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Tuscarora Inc.

 


Address:
800 Fifth Avenue
New Brighton, Pennsylvania 15066
U.S.A.

Telephone: (724) 843-8200
Fax: (724) 847-2140
http://www.tuscarora.com

Statistics:
Public Company
Incorporated: 1962 as Tuscarora Plastics, Inc.
Employees: 1,826
Sales: $232.9 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: TUSC
NAIC: 32614 Polystyrene Foam Product Manufacturing


Company History:

Tuscarora Inc. is the largest manufacturer in the United States of custom molded products made from expanded foam plastic materials. It designs and manufactures interior protective packaging and material handling products and components for industrial and consumer products. In addition to custom molded and die-cut plastic foams, it uses thermoformed plastic, corrugated paperboard, and wood in its products. Tuscarora's principal markets are the high-technology consumer electronics, automotive, and major appliance industries. In 1998 it had manufacturing facilities in the United Kingdom and Mexico as well as the United States.

Three Decades of Growth

The company was founded as Tuscarora Plastics in 1962 by John P. O'Leary, Sr., and Thomas Woolaway, utilizing German technology brought to the United States by Koppers Co. to expand polystyrene into a bubble that could be molded to shape, with the air inside providing insulation. Tuscarora Plastics took the process a step further when it used the air inside the bubble for a shock absorber as well. O'Leary, formerly a Westinghouse Electric Corp. purchasing agent, did not know much about polystyrene foam, but he recognized it as having a potentially large market as a packaging material. Corporate headquarters and the company's first plant were located in New Brighton, Pennsylvania, outside Pittsburgh. The company was named for an Indian tribe that at times lived in what is now western Pennsylvania.

Tuscarora Plastics grew in large part by acquiring similar small businesses making plastic foam packaging. The company was producing polystyrene foam at a dozen locations by 1980. Its net sales, which came to $29 million in 1981, grew from $45.2 million in 1985 (the year ended August 31, 1985) to $55.3 million in 1987, the last year before it became a public company. Its net income rose from $2 million to $2.8 million over this span. In the latter year it had 18 facilities in 14 states, all east of the Mississippi. Tuscarora needed a far-flung network of manufacturing plants because its facilities were limited to serving a market area within a 200- or 300-mile radius. The company made its initial public offering in July 1988, raising about $5.6 million by selling about 15 percent of the outstanding stock at $15.50 a share.

Tuscarora Plastics enjoyed its 19th consecutive year of profit in 1988. By then nearly every television set assembled in the United States was being packed with the company's protective polystyrene foam. It was also molding and fabricating polyethylene and co-polymer resins for use as thermal insulation for refrigeration equipment and other industrial products, such as insulation for coolers, and foam polypropylene components for automobile bumper cores (the company's own technology development). A 1988 Parker Hunter Securities research report quoted in a 1989 issue of the Pittsburgh Business Times & Journal stated, "Once a customer has selected Tuscarora to produce its packaging components, Tuscarora will usually have that business as long as the customer's model is in production."

Tuscarora Plastics was also growing by acquisition: in 1989 it purchased Plastronic Packaging Corp. and Preferred Plastic Co., the latest of about 25 or 30 small companies acquired since its inception. In about half of the most recent cases of acquisition, Tuscarora continued to run the acquired facility, while in the other half it consolidated operations. Making a name for itself in the industry, the company was included on the Forbes magazine 1990 list of the 200 best small companies in the United States, based on its five-year average return on equity.

New Products and Markets in the 1990s

O'Leary retired at the end of 1989 and was succeeded as president and chief executive officer by John P. O'Leary, Jr., who had been with the company since graduating from the University of Pennsylvania's Wharton School in 1971. Thomas Woolaway assumed the role of chief operating officer. Interviewed by Wall Street Transcript in 1990, the younger O'Leary said that most of Tuscarora's manufacturing equipment was being purchased in Germany and that much of its technology for the development of new materials had come from Japan. He added that "We service virtually all the major Japanese assembly plants both in consumer electronics and automotive.... Also, there has been continuing pressure for offshore manufacturers to bring their production into the United States. That's probably been our single biggest growth area in the last three years." In addition, he said that the company intended to introduce a new manufacturing process in foam sheet thermoforming for hard plastics.

