a derivative) that effectively converts a portion of its floating-rate debt to a fixed-rate basis through July 1, 2004, thus reducing the impact of interest-rate changes on future interest expense. At November 30, 2000 and September 1, 2000, respectively, $8.7 million and $9.3 million (approximately 11%) of the Company’s outstanding variable rate debt under bank credit agreements was designated as the hedged item to the interest-rate swap agreement.

At May 31, 2000 and August 31, 1999, accumulated other comprehensive income (loss), which consisted entirely of foreign currency translation adjustments, amounted to ($1,817,720) and ($481,262), respectively.

4Also at September 1, 2000, the Company had an existing interest rate cap agreement, which capped the variable rate interest payments on a portion of its floating-rate debt through July 1, 2004 at 8. ~~Net~~5%. ~~Income~~At ~~Per~~November ~~Share~~ 30, 2000 and September 1, 2000, respectively, $8.7 million and $9.3 million (approximately 11%) of the Company’s outstanding variable rate debt under bank credit agreements was covered by the interest rate cap agreement. At November 30, 2000, interest rates on the portion of debt corresponding to the cap agreement were below the cap of 8.5%. The fair value of the cap agreement and its impact on earnings were not material to the financial statements.


	The adoption of Statement No. 133 on September 1, 2000 resulted in the cumulative effect of an accounting change of ($1,137) being recognized as comprehensive income and a first quarter unrealized loss of ($77,991) in other comprehensive income, offsetting the fair value of the swap agreement described above. The effect on earnings was not material to the financial statements of the Company.

4. Comprehensive Income


	Total comprehensive income, shown before the related income tax effect, for the three months ended November 30, 2000 and 1999 was as follows:


	Three Months Ended November 30,

	2000			1999

Net Income	$	4,141,261		$	4,417,047




Foreign currency translation (loss)		(431,255	)		(123,050	)




Change in fair value of derivative instruments		(77,991	)		—

Comprehensive income before the cumulative effect of a change in accounting principle		3,632,015			4,293,997




Cumulative effect on prior years (to August 31, 2000) of the adoption of FAS 133		(1,137	)		—

Comprehensive income	$	3,630,878		$	4,293,997


	The income tax benefit related to comprehensive income for the three months ended November 30, 2000 and 1999 was $193,887 and $46,159, respectively. Accumulated other comprehensive (loss) consists of:


	November 30,			August 31,
	2000			2000

Foreign currency translation adjustments	$	(2,745,714	)	$	(2,314,459	)




Unrealized loss from derivative instruments		(79,128	)		—

	$	(2,824,842	)	$	(2,314,459	)

5. Net Income Per Share


	The following table sets forth the computation of basic and diluted net income per share of Common Stock in accordance with the provisions of SFAS No. 128:

		Three Months Ended				Nine Months Ended
		Three Months Ended November 30,
		May 31,				May 31,
		2000		1999
		2000		1999		2000		1999
Net income		$	4,141,261	$	4,417,047
Net income		$	3,898,405	$	2,998,963	$	10,634,207	$	8,855,605
Weighted average shares of Common Stock outstanding – basic			9,304,386		9,411,473
Weighted average shares of Common Stock outstanding – basic			9,310,080		9,488,484		9,354,937		9,508,055
Effect of dilutive securities:
	Stock options		62129,~~680~~585		6857,~~737~~200		~~52,437~~		~~76,294~~
Weighted average shares of Common Stock outstanding – diluted			9,~~372~~433,~~760~~971		9,~~557~~468,~~221~~673		~~9,407,374~~		~~9,584,349~~
Basic net income per share of Common Stock		$	0.4245	$	0.3247	$	~~1.14~~	$	~~0.93~~
Diluted net income per share of Common Stock		$	0.4244	$	0.3147	$	~~1.13~~	$	~~0.92~~


	Securities not included in the computation of diluted net income per share of Common Stock for the periods presented were as follows:

	Three Months Ended				Nine Months Ended
	Three Months Ended November 30,
	May 31,				May 31,
	2000		1999
	2000		1999		2000		1999
Stock options		412,825		1,044,470
Stock options		990,075		971,819		1,101,644		866,734
Option price range	$	14.96-$19.16	$	12.50-$19.16
Option price range		$12.82-$19.16		$12.82-$19.16		$12.50-$19.16		$12.82-$19.16


	The options to purchase shares of Common Stock not included in the computation of diluted net income per share of Common Stock for the periods presented were excluded because the exercise price of the stock options was higher than the average market price of the shares of Common Stock during the periods.

56. Business ~~Acquisitions~~Acquisition

OnIn September 12000, ~~1999,~~ the Company purchased the ~~specialty~~operating ~~corrugated~~assets ~~container,~~of ~~heavy~~the ~~wall~~Mt. ~~corrugated~~Pleasant, ~~fabrication~~Tennessee ~~and~~facility ~~custom wood crating business~~ of ~~Lane~~Polyfoam ~~Container~~Packers ~~Company~~Corporation. ofIn ~~Dallas,~~addition ~~Texas~~to ~~for~~ a ~~combination~~ state-of ~~cash,~~ -the-art ~~assumption~~custom offoam ~~certain~~molding ~~liabilities~~facility, ~~and~~the ~~certain contingent payments. The~~ Company ~~is continuing the business~~ acquired atnew ~~its~~customer ~~current~~accounts ~~location~~that ~~under~~are aexpected ~~lease~~to ~~with~~add aapproximately ~~third party. On February 1~~$3, ~~2000~~000,000 ~~the~~of ~~Company~~new ~~purchased~~revenues in the ~~custom~~2001 ~~wood~~fiscal ~~pallet~~year. ~~and~~The ~~container~~total ~~business~~consideration ofconsisted ~~Erickson Wood Products~~ of ~~Belmont,~~cash ~~California~~paid ~~for~~at ~~cash~~closing and ~~certain~~additional ~~contingent~~cash ~~payments.~~consideration ~~The~~which ~~business~~may ~~acquired~~be ~~was~~paid ~~relocated~~ to the ~~Company’s~~seller ~~existing~~based ~~manufacturing~~on ~~facility~~certain insales ~~Hayward,~~made ~~California.~~in ~~On March 1, 2000,~~ the ~~Company~~future ~~purchased~~by the ~~interior foam cushion fabricating~~ business ~~of Cushion Packaging Company of Dallas, Texas for cash and certain contingent payments~~acquired. The ~~Company~~aggregate ~~intends~~consideration topaid ~~relocate~~and ~~the business acquired~~ to ~~its~~be ~~facility~~paid inis ~~Dallas,~~not ~~Texas upon the expiration of the existing lease~~material. ~~Each~~The ofacquisition ~~the above acquisitions~~ was accounted for ~~under~~as ~~the purchase method of accounting and in each case~~ a ~~portion of the~~ purchase ~~price was allocated to goodwill and a covenant not to compete~~. ~~The total amount paid and to be paid in connection with such acquisitions is not material.~~

