TABLE OF CONTENTS




|                              |                                                                                               |  |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                 
|                              | CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)                                            
|                              | 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 4. Submission of Matters to a Vote of Security Holders                                  
|                              | Item 6. Exhibits and Reports on Form 8-K                                                     

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 29, 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 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 the past 90 days.

Yes _X_      No ____

As of April 1, 2000, 9,312,168 shares of Common Stock, without par value,
of the registrant were outstanding.



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Tuscarora Incorporated

INDEX

|                              |                                                                                                                              |  |      |         | 
|----------------------------- | ---------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | 
|                              |                                                                                                                              |  | Page
|                              |                                                                                                                              |  |     
|Part I. Financial Information
|                             
|                             
|                             
|                             
|                             
|                              | Item 1. Financial Statements                                                                                                
|                             
|                             
|                             
|                             
|                              | Condensed Consolidated Balance Sheets at
February 29, 2000 (Unaudited) and August 31, 1999                                   |  |      | 3       | 
|                             
|                             
|                             
|                             
|                             
|                              | Condensed Consolidated Statements of
Income (Unaudited)  Three and six months ended February 29, 2000 and February 28, 1999 |  |      | 4       | 
|                             
|                             
|                             
|                             
|                             
|                              | Condensed Consolidated Statements of
Cash Flows (Unaudited)  Six months ended
February 29, 2000 and February 28, 1999       |  |      | 5       | 
|                             
|                             
|                             
|                             
|                             
|                              | Notes to Condensed Consolidated Financial
Statements (Unaudited)                                                             |  |      | 6 - 9   | 
|                             
|                             
|                             
|                             
|                             
|                              | Item 2. Managements Discussion and Analysis
of Results of Operations and Financial
Condition                                |  |      | 10 - 13 | 
|                             
|                             
|                             
|                             
|                             
|Part II. Other Information   
|                             
|                             
|                             
|                             
|                             
|                              | Item 4. Submission of Matters to a Vote of
Security Holders                                                                  |  |      | 14      | 
|                             
|                             
|                             
|                             
|                             
|                              | Item 6. Exhibits and Reports on Form 8-K                                                                                     |  |      | 14      | 