Given the increasing number of environmental concerns during this time, O'Leary usually spent some time defending Tuscarora against charges that its output was degrading the environment. Speaking to Wall Street Transcript, he conceded that "plastics have a bit of a blemish in that they are part of the solid waste stream" but added that all plastics were recyclable to one degree or another. Interviewed by Mark Houser of Greensburg, Pennsylvania's Tribune Review in 1995, he indicated that the problem was best addressed by the free market. "The producer's motivation to have as little packaging as possible was already in place long before the environmental concerns came along," he maintained. "Packaging costs money but does not add value to his product, so his boss is telling him not to use any more than he has to. My ability to sell my product to him is the ability to sell as little of it as possible."

During the Persian Gulf War Tuscarora Plastics shipped the sensitive nosecones of Patriot air-defense missiles in large expandable polystyrene bead-shape packages. The short-term gains from this military order were more than counteracted, however, by a recession that slowed demand by Tuscarora's customers for shape packaging and stalled new product development and adoptions. Net sales dropped from $85.5 million in 1990 to $84.4 million in 1991. Earnings also fell from 1990's record. In 1991 the company's products were being sold to 1,300 customers in more than 35 states, Canada, and Mexico.

Tuscarora Plastics, which shortened its name to Tuscarora Inc. in 1992, resumed its growth that year, purchased two more companies, expanded its customer base to about five more states, and secured a new plant in Las Cruces, New Mexico--its first industrial facility west of the Mississippi. Most of the new clients were Fortune 500 firms. During 1993 and 1994 Tuscarora purchased four more companies, including two corrugated-cardboard packagers and a foam packager in Ciudad Juarez, Mexico, that was manufacturing cushioning materials for consumer electronics produced in the assembly plants springing up across the border from El Paso, Texas.

The production of custom-molded foam to protect consumer products in shipment remained Tuscarora's main business. In 1993, however, IBM--Tuscarora's biggest customer at the time--converted its orders from high-grade resilient polypropylene and polyethylene packaging to more common-grade polystyrene in order to cut expenses. Accordingly, the company was striving more than ever to develop alternative packaging materials. The company's Tuscarora Container Systems, for example, began producing lightweight aluminum shipping containers with hinges allowing a unit to fold to nearly one-tenth of the original size, then be shipped back for reuse. Moreover, the company's Thermo Forming department was forming warmed plastic sheeting into a shape suitable for shipping products, such as cases for scientific instruments.

Tuscarora's sales of nonfoam products and integrated materials--packaging made of wood, thermoformed plastics, corrugated cardboard, molded pulp paper, collapsible aluminum shipping crates, or combinations of those materials&mdashcounted for 13 percent of all sales in 1994. In 1995 O'Leary told Houser, "This year we will have almost $40 million in sales of products that for all intents and purposes we didn't manufacture five years ago."

Tuscarora entered the British market in February 1995 by purchasing M.Y. Trondex Ltd. of Northampton, England. The following June it opened a plant in Spennymoor and by that October had acquired EPS Moulders Ltd. of Livingston, Scotland. With the 1997 acquisition of Arrowtip Group, a foam-packing producer with operations in London and Norwich, England, Tuscarora brought its annual sales to $30 million in the United Kingdom, where it was the largest producer of plastics packaging.

In 1996 Tuscarora had record net sales of $182.6 million and record net income of $9.7 million. By May 1997 the company had further extended its operations to west of the Mississippi by acquiring two manufacturers in Colorado Springs, Colorado, and a plant in Storm Lake, Iowa, with another scheduled to open during the year in Brenham, Texas. Also, during 1997, the company acquired two California companies and announced plans to build a second manufacturing plant in Mexico. This plant, in Tijuana, opened in 1998.

Tuscarora's largest customer during this time was Sony Electronics Inc., a Pennsylvania-based producer of high-definition and large thin-screened television sets. Tuscarora added new molding presses to its New Brighton plant to accommodate orders for the larger and flatter televisions. The company anticipated such products becoming a major factor in its future because the federal government had ordered all broadcasters to transmit digitally by 2006. In the high-technology area, Tuscarora had a license for E-PAC, a design-for-assembly technology, utilizing foam plastic shapes, developed by Hewlett-Packard Co. in Germany. E-PAC was intended to reduce both material cost and assembly time by bundling delicate electronic components into a lightweight, protective carrier placed inside an exterior housing.