7 In October 2000, the Company acquired a 50% interest in Hytherm Packaging Limited, a custom foam molding company in Cork, Ireland. The 50/50 joint venture with Hytherm (Ireland) Limited will conduct business under the name Tuscarora (Ireland) Limited. The purchase price was not material.

6. Share Repurchase Program

In October 1998, the Company’s Board of Directors authorized the repurchase of up to 250,000 shares of the Company’s Common Stock at prices not to exceed $15 per share through August 31, 1999. Such authorization has subsequently been extended through August 31, 2001, with the maximum number of shares that may be repurchased increased to 500,000. There was no increase in the maximum price per share that may be paid. During fiscal 1999, the Company repurchased 123,850 shares of Common Stock at prices ranging from $9.94 to $13.94 per share and during the nine months ended May 31, 2000, the Company repurchased 140,300 shares of Common Stock at prices ranging from $10.94 to $13.56 per share.

7. Business Segments and Geographical Information

The Company currently operates in a single business segment as a designer and manufacturer of protective packaging, material handling solutions and componentry. The Company has product design, sales and manufacturing operations in the U.S. and the U.K., along with sales and manufacturing operations in Mexico. The geographic distribution of net sales and operating income (loss) for the three and nine months ended May 31, 2000 and 1999 and of long-lived assets at May 31, 2000 and August 31, 1999 is set forth below. The business in Mexico is conducted under “Maquiladora” programs, and a portion of U.S. selling expenses has been allocated to the Mexican operations for the periods presented since the product design and a majority of the selling activity for these operations is performed by U.S. personnel. Operating income (loss) is gross profit less selling and administrative expenses.

			Three Months Ended						Nine Months Ended
			May 31,						May 31,
			2000			1999			2000			1999
Net Sales
	United States		$	60,589,613		$	49,111,217		$	162,959,837		$	141,860,639
	United Kingdom			5,870,454			6,516,664			17,937,324			18,991,729
	Mexico			6,004,979			4,075,455			17,586,573			12,957,283
		Total	$	72,465,046		$	59,703,336		$	198,483,734		$	173,809,651
Operating Income (Loss)
	United States		$	7,816,570		$	5,938,240		$	20,683,312		$	17,934,256
	United Kingdom			(199,237	)		135,611			(529,374	)		5,470
	Mexico			65,654			(363,616	)		535,169			(529,079	)
		Total	$	7,682,987		$	5,710,235		$	20,689,107		$	17,410,647

			May 31,		August 31,
			2000		1999
Long-Lived Assets
	United States		$	94,375,446	$	86,379,603
	United Kingdom			12,345,568		17,044,811
	Mexico			8,603,129		9,527,409
		Total	$	115,324,143	$	112,951,823

87. ~~Claims~~ ~~and~~Share ~~Contingencies~~Repurchase Program

OnIn ~~May~~October 221998, ~~2000,~~the aCompany’s ~~Motion~~Board ~~for~~of ~~Summary~~Directors ~~Judgment~~authorized inthe ~~favor~~repurchase of up to 250,000 shares of the Company’s ~~was~~Common ~~granted~~Stock inat aprices ~~lawsuit~~not ~~filed~~to ~~against~~exceed ~~the~~$15 ~~Company~~per inshare ~~December~~through ~~1996~~August ~~seeking~~31, ~~substantial~~1999. ~~compensatory~~This ~~and~~authorization ~~punitive~~was ~~damages~~subsequently asextended athrough ~~result~~August of31, ~~the~~2001, ~~alleged~~with ~~wrongful~~the ~~death~~maximum number of anshares ~~employee.~~that ~~The~~may ~~plaintiff~~be inrepurchased ~~this~~increased ~~lawsuit~~to ~~has~~500,000. ~~filed~~There anwas ~~appeal~~no ~~(see~~increase ~~Items~~in 1the ~~and~~maximum ~~6(b)~~price ofper ~~Part~~share IIthat ofmay ~~this~~be ~~quarterly report)~~paid. InDuring ~~addition,~~the athree ~~number~~month ofperiod ~~legal~~ended ~~and~~November ~~administrative~~30, ~~proceedings~~2000, ~~against~~ the Company ~~involving~~repurchased ~~claims~~4,600 shares of ~~employment~~Common ~~discrimination~~Stock ~~are~~at ~~pending~~prices ranging from $13.81 Into ~~the~~$13.94 ~~opinion~~per ofshare. ~~management~~During fiscal 2000, the ~~dispositions~~Company repurchased 170,800 shares of ~~the~~Common ~~lawsuit~~Stock ~~and~~at ~~the~~prices ~~proceedings~~ranging ~~should~~from ~~not~~$10.94 ~~have~~to a$13.94 ~~material~~per ~~adverse~~share ~~effect~~and onduring fiscal 1999, the Company’s ~~financial~~repurchased ~~position~~123,850 orshares ~~results~~ of ~~operations~~Common Stock at prices ranging from $9.94 to $13.94 per share.