2



---






PART I. FINANCIAL INFORMATION




Item 1. Financial Statements




Tuscarora Incorporated
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |             |   |             | 
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------------------------------------------ | ---------- | ------------ | ----------- | ----------- | ----------- | - | ----------- | 
|                                         |                                                                                                                                                 |                                      |                                            |            | February 29, |             | August 31, 
|                                         |                                                                                                                                                 |                                      |                                            |            | 2000         |             | 1999       
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |            
|                                         |                                                                                                                                                 |                                      |                                            |            | (Unaudited) 
|                                         |                                                                                                                                                 |                                      | ASSETS                                    
|                                        
|                                        
|                                        
|                                        
|Current Assets                          
|                                        
|                                        
|                                        
|                                        
|                                         | Cash and cash equivalents                                                                                                                       |                                      | $                                          | 2,449,482  |              |             | $           | 6,090,066   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Trade accounts receivable, net of provision for losses                                                                                          |                                      |                                            | 39,356,791 |              |             |             | 33,427,529  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Inventories                                                                                                                                     |                                      |                                            | 32,781,940 |              |             |             | 22,490,918  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Prepaid expenses and other current assets                                                                                                       |                                      |                                            | 3,096,645  |              |             |             | 2,425,187   |  
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | 77,684,858                                 |            |              |             | 64,433,700  |            
|                                        
|                                        
|                                        
|                                        
|Property, Plant and Equipment, net       |                                                                                                                                                 |                                      | 103,231,365                                |            |              |             | 101,054,887 |            
|                                        
|                                        
|                                        
|                                        
|Other Assets                            
|                                        
|                                        
|                                        
|                                        
|                                         | Goodwill                                                                                                                                        |                                      |                                            | 9,709,387  |              |             |             | 8,667,816   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Other non-current assets                                                                                                                        |                                      |                                            | 3,698,832  |              |             |             | 3,229,120   |  
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | Total Assets                               |            | $            | 194,324,442 |             |             | $ | 177,385,523 | 
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 | LIABILITIES AND SHAREHOLDERS EQUITY
|                                        
|                                        
|                                        
|                                        
|Current Liabilities                     
|                                        
|                                        
|                                        
|                                        
|                                         | Current maturities of long-term debt                                                                                                            |                                      | $                                          | 5,275,722  |              |             | $           | 5,113,972   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Accounts payable                                                                                                                                |                                      |                                            | 17,642,588 |              |             |             | 15,133,063  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Accrued income taxes                                                                                                                            |                                      |                                            | 1,224,045  |              |             |             | 276,112     |  
|                                        
|                                        
|                                        
|                                        
|                                         | Accrued payroll and related taxes                                                                                                               |                                      |                                            | 1,114,446  |              |             |             | 1,518,769   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Other current liabilities                                                                                                                       |                                      |                                            | 5,254,533  |              |             |             | 5,017,092   |  
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | 30,511,334                                 |            |              |             | 27,059,008  |            
|                                        
|                                        
|                                        
|                                        
|Long-term Debt - less current maturities |                                                                                                                                                 |                                      | 70,518,323                                 |            |              |             | 60,064,673  |            
|                                        
|                                        
|                                        
|                                        
|Deferred Income Taxes                    |                                                                                                                                                 |                                      | 407,604                                    |            |              |             | 1,123,373   |            
|                                        
|                                        
|                                        
|                                        
|Other Long-term Liabilities              |                                                                                                                                                 |                                      | 2,336,457                                  |            |              |             | 2,454,547   |            
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | Total Liabilities                          |            |              | 103,773,718 |             |             |   | 90,701,601  | 
|                                        
|                                        
|                                        
|                                        
|Shareholders Equity                    
|                                        
|                                        
|                                        
|                                        
|                                         | 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, 9,574,388 at February 29,
2000 and 9,568,343 at August 31, 1999 |                                      |                                            | 9,574,388  |              |             |             | 9,568,343   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Capital surplus                                                                                                                                 |                                      |                                            | 1,763,233  |              |             |             | 1,696,670   |  
|                                        
|                                        
|                                        
|                                        
|                                         | Retained earnings                                                                                                                               |                                      |                                            | 83,126,466 |              |             |             | 77,680,902  |  
|                                        
|                                        
|                                        
|                                        
|                                         | Accumulated other comprehensive (loss)                                                                                                          |                                      |                                            | (700,095   | )            |             |             | (   481,262 | )
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | 93,763,992                                 |            |              |             | 88,464,653  |            
|                                        
|                                        
|                                        
|                                        
|                                         | Less cost of reacquired shares
of Common Stock:
258,968 shares at February 29, 2000 and 138,468
shares at August 31, 1999                       |                                      |                                            | (3,213,268 | )            |             |             | (1,780,731  | )
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | Total Shareholders Equity                 |            |              | 90,550,724  |             |             |   | 86,683,922  | 
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            
|                                         |                                                                                                                                                 |                                      | Total Liabilities and Shareholders Equity |            | $            | 194,324,442 |             |             | $ | 177,385,523 | 
|                                         |                                                                                                                                                 |                                      |                                            |            |              |             |             |            

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

See notes to unaudited condensed consolidated financial statements.