1998 and Beyond

Tuscarora had record net sales of $232.9 million in 1998. Its lackluster net income of $8 million--the lowest since 1994--came after a pretax restructuring charge of $3.5 million. The long-term debt (excluding the current portion) rose to a record $61.2 million at the end of 1998.

Tuscarora's interior protective packaging products, made from foam plastic materials and integrated materials, were being used to protect a wide range of finished consumer and industrial goods during shipment in order to reduce or eliminate damage as a result of shock, vibration, or wide temperature fluctuations. Material handling products generally served the same purposes and functions but were being used primarily in intraplant and interplant movement of parts and components rather than shipment of finished goods. They were usually more durable than the interior protective packaging products and usually reusable. Most of these were foam plastic shapes manufactured at Tuscarora's custom molding facilities.

Tuscarora was also manufacturing foam plastic shapes used as components in automobiles, watercraft, and recreational vehicles; as thermal insulation components used by appliance manufacturers in such products as refrigerators, freezers, and air conditioners; and as insulation by the construction industry. Components such as garage-door panels and motor-vehicle trim were being made from thermoformed materials. Of Tuscarora's net sales during 1998, interior protective packaging and material handling products accounted for about 86 percent, with component products responsible for the remainder.

At Tuscarora's integrated-material facilities, foam plastics were being combined with other materials such as corrugated paperboard to produce protective packaging products with superior properties and/or lower costs compared to products made from a single material. Thermoformed interior protective packaging products were being used where the shock absorbency or thermal insulating properties of foam plastic were not required, generally to hold finished goods in place inside an exterior container during shipment and handling. In 1998, about 19 percent of Tuscarora's net sales came from products manufactured by its integrated-materials facilities and about six percent from its thermoforming facilities.

Four major markets accounted for two-thirds of Tuscarora's sales in 1998: high technology (21 percent); consumer electronics (18 percent); automotive (15 percent); and major appliances (13 percent). The company was serving more than 3,500 customers, of which none accounted for more than five percent of sales and the ten largest for about 26 percent.

Virtually all of Tuscarora's products were being custom designed at seven design and testing centers equipped with computer-aided design and manufacturing systems. After a shape was approved by the customer, aluminum production molds were being made and then shipped to a custom molding facility, generally the one nearest the customer. There were 33 manufacturing facilities in 1998, including four in the United Kingdom and two in Mexico.

Principal Subsidiaries: Alpine Packaging, Inc.; Tuscarora International, Inc.; Tuscarora Investment Corporation; Tuscarora Limited.

Principal Divisions: Eastern U.S. & U.K.; Midwestern Division; Southern Division; Western Division.





Further Reading:


Antonelli, Cesca, "Tuscarora Molds a Fragmented Market in England," Pittsburgh Business Times & Journal, August 11, 1997, p. 5.
----, "Tuscarora Wants to Double Its Size in Next Four Years," Pittsburgh Business Times & Journal, May 19, 1997, p. 3.
Cotter, Wes, "Tuscarora Starts New Ventures in Westinghouse Space," Pittsburgh Business Times & Journal, May 18, 1992, p. 3.
Gaynor, Pamela, "Ready to Roam?," Pittsburgh Post-Gazette, July 12, 1996, p. C5.
Houser, Mark, "Packaging Company Molding New Markets," Tribune Review (Greensburg, Penn.), March 12, 1995, pp. H1+.
Klein, Barbara, "The Big Time Without the Glitz," Pennsylvania Business & Technology, April 1992, p. 23.
Leaversuch, Robert D., "The War That Was: Pains and Gains for Processors," Modern Plastics, April 1991, p. 14.
Rhodes, Gary, "Tuscarora Sees Growth Following Sale of Stock," Pittsburgh Business Times & Journal, April 10, 1989, Sec. 2, p. 2.
Robertson, Scott, "Tuscarora Plastics Molds Plan for Future," Allegheny Business News, January 8, 1992, pp. 1+.
Tascarella, Patty, "Local Manufacturer Keeps the Future of High-Tech Appliances Under Wraps," Pittsburgh Business Times & Journal, December 4, 1998, p. 26.
"Tuscarora Plastics, Inc.," Wall Street Transcript, May 7, 1990.
Willis, Rod, "Tuscarora Plastics Stays Hungry," Financier, August 1991, pp. 54--55.

Source: International Directory of Company Histories, Vol. 29. St. James Press, 1999.




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