98. ~~Other~~ Business Segments and Geographical Information

InThe ~~1998,~~Company ~~the~~currently ~~Financial~~operates ~~Accounting~~in ~~Standards~~a ~~Board~~single ~~(FASB)~~business ~~issued~~segment ~~Statement~~as a custom designer and manufacturer of ~~Financial~~protective ~~Accounting~~packaging, ~~Standards~~material ~~(SFAS)~~handling Noproducts and specialty components. ~~133,~~The ~~“Accounting~~Company ~~for~~has ~~Derivative~~product ~~Instruments~~design, sales and ~~Hedging~~manufacturing ~~Activities”~~operations in the U.S. ~~Subsequently,~~and the ~~FASB~~U.K., ~~issued~~as ~~SFAS~~well Noas in Maquiladora zones in Mexico. ~~137,~~The ~~“Accounting~~geographic ~~for~~distribution ~~Derivative~~of ~~Instruments~~net sales and ~~Hedging~~operating ~~Activities:~~income ~~Deferral~~(loss) offor the ~~Effective~~three ~~Date~~months ended November 30, 2000 and 1999 and of ~~SFAS~~long-lived ~~Statement~~assets ~~No.~~at ~~133”~~November 30, ~~which~~2000 ~~deferred~~and ~~the~~August ~~effective~~31, ~~date~~2000 ofis ~~SFAS~~set Noforth below. ~~133~~A ~~for~~portion ~~one~~of ~~year~~U. ~~SFAS No~~S. ~~133~~selling ~~will~~expenses behas ~~applicable~~been allocated to the ~~Company~~Mexican onoperations ~~September~~for 1,all ~~2000~~periods presented since most of the design and ~~will~~selling ~~result~~activity infor anthe ~~item~~Mexican ofoperations ~~accumulated~~is ~~other~~performed ~~comprehensive~~by U.S. personnel. Operating income (loss) ~~which~~is ~~will~~gross ~~not~~profit beless ~~significant~~selling and administrative expenses.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements,” to clarify the revenue recognition rules for certain types of transactions. The Company is currently evaluating the effect of implementing SAB 101, which is required to be adopted by the Company by the fourth quarter of the fiscal year ending August 31, 2001.


			Three Months Ended November 30,

			2000		1999

Net Sales
	United States		$	61,513,711	$	52,156,322




	United Kingdom			7,423,699		6,501,414




	Mexico			7,150,609		6,060,067

		Total	$	76,088,019	$	64,717,803

Operating Income (Loss)
	United States		$	6,810,334	$	7,789,206




	United Kingdom			479,056		(58,550	)




	Mexico			509,089		361,550

		Total	$	7,798,479	$	8,092,206


			November 30,		August 31,
			2000		2000

Long-lived Assets
United States			$	101,025,581	$	96,105,956




	United Kingdom			12,889,220		11,724,457




	Mexico			7,852,730		8,091,037

		Total	$	121,767,531	$	115,921,450

9. 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 1996. On May 22, 2000, the trial judge granted the Company's Motion for Summary Judgment, thus adjudicating the lawsuit in favor of the Company. The plaintiff appealed, and on December 13, 2000 the Court of Appeals affirmed the decision of the trial judge in granting the Motion for Summary Judgment. On December 22, 2000 the plaintiff filed an Application for Reconsideration with the Court of Appeals, and on January 3, 2001 the Company filed a Memorandum in Opposition to the Application for Reconsideration. (See Item 1 of Part II of this quarterly report.) The Company intends to vigorously oppose the Application for Reconsideration. In addition, a number of legal and administrative proceedings against the Company involving claims of employment discrimination are pending. In the opinion of management, the dispositions of the lawsuit and the proceedings should not have a material adverse effect on the Company's financial position or results of operations.

10. Other Information

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 (SAB 101), “Revenue Recognition in Financial Statements”, to clarify the revenue recognition rules for certain types of transactions. The Company is currently evaluating the effect of implementing SAB 101, which is required to be adopted by the Company by the fourth quarter of the fiscal year ending August 31, 2001.

11. Subsequent Event

In December 2000, the Company announced an agreement in principle to acquire the business of Technapack, Inc., located in Hillsboro, Oregon, near Portland, Oregon, for a combination of cash, the assumption of certain liabilities and certain contingent payments. Technapack is a designer and manufacturer of specialty protective packaging solutions constructed from corrugated paperboard, fabricated foams and wood. Technapack’s primary focus is on supplying Northwestern U.S. customers in the high technology and electronics industry. The acquisition is expected to be closed on or about January 31, 2001 and will add in excess of $6,000,000 annually to the Company’s revenues. The acquisition will be accounted for under the purchase method of accounting and a portion of the purchase price will be allocated to goodwill. The aggregate consideration to be paid in connection with this acquisition will not be material.

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

Results of Operations — Three Months Ended ~~May~~ November 3130, 2000 Compared to Three Months Ended ~~May~~November 3130, 1999

Net ~~income~~sales for the three months ended ~~May~~November 3130, 2000 ~~was~~were $376.91 million, or ~~$0.42~~an ~~per~~increase ~~diluted~~of ~~share~~$11.4 million, upor 3017.6%, ~~compared~~over ~~with~~the ~~net~~same ~~income~~period of $3fiscal 2000.~~0 million,~~ orA ~~$0.31~~significant ~~per~~majority ~~diluted~~of ~~share,~~the increase in net sales was attributable to increased demand for the ~~three~~Company’s ~~months~~products ~~ended~~in ~~May 31,~~virtually ~~1999.~~all ~~The~~end-use ~~increase~~ markets in ~~net~~North America, ~~income~~with ~~was~~continued ~~due~~strong growth in sales to ~~increased~~customers ~~net~~in ~~sales~~the high technology, telecommunications and ~~increased~~consumer ~~gross~~electronics ~~profit~~industries. asHowever, the ahigh rate of sales growth in these markets began to slow in the latter part ~~percentage~~of the current period. The balance of the increase in net sales. ~~Net~~is ~~sales~~due primarily ~~and~~to ~~gross~~higher ~~profit~~selling prices for ~~the~~certain ~~third~~products. ~~fiscal~~The ~~quarter~~higher ofselling ~~2000~~prices ~~set~~were ~~new~~necessitated ~~records~~by ~~for~~increased ~~any~~raw ~~quarter~~material incosts throughout the ~~Company’s~~prior fiscal ~~history~~year, particularly for expandable polystyrene resins and corrugated paper.