3



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Tuscarora Incorporated




CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |            | 
|-------------------------------------------- | -------------------------- | - | ------------------ | ---------- | ---------------- | - | ------------ | ---------- | ------------ | - | ----------- | ---------- |  | - | ----------- | ---------- | 
|                                             |                            |   | Three Months Ended |            | Six Months Ended
|                                             |                            |   |                    |            |                 
|                                             |                            |   | February 29,       |            | February 28,     |   | February 29, |            | February 28,
|                                             |                            |   | 2000               |            | 1999             |   | 2000         |            | 1999        
|                                             |                            |   |                    |            |                  |   |              |            |             
|Net Sales                                    |                            | $ | 61,300,885         |            |                  | $ | 53,640,580   |            |              | $ | 126,018,688 |            |  | $ | 114,106,315 |           
|                                            
|                                            
|                                            
|                                            
|Cost of Sales                                |                            |   | 47,340,523         |            |                  |   | 41,626,953   |            |              |   | 95,733,283  |            |  |   | 87,005,377  |           
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|                                             | Gross profit               |   |                    | 13,960,362 |                  |   |              | 12,013,627 |              |   |             | 30,285,405 |  |   |             | 27,100,938 | 
|                                            
|                                            
|                                            
|                                            
|Selling and Administrative
Expenses          |                            |   | 9,046,448          |            |                  |   | 7,749,612    |            |              |   | 17,279,285  |            |  |   | 15,400,526  |           
|                                            
|                                            
|                                            
|                                            
|Interest Expense                             |                            |   | 1,319,821          |            |                  |   | 1,182,085    |            |              |   | 2,512,057   |            |  |   | 2,393,916   |           
|                                            
|                                            
|                                            
|                                            
|Other (Income) Expense  net                 |                            |   | (163,430           | )          |                  |   | (9,397       | )          |              |   | (332,164    | )          |  |   | (130,230    | )         
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|                                             | Total expenses             |   |                    | 10,202,839 |                  |   |              | 8,922,300  |              |   |             | 19,459,178 |  |   |             | 17,664,212 | 
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|                                             | Income before
income taxes |   |                    | 3,757,523  |                  |   |              | 3,091,327  |              |   |             | 10,826,227 |  |   |             | 9,436,726  | 
|                                            
|                                            
|                                            
|                                            
|Provision for Income Taxes                   |                            |   | 1,438,768          |            |                  |   | 1,199,092    |            |              |   | 4,090,425   |            |  |   | 3,580,084   |           
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|                                             | Net income                 |   | $                  | 2,318,755  |                  |   | $            | 1,892,235  |              |   | $           | 6,735,802  |  |   | $           | 5,856,642  | 
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|Dividends declared and paid per share        |                            | $ | .135               |            |                  | $ | .12          |            |              | $ | .135        |            |  | $ | .12         |           
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|Basic net income per share of
Common Stock   |                            | $ | .25                |            |                  | $ | .20          |            |              | $ | .72         |            |  | $ | .62         |           
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           
|Diluted net income per share of
Common Stock |                            | $ | .25                |            |                  | $ | .20          |            |              | $ | .71         |            |  | $ | .61         |           
|                                             |                            |   |                    |            |                  |   |              |            |              |   |             |            |  |   |             |           

See notes to unaudited condensed consolidated financial statements.

4



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Tuscarora Incorporated




CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |            |           |            |  
|----------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------ | ----------- | ---------------- | ----------- | ------------ | ---------- | --------- | ---------- | -
|                                                                              |                                                                                       |                                                                  |                                                  |             | Six Months Ended
|                                                                              |                                                                                       |                                                                  |                                                  |             |                 
|                                                                              |                                                                                       |                                                                  |                                                  |             | February 29,     |             | February 28,
|                                                                              |                                                                                       |                                                                  |                                                  |             | 2000             |             | 1999        
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |             
|Operating Activities                                                         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Net Income                                                                            |                                                                  | $                                                | 6,735,802   |                  |             | $            | 5,856,642  |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Adjustments to reconcile net income to cash
provided by operating activities:        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Depreciation                                                     |                                                  |             | 8,508,505        |             |              |            | 7,843,839 |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Amortization                                                     |                                                  |             | 669,096          |             |              |            | 607,943   |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Provision for losses on receivables                              |                                                  |             | 27,348           |             |              |            | 137,879   |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Decrease in deferred income taxes                                |                                                  |             | (718,436         | )           |              |            | (321,861  | )         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Loss (gain) on disposition of property, plant and
equipment, net |                                                  |             | 12,373           |             |              |            | (184,065  | )         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Stock compensation expense                                       |                                                  |             | 6,073            |             |              |            | 6,127     |           
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Changes in operating assets and liabilities, net
of effects of business acquisitions:
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Decrease (increase):                                            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Trade accounts receivable                        |             |                  | (5,132,174  | )            |            |           | (322,949   | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Inventories                                      |             |                  | (9,762,279  | )            |            |           | (1,796,889 | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Prepaid expenses and other current assets        |             |                  | (635,086    | )            |            |           | (1,823,205 | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Other non-current assets                         |             |                  | (329,395    | )            |            |           | (67,677    | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       | Increase (decrease):                                            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Accounts payable                                 |             |                  | 2,119,207   |              |            |           | 264,647    |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Accrued income taxes                             |             |                  | 947,933     |              |            |           | 28,089     |  
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Accrued payroll and related taxes                |             |                  | (402,749    | )            |            |           | (277,209   | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Other current liabilities                        |             |                  | 138,313     |              |            |           | (1,361,263 | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              |                                                                                       |                                                                  | Other long-term liabilities                      |             |                  | (117,710    | )            |            |           | (133,737   | )
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|                                                                              |                                                                                       |                                                                  | Cash provided by operating activities            |             |                  | 2,066,821   |              |            |           | 8,456,311  |  
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|Investing Activities                                                         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Purchase of property, plant and equipment                                             |                                                                  |                                                  | (9,886,689  | )                |             |              | (7,681,740 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Business acquisitions, net of cash acquired                                           |                                                                  |                                                  | (3,696,259  | )                |             |              | (2,379,324 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Proceeds from sale of property, plant and equipment                                   |                                                                  |                                                  | 223,121     |                  |             |              | 694,810    |          
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|                                                                              |                                                                                       |                                                                  | Cash used for investing activities               |             |                  | (13,359,827 | )            |            |           | (9,366,254 | )
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|Financing Activities                                                         
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Proceeds from long-term debt                                                          |                                                                  |                                                  | 77,030,000  |                  |             |              | 1,000,000  |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Payments on long-term debt                                                            |                                                                  |                                                  | (66,715,704 | )                |             |              | (2,890,006 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Dividends paid                                                                        |                                                                  |                                                  | (1,290,238  | )                |             |              | (1,143,735 | )        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Proceeds from sale of Common Stock                                                    |                                                                  |                                                  | 66,536      |                  |             |              | 77,414     |          
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Payments to reacquire Common Stock                                                    |                                                                  |                                                  | (1,432,538  | )                |             |              | (396,588   | )        
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|                                                                              |                                                                                       |                                                                  | Cash provided by (used for) financing activities |             |                  | 7,658,056   |              |            |           | (3,352,915 | )
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|Effect of Foreign Currency Exchange Rate Changes
on Cash and Cash Equivalents |                                                                                       |                                                                  | (5,634                                           | )           |                  |             | (57,200      | )         
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|                                                                              |                                                                                       |                                                                  | Net decrease in cash and cash equivalents        |             |                  | (3,640,584  | )            |            |           | (4,320,058 | )
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|Cash and Cash Equivalents at Beginning of Period                              |                                                                                       |                                                                  | 6,090,066                                        |             |                  |             | 5,452,281    |           
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           
|Cash and Cash Equivalents at End of Period                                    |                                                                                       | $                                                                | 2,449,482                                        |             |                  | $           | 1,132,223    |           
|                                                                              |                                                                                       |                                                                  |                                                  |             |                  |             |              |           

See notes to unaudited condensed consolidated financial statements.