~~Net~~Gross ~~sales~~profit increased 9.3% to $17.8 million for the three months ended ~~May~~ November 3130, 2000 ~~were $72.5 million~~, ~~an increase~~as ofcompared to $1216.83 million, orin ~~21.4%, over~~ the ~~same~~three ~~period~~months ofended November 30, ~~fiscal~~ 1999. ~~Approximately~~ ~~73%~~Market ofconditions ~~the~~during ~~increase~~fiscal in2000 ~~net~~and ~~sales~~the ~~was~~first ~~attributable to increased~~quarter ~~demand~~of ~~for~~fiscal ~~the~~2001 ~~Company’s~~were ~~products~~such inthat ~~virtually~~significant ~~all~~increases ~~end-use markets~~ in ~~North America,~~raw ~~with~~material ~~especially~~costs ~~strong~~and significant ~~growth~~increases in ~~sales~~gas toand ~~customers~~electric inutility ~~the~~prices ~~high technology~~could ~~industry,~~not ~~particularly~~be ~~manufacturers of telecommunications~~proportionally ~~products.~~passed ~~The~~along ~~balance~~to of the ~~increase~~ inCompany’s ~~net~~customers ~~sales~~in ~~is due primarily to~~ the ~~acquisition~~form of ~~Lane~~price ~~Container~~increases ~~Company~~for inthe ~~Dallas,~~Company’s ~~Texas~~products. inAs ~~September 1999~~a ~~and~~result, togross ~~higher~~profit ~~selling~~as ~~prices~~a ~~for~~percent ~~many~~ of ~~the~~sales decreased ~~Company’s~~to ~~products~~23.5% ~~The~~for ~~higher~~the ~~selling~~three ~~prices~~months ~~were~~ended ~~necessitated~~November 30, by2000, ~~increased~~as ~~raw material~~compared ~~costs,~~to ~~particularly~~ 25.2% for ~~expandable~~the ~~polystyrene~~three ~~resins~~months ~~and~~ended ~~corrugated paper~~November 30, 1999.

~~Gross~~Selling ~~profit~~and ~~increased~~administrative ~~24.5%~~expenses ~~to $17.1 million~~ for the three months ended November ~~May 31~~30, 2000 increased 22.1%, asor ~~compared~~$1.8 million, to $1310.71 million. inThis ~~the~~increase ~~three~~is primarily ~~months~~attributable ~~ended~~to ~~May 31~~higher employee costs, sales commissions and other selling ~~1999.~~expenses ~~Despite~~incurred ~~the~~to ~~increases~~support inthe ~~raw~~significantly ~~material~~higher ~~costs,~~level ~~gross~~of ~~profit~~sales. asAs a percentage of net sales, selling and administrative expenses increased to 2313.52% in the ~~current~~ three month period ~~from~~ended ~~22.9%~~November 30, ~~in the~~2000 ~~same~~up ~~period~~from ~~of the prior fiscal year~~12.7% ~~The~~in ~~Company’s increased profitability demonstrates its continued focus on improving~~ the ~~operating~~three ~~efficiency~~month ~~of many~~period ofended ~~its~~November 30, ~~manufacturing facilities~~1999.

~~Selling~~Net ~~and~~sales ~~administrative~~for ~~expenses~~the United Kingdom operations for the three months ended ~~May~~ November 3130, 2000 ~~increased~~and ~~17.3%~~November 30, or1999 were $17.4 million, toand $96.45 million, respectively. ~~This~~The 14.2% increase ~~is primarily~~in ~~attributable~~net tosales ~~higher~~volume ~~employee~~was ~~costs~~accompanied ~~and~~by toa ~~costs~~42.6% increase ~~added~~in ~~with~~gross profit. Gross profit for the three months ended November 30, ~~current~~2000 ~~fiscal~~was ~~year~~$1.5 million, ~~acquisition~~or 20.5% of ~~Lane~~net ~~Container~~sales, ~~Company~~up infrom ~~September~~$1.1 ~~1999~~million, or 16.4% of ~~Despite~~net sales for the ~~increases~~three months ended November 30, ~~selling~~1999. ~~and~~Selling and administrative ~~costs~~expenses asdecreased aslightly ~~percentage~~for the first quarter of ~~net sales~~fiscal ~~decreased~~2000, as compared to 12the first quarter of fiscal 1999.9% inOperating income for the ~~current~~first three ~~month~~months ~~period~~of fiscal 2001 was $479,056, ~~down~~as ~~from 13.4%~~compared to an operating loss of $58,550 in the first three ~~month~~months ~~period~~of ~~ending~~fiscal ~~May 31, 1999~~2000. ~~This~~These ~~decrease~~increases asin ~~a percentage~~sales, ofgross ~~net~~profit, ~~sales~~and operating ~~principally~~income ~~reflects~~demonstrate ~~economies~~continued ofimproved ~~scale~~results ~~realized~~in ~~with additional~~the ~~sales~~UK, ~~volume~~although trading ~~and~~conditions ~~increased~~there ~~prices~~remained weak.