5



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Tuscarora Incorporated




NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Condensed Consolidated Financial Statements



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The condensed consolidated balance sheet at February 29, 2000 and the
consolidated statements of income and consolidated statements of cash flows
of Tuscarora Incorporated (the Company) for the six months ended February 29,
2000 and February 28, 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
February 29, 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 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.



| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The results of
operations for the six months ended February 29, 2000 are
not necessarily indicative of the operating results to be expected for the
full year.

2. Inventories



| |                                       
| | --------------------------------------
| | Inventories are summarized as follows:

|                |  |              |            |            |  |   |            |  | 
|--------------- |  | ------------ | ---------- | ---------- |  | - | ---------- |  | 
|                |  | February 29, |            | August 31,
|                |  | 2000         |            | 1999      
|                |  |              |            |           
|Finished goods  |  | $            | 12,694,301 |            |  | $ | 10,606,473 | 
|               
|               
|               
|               
|Work in process |  |              | 249,027    |            |  |   | 198,093    | 
|               
|               
|               
|               
|Raw materials   |  |              | 17,730,721 |            |  |   | 10,326,444 | 
|               
|               
|               
|               
|Supplies        |  |              | 2,107,891  |            |  |   | 1,359,908  | 
|                |  |              |            |            |  |   |            | 
|                |  | $            | 32,781,940 |            |  | $ | 22,490,918 | 
|                |  |              |            |            |  |   |            | 

3. Comprehensive Income



| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| | Total comprehensive
income for the three and six months ended February 29, 2000 and February 28, 1999, were as follows:

|                                    |  |                    |           |                  |  |              |           |              |  |   |           |   |  |   |           |  
|----------------------------------- |  | ------------------ | --------- | ---------------- |  | ------------ | --------- | ------------ |  | - | --------- | - |  | - | --------- | -
|                                    |  | Three Months Ended |           | Six Months Ended
|                                    |  |                    |           |                 
|                                    |  | February 29,       |           | February 28,     |  | February 29, |           | February 28,
|                                    |  | 2000               |           | 1999             |  | 2000         |           | 1999        
|                                    |  |                    |           |                  |  |              |           |             
|Net Income                          |  | $                  | 2,318,755 |                  |  | $            | 1,892,235 |              |  | $ | 6,735,802 |   |  | $ | 5,856,642 |  
|                                   
|                                   
|                                   
|                                   
|Foreign currency translation (loss) |  |                    | (95,783   | )                |  |              | (691,202  | )            |  |   | (218,833  | ) |  |   | (797,907  | )
|                                    |  |                    |           |                  |  |              |           |              |  |   |           |   |  |   |           |  
|Comprehensive income                |  | $                  | 2,222,972 |                  |  | $            | 1,201,033 |              |  | $ | 6,516,969 |   |  | $ | 5,058,735 |  
|                                    |  |                    |           |                  |  |              |           |              |  |   |           |   |  |   |           |  



| |                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | At February 29, 2000 and August 31, 1999, accumulated other
comprehensive expense, which consisted entirely of foreign currency
translation adjustments, amounted to $700,095 and $481,262, respectively.

6



---



4. Net Income Per Share



| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | The following table sets forth the computation of basic and diluted net
income per common share in accordance with the provisions of SFAS No. 128.

|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |        | 
|---------------------------------------------------- | ------------- | - | ------------------ | ------ | ---------------- | - | ------------ | ------ | ------------ | - | --------- | ------ |  | - | --------- | ------ | 
|                                                     |               |   | Three Months Ended |        | Six Months Ended
|                                                     |               |   |                    |        |                 
|                                                     |               |   | February 29,       |        | February 28,     |   | February 29, |        | February 28,
|                                                     |               |   | 2000               |        | 1999             |   | 2000         |        | 1999        
|                                                     |               |   |                    |        |                  |   |              |        |             
|Net income                                           |               | $ | 2,318,755          |        |                  | $ | 1,892,235    |        |              | $ | 6,735,802 |        |  | $ | 5,856,642 |       
|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |       
|Weighted average common
shares outstanding  basic   |               |   | 9,367,932          |        |                  |   | 9,509,061    |        |              |   | 9,389,702 |        |  |   | 9,518,002 |       
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of dilutive securities:                      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Stock options |   |                    | 41,382 |                  |   |              | 88,445 |              |   |           | 48,054 |  |   |           | 80,539 | 
|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |       
|Weighted average common
shares outstanding  diluted |               |   | 9,409,314          |        |                  |   | 9,597,506    |        |              |   | 9,437,756 |        |  |   | 9,598,541 |       
|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |       
|Basic net income per common share                    |               | $ | 0.25               |        |                  | $ | 0.20         |        |              | $ | 0.72      |        |  | $ | 0.62      |       
|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |       
|Diluted net income per common share                  |               | $ | 0.25               |        |                  | $ | 0.20         |        |              | $ | 0.71      |        |  | $ | 0.61      |       
|                                                     |               |   |                    |        |                  |   |              |        |              |   |           |        |  |   |           |       



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

|                   |  |                    |              |                  |  |              |              |              |  |   |              |  |  |   |              | 
|------------------ |  | ------------------ | ------------ | ---------------- |  | ------------ | ------------ | ------------ |  | - | ------------ |  |  | - | ------------ | 
|                   |  | Three Months Ended |              | Six Months Ended
|                   |  |                    |              |                 
|                   |  | February 29,       |              | February 28,     |  | February 29, |              | February 28,
|                   |  | 2000               |              | 1999             |  | 2000         |              | 1999        
|                   |  |                    |              |                  |  |              |              |             
|Stock options      |  |                    | 1,130,075    |                  |  |              | 454,825      |              |  |   | 1,087,273    |  |  |   | 454,825      | 
|                  
|                  
|                  
|                  
|Option price range |  | $                  | 12.50-$19.16 |                  |  | $            | 14.96-$19.16 |              |  | $ | 12.50-$19.16 |  |  | $ | 14.96-$19.16 | 



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

5. Business Acquisition



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On September 1, 1999, the Company purchased the specialty corrugated
container, heavy wall corrugated fabrication and custom wood crating
business of Lane Container Company of Dallas, Texas for a combination of
cash, the assumption of certain liabilities and certain contingent payments.
The Company is continuing the business acquired at its current location
under a lease with a third party. On February 1, 2000, the Company
purchased the custom wood pallet and container business of Erickson Wood
Products of Belmont, California for cash and certain contingent payments.
The business acquired will be relocated to the Companys existing
manufacturing facility in Hayward, California. Each of such
acquisitions was accounted for under the purchase method of accounting and in each case
a portion of the purchase price was allocated to goodwill. The total amount
paid and to be paid in connection with such acquisitions is not material.