Net sales and operating income for the ~~United~~Mexican ~~Kingdom~~ operations for the three months ended ~~May 31~~November 30, 2000 ~~and May 31, 1999~~ were $57.92 million and $~~6.5 million~~509,089, respectively., compared ~~This decrease in net sales volume led~~ to ~~a decrease in gross profit margin~~$6. ~~For the three months ended May~~1 ~~31,~~million ~~2000, gross profit~~ and ~~gross~~ ~~profit as a percentage of net sales were~~ $~~936~~361,~~813 and 16.0%~~550, respectively, ~~and for~~in the ~~same~~three ~~period~~months ofended November 30, ~~fiscal~~ 1999. ~~were~~The ~~$1,170,621 and~~ 18.0%, ~~respectively.~~increase ~~Selling and~~in ~~administrative~~net ~~expenses~~sales ~~for~~resulted ~~the~~from ~~third~~growth ~~quarter of fiscal 2000 continued to~~in bebusiness ~~negatively~~from ~~impacted~~existing bycustomers ~~costs~~as ~~incurred~~well toas ~~redistribute~~business ~~certain~~from ~~business~~customers ~~more~~relocating ~~efficiently~~their ~~among the~~ manufacturing facilities into Mexico. During the ~~United~~three ~~Kingdom.~~months Anended ~~overall~~November 30, ~~slight~~2000, ~~increase~~gross inprofit ~~selling~~for ~~and~~the ~~administrative~~Mexican ~~expenses~~operations ~~(approximately~~ amounted to $~~100~~1.4 million,~~000)~~ ~~combined~~or ~~with~~19.1% ~~the~~of ~~decrease in~~ net sales ~~and gross profit margin~~, ~~led~~ compared to a ~~decrease~~gross inprofit ~~operating~~of ~~income~~$1.0 ~~Operating~~or ~~income~~17.0% ~~(loss) for the United~~of ~~Kingdom~~net ~~operations~~sales ~~for~~in the ~~three months ended May 31, 2000 was ($199,237), and for the~~ same period of the prior fiscal year ~~was $135,611~~.

1011

~~Net~~Interest ~~sales~~expense ~~and~~increased ~~operating income (loss) for the Mexican operations for the three months ended May 31, 2000 were $6~~38.~~0 million and $65~~6%,~~654,~~ ~~respectively, compared~~ to $4.1 .7 million ~~and ($363,616), respectively,~~ in the ~~same~~first ~~period~~quarter of fiscal ~~1999.~~2001, ~~The increase~~up ~~in net sales resulted~~ from ~~growth in business from existing customers as well as business from customers relocating their manufacturing facilities to Mexico~~$1.2 million ~~To accommodate the sales growth~~ in ~~Mexico, particularly in~~ the ~~high technology~~first ~~industry, during the third~~ quarter of fiscal 2000. ~~the~~As ~~Company~~a ~~opened~~percent aof ~~new~~net ~~facility in Guadalajara~~sales, ~~Mexico.~~interest ~~During~~expense ~~the~~increased ~~three months ended May 31, 2000, gross profit for the Mexican operations amounted~~ to ~~$858,068 or 14~~2.32% of ~~net~~in ~~sales~~the ~~compared~~current tofiscal quarter afrom ~~gross profit of $174,065 or 4~~1.38% ~~of net sales~~ in the same period of the prior fiscal year. ~~Operating~~This ~~income~~increase ~~for the fiscal 1999~~is ~~period~~attributable ~~was~~to ~~adversely~~higher ~~impacted~~levels byof ~~start~~outstanding updebt ~~costs~~during of the ~~Company’s~~current ~~Tijuana~~period ~~facility.~~primarily ~~The~~incurred ~~significant~~to ~~improvement~~fund incapital ~~operating~~expenditures ~~income~~and ~~during~~build ~~the~~significantly ~~fiscal~~higher ~~2000~~raw ~~period~~material isinventory levels due to ~~the~~rising ~~Tijuana~~raw ~~facility~~material ~~being~~prices ~~fully~~in ~~operational~~the ~~during that~~prior ~~period~~fiscal year.

~~Interest~~Other ~~expense~~income ~~increased~~and ~~43.1%,~~expense netted to $~~1.5 million~~531,966 ~~in the third quarter~~ of ~~fiscal~~ ~~2000,~~income upfor ~~from $1.1 million in~~ the ~~third~~three ~~quarter of fiscal 1999. As a~~months ~~percent~~ended ~~of net sales~~November 30, ~~interest~~2000 ~~expense~~as ~~increased~~compared to ~~2.1%~~$168,734 inof income for the ~~current~~three ~~fiscal~~months ~~quarter~~ended ~~from~~November 30, 11999.8% inA ~~the~~one ~~same~~time ~~period~~gain ofon the ~~prior~~sale ~~fiscal year. This increase is attributable to higher levels~~ of ~~outstanding~~an ~~debt~~investment ~~during~~in the ~~current~~ ~~period~~amount ~~primarily~~of ~~incurred~~$460,254 ~~to fund~~was ~~capital~~recorded ~~expenditures~~for ~~and build significantly higher raw material inventory levels due to~~ the ~~current~~first ~~environment~~quarter of ~~rising~~fiscal ~~raw material prices~~2001.

Income before income taxes for the three months ended ~~May~~November 3130, 2000 ~~increased~~decreased to $6.37 million from $47.81 million in the same period of the prior fiscal ~~1999~~year, ana ~~increase~~decrease of 315.85%. The effective tax rate increased to 38.0% in the current period, up from 37.15% in the prior period.

~~Results~~ Net ofincome ~~Operations~~for —the ~~Nine~~three ~~Months~~months ~~Ended~~ended ~~May~~November 3130, 2000 was $4.1 million, ~~Compared~~or to$0.45 ~~Nine~~per ~~Months~~share, ~~Ended~~down ~~May~~6.2% compared with net income of $4.4 31million, or $0.47 per share, for the three months ended November 30, 1999. Net income was most significantly impacted by increases in manufacturing costs during the first quarter of fiscal year 2001, as discussed above.

~~Net~~Liquidity income for the nine months ended May 31, 2000 was $10.6 million, or $1.13 per diluted share, compared with net income of $8.9 million, or $0.92 per diluted share, for the same period in fiscal 1999. This represents an increase in net income of 20.1% and anCapital ~~increase in diluted net income per share of~~Resources ~~22.8%. The increase in net income was due to increases in net sales and the~~ ~~continued implementation of efficiencies in the production process at the plant level, leading to higher gross profit and a slightly higher gross profit margin than in the prior fiscal year.~~

~~Net~~Cash ~~sales~~provided ~~increased~~by ~~$24.7 million,~~operating oractivities ~~14.2%,~~for ~~to $198.5 million in~~ the ~~first~~ ~~nine~~three months ofended ~~fiscal~~November 30, 2000 ~~from~~amounted to $~~173~~3.83 million, inas ~~the~~compared ~~first~~to ~~nine months of fiscal 1999~~$4.7 million ~~Approximately~~during ~~64% of~~ the ~~increase~~three months inended ~~net~~November 30, ~~sales~~1999. isDepreciation ~~attributable to~~and anamortization ~~increased~~amounted ~~demand~~to $4.7 million for the ~~Company’s~~three ~~products,~~months ~~with~~ended ~~especially~~November 30, ~~strong growth~~2000 incompared ~~sales~~ to ~~customers~~$4.5 million for in the ~~high~~same ~~technology~~period ~~industry, particularly~~of ~~manufacturers~~the ofprior ~~telecommunications~~fiscal ~~products~~year. ~~The~~Because ~~balance~~a substantial portion of the ~~increase~~Company’s inoperating ~~net~~expenses ~~sales~~are isattributable ~~due primarily~~ to ~~the~~depreciation ~~acquisitions~~and ~~of Berry Packaging~~amortization, ~~Inc.~~the ~~in February 1999 and Lane Container~~ Company ~~in September 1999~~believes asthat ~~well~~its asliquidity ~~the~~would ~~higher~~not ~~selling~~be ~~prices for many of the Company’s~~adversely ~~products~~affected ~~referred~~should toa inperiod ~~the discussion above~~ of ~~the~~reduced ~~results~~earnings ~~for the third fiscal quarter~~occur.

~~Gross~~Inventory ~~profit~~and ~~for~~accounts ~~the~~receivable ~~nine~~at ~~months ended May~~November 3130, 2000 ~~was~~increased slightly to $4736.35 million, ~~an increase~~and of $648.56 million, respectively, up from $4034.80 million inand $48.5 million, ~~the~~respectively, ~~same~~at ~~period~~August 31, ~~of fiscal 1999~~2000. Raw ~~Despite~~material ~~increases~~inventories inat ~~raw~~both ~~material~~November 30, ~~costs~~2000 and August 31, 2000 ~~gross~~were ~~profit~~at ashigher athan ~~percentage~~normal oflevels ~~net sales~~in ~~rose~~an effort to 23minimize the effects of previously announced price increases.8% ~~during~~The ~~the~~Company ~~nine~~expects ~~months~~its inventory ~~ended~~levels ~~May 31,~~to ~~2000,~~decrease upas ~~from~~raw 23material prices stabilize.5% inThe slight ~~the~~increase ~~same~~in ~~period~~accounts ofreceivable was due principally to the ~~prior~~higher ~~fiscal~~sales ~~year~~during the period. ~~The~~Accounts ~~Company’s~~payable ~~increased~~decreased ~~profitability~~to $13.5 million at November 30, 2000, ~~demonstrates~~as ~~its~~compared ~~continued~~to ~~focus~~$20.0 million onat ~~improving~~August 31, ~~the~~2000. ~~operating~~This ~~efficiency~~decrease ofwas ~~many of~~a ~~its~~result ~~manufacturing~~of normal ~~facilities~~operating activities.

11 Capital expenditures for property, plant and equipment during the three months ended November 30, 2000 amounted to $5.9 million, including approximately $325,000 for environmental control equipment. Approximately 25% of the capital expenditures were for land, buildings and leasehold improvements, primarily consisting of renovations to existing facilities. A majority of the balance of the capital expenditures was for molding presses and other manufacturing and auxiliary equipment.

~~Table~~ Long-term debt increased to $80.6 million at November 30, 2000, up from $78.8 million at August 31, 2000. Increases in debt were made under the Company’s revolving credit facility, primarily to fund the acquisition of ~~Contents~~the operating assets of Polyfoam Packers Corporation in September 2000 (see Note 6 to the Condensed Consolidated Financial Statements (Unaudited)).

Selling and administrative expenses for the nine months ended May 31, 2000 rose 14.0% to $26.6 million compared to $23.4 million in the same period last fiscal year. This increase is primarily attributable to the higher employee costs referred to in the discussion above of the results for the third fiscal quarter. Despite the increases, selling and administrative costs as a percentage of net sales decreased to 13.4% in the current nine month period, down from 13.5% in the nine month period ending May 31, 1999. This decrease as a percentage of net sales principally reflects economies of scale realized with additional sales volume and increased prices.

The gross profit of the United Kingdom operations increased as a percentage of net sales during the nine months ended May 31, 2000, despite lower net sales. Net sales and gross profit for the nine months ended May 31, 2000 were $17.9 million and $2.9 million, respectively, and for the same period of the prior fiscal year were $19.0 and $3.0 million, respectively. Gross profit as a percentage of net sales for the nine months ended May 31, 2000 increased to 15.9% as compared to 15.7% for the same period of the prior fiscal year. Selling and administrative expenses increased approximately $400,000 to $3.4 million for the nine months ended May 31, 2000 as compared to the same period of the prior fiscal year, due in part to costs incurred to redistribute certain business more efficiently among the manufacturing facilities in the United Kingdom. The decrease in net sales and gross profit, combined with the increase in selling and administrative expenses, decreased operating income to a loss of ($529,374) in the current period, as compared to profit of $5,470 in the prior period.

Net sales and gross profit of the Mexican operations improved by 35.7% and 139.1%, respectively, for the first nine months of fiscal 2000 as compared to the same period of the prior fiscal year. The increase in net sales resulted from growth in business from existing customers as well as new business from customers relocating their manufacturing facilities to Mexico. To accommodate the sales growth in Mexico, particularly in the high technology industry, during the third quarter of fiscal 2000, the Company opened a new facility in Guadalajara, Mexico. During the nine months ended May 31, 2000, gross profit for the Mexican operations amounted to $2.7 million, or 15.6% of net sales of $17.6 million, compared to a gross profit of $1.1 million, or 8.9% of net sales of $13.0 million, in the same period of the prior fiscal year. Operating income of the Mexican operations improved to a profit of $535,169 in the current nine month period as compared to an operating loss of ($529,079) in the same period of the prior fiscal year. Operating income for the fiscal 1999 period was adversely affected by start up costs of the Company’s Tijuana facility. The significant improvement in operating income during the fiscal 2000 period was due to the Tijuana facility being fully operational during that period.

Interest expense increased 16.8%, to $4.1 million during the nine months ended May 31, 2000, up from $3.5 million during the nine months ended May 31, 1999. This increase is attributable to higher levels of outstanding debt during the current period, as discussed above in the results for the third fiscal quarter. Despite its increase, interest expense remained at 2.0% of net sales in both the current and prior nine month periods.

Income before income taxes for the nine months ended May 31, 2000 increased 20.5% to $17.1 million, up from $14.2 million in the same period of fiscal 1999. The effective tax rate increased to 37.9% in the current period from 37.7% in the prior period.

The Company continues to be pleased with the results of operations. Record net sales and net income for each of the first, second and third quarters of the fiscal year reflect a strong demand for the Company’s products and improvements in the Company’s gross profit margins and overall profitability.

~~Liquidity~~ During ~~and~~the ~~Capital~~three ~~Resources~~months ended November 30, 2000, the Company spent $63,825 in connection with its share repurchase program (see Note 7 to the Condensed Consolidated Financial Statements (Unaudited)). On December 18, 2000, the Company declared a regular semi-annual cash dividend of $0.15 per share payable on January 8, 2001 to shareholders of record on December 28, 2000. Cash dividends of $0.135 per share were paid in both January and July 2000.

Cash provided by operating activities ~~amounted~~as tosupplemented ~~$475,000,~~by ~~($2.6)~~the ~~million~~amount ~~and~~available ~~$4.7 million~~under ~~during~~ the ~~three~~Company’s ~~months~~credit ~~ended~~agreement ~~May 31,~~should ~~2000,~~be ~~February 29,~~sufficient ~~2000 and November 30, 1999, respectively, compared~~ to ~~$5.9 million,~~fund ~~$6.2 million and $2.3 million during~~ the ~~three months ended May 31, 1999, February 28, 1999 and~~Company’s ~~November 30, 1998 respectively. The reduced cash flow from~~ operating ~~activities during the three months ended May 31~~needs, ~~2000~~capital requirements and ~~February 29,~~dividend ~~2000~~payments ~~was~~as ~~caused~~well ~~by very~~as ~~substantial purchases of EPS resins during both fiscal quarters in advance of several announced price increases by~~ the Company’s ~~raw~~share ~~material~~repurchase ~~suppliers~~program. ~~As a result of the raw material purchases, inventories at May 31, 2000~~ ~~increased to $39.3 million from $32.8 million at February 29, 2000, $26.7 million at November 30, 1999 and $22.5 million at August 31, 1999~~

Depreciation and amortization amounted to $13.6 million for the nine months ended May 31, 2000 compared to $12.9 million for the same period of the prior fiscal year. 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.

Accounts receivable and accounts payable at May 31, 2000 increased to $45.4 million and $23.0 million, respectively, from $33.4 million and $15.1 million, respectively, at August 31, 1999. The increase in accounts receivable was due principally to the higher sales during the period and the acquisition of Lane Container Company in September 1999. The increase in accounts payable was due principally to the increased raw material purchases.

Capital expenditures for property, plant and equipment during the nine months ended May 31, 2000 amounted to $15.2 million, including approximately $802,000 for environmental control equipment. Approximately 40.0% of the capital expenditures were for land, buildings and leasehold improvements, including the purchase and refurbishment of an integrated materials facility in Darlington, Pennsylvania to which the Company transferred its integrated materials manufacturing operations from a leased facility in Beaver, Pennsylvania. A majority of the balance of the capital expenditures was for molding presses and other manufacturing and auxiliary equipment.

On September 1, 1999, the Company purchased the specialty corrugated container, heavy wall corrugated fabrication and custom wood crating business of Lane Container Company (see Note 5 to the Unaudited Condensed Consolidated Financial Statements). On February 1, 2000, the Company purchased the custom wood pallet and container business of Erickson Wood Products (see Note 5 to the Unaudited Condensed Consolidated Financial Statements). On March 1, 2000, the Company purchased the interior foam cushion fabricating business of Cushion Packaging Company (see Note 5 to the Unaudited Condensed Consolidated Financial Statements). During the nine months ended May 31, 2000, expenditures in connection with business acquisitions, net of cash acquired, substantially all of which related to such acquisitions, amounted to $4.1 million. The Company will continue to look for acquisitions which will mesh well with the Company’s business.

In March 2000, the Company announced the opening of a new facility in Guadalajara, Mexico, one of the world’s fastest growing centers for high technology manufacturing. This facility will serve high technology customers with a variety of protective packaging products, some of which are made in-house while others are supplied by subcontractors.

On September 23, 1999, the Company entered into a new credit agreement with its principal bank and a second bank. The new agreement provides for a revolving credit facility of $45.0 million and $45.0 million in five-year term notes. The Company initially borrowed $19.0 million under the revolving credit facility and $45.0 million under the term notes. The proceeds were used to repay in full the outstanding borrowings under the previous credit agreement including $2.5 million borrowed in September 1999 to fund part of the purchase price for Lane Container Company. Through May 31, 2000, an additional $18.5 million was borrowed under the revolving credit facility primarily to fund raw material purchases and capital expenditures.

Long-term debt has increased from $60.1 million at August 31, 1999 to $77.2 million at May 31, 2000. Of the amount outstanding at May 31, 2000, $74.7 million was borrowed under the credit agreement, including $37.5 million of the $45.0 million available under the revolving credit facility.

During the nine months ended May 31, 2000, the Company spent $1.7 million in connection with its share repurchase program (see Note 6 to the Unaudited Condensed Consolidated Financial Statements). On December 15, 1999, the Company declared a regular semi-annual cash dividend of $0.135 per share payable on January 6, 2000 to shareholders of record on December 27, 1999. On June 16, 2000, the Company declared a regular semi-annual cash dividend of $0.135 per share payable on July 6, 2000 to shareholders of record on June 26, 2000. Cash dividends of $0.12 per share were paid in both January and July 1999.

Cash provided by operating activities as supplemented by the amount available under the credit agreement should be sufficient to fund the Company’s operating needs, capital requirements and dividend payments as well as the Company’s share repurchase program.

Market Risks

The Company is exposed to market risk from changes in interest rates and foreign exchange rates. There has been no material change in the Company’s exposure to market risks since August 31, ~~1999~~2000.

Other

The impact of inflation on both the Company’s results of operations and financial condition has been minimal and is not expected to adversely effect fiscal 2000 results.

In 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities”. Subsequently, the FASB issued SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities: Deferral of the Effective Date of SFAS Statement No. 133”, which deferred the effective date of SFAS No. 133 for one year. SFAS No. 133 will be applicable to the Company on September 1, 2000 and will result in an item of accumulated other comprehensive income (loss) which will not be significant.

Forward-Looking Statements

This Management’s Discussion and Analysis of Results of Operations and Financial Condition and the Notes to Condensed Consolidated Financial Statements (Unaudited) contain, in addition to historical information, certain forward-looking statements. Such statements (which are typically identified by the words “believe”,” “should”,” “expect”,” “anticipate” and other expressions that look to the future) are based on assumptions and expectations which, although believed to be reasonable based on information available to the Company, are inherently subject to risks and uncertainties and which, consequently, may or may not be realized. The Company undertakes no obligation to update or revise any forward-looking statements. The risks and uncertainties inherent in the assumptions and expectations could be material, and include, but are not limited to, economic and market conditions, the impact of competition, consumer buying trends, pricing trends, fluctuations in the cost and availability of raw materials and the ability to maintain favorable customer and supplier relationships and arrangements. ~~The Company undertakes no obligation to update~~ ~~or revise any forward-looking statements.~~

1413

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

On ~~May~~December 2213, 2000, ~~the trial judge~~ in John C. Bartram, Administrator of the Estate of Dwayne Scott Mount, Deceased v. Tuscarora Incorporated, et al. - (Case No. 96CV-0511 in the Court of Common Pleas for Marion County, Ohio) the Third District Court of Appeals, Marion County, Ohio (the “Court of Appeals”) affirmed the May 22, 2000 decision of the trial ~~granted~~judge in granting the Company’'s Motion for Summary Judgment, and thus the ~~adjudicating~~Court of Appeals affirmed the trial judge’s adjudication of the lawsuit in favor of the Company. The lawsuit, which was filed against the Company in 1996, sought substantial compensatory and punitive damages as a result of the alleged wrongful death of an employee, and was described in full, most recently, in Item 3 of the Company’s annual report on Form 10-K for the fiscal year ended August 31, ~~1999~~ 2000. On ~~May~~December 2322, 2000, the plaintiff filed an ~~appeal~~Application ~~with~~for ~~the~~Reconsideration ~~Third~~with ~~District~~ the Court of Appeals, ~~Marion~~ ~~County~~and on January 3, ~~Ohio~~2001 the Company filed a Memorandum in Opposition to the Application for Reconsideration. The Company ~~will~~intends to vigorously ~~contest~~oppose the ~~appeal~~Application for Reconsideration. In the opinion of management, the final disposition of the lawsuit should not have a material adverse effect on the Company’'s financial position or results of operations.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

~~The exhibits listed below are filed as a part of this quarterly report.~~None

Exhibit No.		Document
4		First Amendment, dated as of May 1, 2000, to the Loan Agreement, dated September 23, 1999, by and among the Company, Mellon Bank, N.A., KeyBank National Association and Mellon Bank, as Agent.
27		Financial Data Schedule for the nine months ended May 31, 2000.

(b) Reports on Form 8-K

~~(b) Reports~~No events which resulted in the filing of a current report on Form 8-K occurred during the fiscal quarter ended November 30, 2000.

~~A current report on Form 8-K was filed on June 12, 2000. Under Item 5,~~14 ~~the Company reported the grant of the Motion for Summary Judgment referred to~~ ~~in Part II, Item 1, above.~~

15 Table of Contents

~~Table of Contents~~SIGNATURES

~~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.

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 16, 2001		By /s/ John P. O’Leary, Jr. John P. O’Leary, Jr., President and Chief Executive Officer

Date: January 16, 2001		By /s/ Brian C. Mullins Brian C. Mullins, Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

		Tuscarora Incorporated (Registrant)
Date: July 14, 2000		By /s/ John P. O’Leary, Jr. John P. O’Leary, Jr., President and Chief Executive Officer
Date: July 14, 2000		By /s/ Brian C. Mullins Brian C. Mullins, Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Tuscarora Incorporated FORM 10-Q FOR QUARTER ENDED MAY 31, 2000

EXHIBIT INDEX

The following exhibits are filed as a part of this quarterly report on Form 10-Q.

Exhibit No.		Document
4		First Amendment, dated as of May 1, 2000, to the Loan Agreement, dated September 23, 1999, by and among the Company, Mellon Bank, N.A., KeyBank National Association and Mellon Bank, as Agent.
27		Financial Data Schedule for the nine months ended May 31, 2000.

Filing Compare · TUSCARORA INC