7



---



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 six
months ended February 29, 2000, the Company repurchased 120,500 shares of
Common Stock at prices ranging from $10.94 to $12.69 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 six months ended
February 29, 2000 and February 28, 1999 and of long-lived assets at February
29, 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 |            | Six Months Ended
|                        |                |       |   |                    |            |                 
|                        |                |       |   | February 29,       |            | February 28,     |   | February 29, |            | February 28,
|                        |                |       |   | 2000               |            | 1999             |   | 2000         |            | 1999        
|                        |                |       |   |                    |            |                  |   |              |            |             
|Net Sales              
|                        | United States  |       | $ | 50,213,902         |            |                  | $ | 44,064,326   |            |              | $ | 102,370,224 |             |  | $ | 92,749,422 |            
|                       
|                       
|                       
|                       
|                        | United Kingdom |       |   | 5,565,456          |            |                  |   | 5,918,413    |            |              |   | 12,066,870  |             |  |   | 12,475,065 |            
|                       
|                       
|                       
|                       
|                        | Mexico         |       |   | 5,521,527          |            |                  |   | 3,657,841    |            |              |   | 11,581,594  |             |  |   | 8,881,828  |            
|                        |                |       |   |                    |            |                  |   |              |            |              |   |             |             |  |   |           
|                        |                | Total |   | $                  | 61,300,885 |                  |   | $            | 53,640,580 |              |   | $           | 126,018,688 |  |   | $          | 114,106,315 | 
|                        |                |       |   |                    |            |                  |   |              |            |              |   |             |             |  |   |           
|Operating Income (Loss)
|                        | United States  |       | $ | 5,077,536          |            |                  | $ | 4,850,262    |            |              | $ | 12,866,742  |             |  | $ | 11,996,016 |            
|                       
|                       
|                       
|                       
|                        | United Kingdom |       |   | (271,587           | )          |                  |   | (104,133     | )          |              |   | (330,137    | )           |  |   | (130,141   | )          
|                       
|                       
|                       
|                       
|                        | Mexico         |       |   | 107,965            |            |                  |   | (482,114     | )          |              |   | 469,515     |             |  |   | (165,463   | )          
|                        |                |       |   |                    |            |                  |   |              |            |              |   |             |             |  |   |           
|                        |                | Total |   | $                  | 4,913,914  |                  |   | $            | 4,264,015  |              |   | $           | 13,006,120  |  |   | $          | 11,700,412  | 
|                        |                |       |   |                    |            |                  |   |              |            |              |   |             |             |  |   |           

|                  |                |       |   |              |             |            |   |            |             |  | 
|----------------- | -------------- | ----- | - | ------------ | ----------- | ---------- | - | ---------- | ----------- |  | 
|                  |                |       |   | February 29, |             | August 31,
|                  |                |       |   | 2000         |             | 1999      
|                  |                |       |   |              |             |           
|Long-Lived Assets
|                  | United States  |       | $ | 91,663,273   |             |            | $ | 86,379,603 |            
|                 
|                 
|                 
|                 
|                  | United Kingdom |       |   | 16,027,800   |             |            |   | 17,044,811 |            
|                 
|                 
|                 
|                 
|                  | Mexico         |       |   | 8,948,511    |             |            |   | 9,527,409  |            
|                  |                |       |   |              |             |            |   |           
|                  |                | Total |   | $            | 116,639,584 |            |   | $          | 112,951,823 | 
|                  |                |       |   |              |             |            |   |           

8



---



8. Claims and Contingencies



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | A lawsuit seeking substantial compensatory and punitive damages as a
result of the alleged wrongful death of an employee was filed against the
Company in December 1996 and is scheduled for trial in June 2000. 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.

9. Other Information



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. In 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities: Deferral of
the Effective Date of SFAS Statement No. 133. SFAS No. 137 defers for one
year the effective date of SFAS No. 133. SFAS No. 133 will apply to all
fiscal quarters of all fiscal years beginning after June 15, 2000, and, when
adopted by the Company, is not expected to have a material effect on the
consolidated financial statements.

10. Subsequent Event



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On March 1, 2000, the Company purchased the interior foam cushion
fabricating business of Cushion Packaging Company in Dallas, Texas for cash
and certain contingent payments. The business acquired will be relocated to
the Companys existing manufacturing facility in Dallas, Texas. The amount
paid and to be paid in connection with the acquisition is not material. The
acquisition was accounted for under the purchase method of accounting, with
a portion of the purchase price allocated to goodwill.

9



---






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

Results of Operations
 Three Months Ended February 29, 2000
Compared to Three Months Ended February 28, 1999

Net income for the three months ended February 29, 2000 was
$2.3 million, or $0.25 per diluted share, up 23% compared with net income of
$1.9 million, or $0.20 per diluted share, for the three months ended February
28, 1999. 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.  The results for both net sales and net
income represent quarterly records for the Companys second fiscal quarter.

Net sales for the three months ended February 29, 2000 were
$61.3 million, an increase of $7.7 million, or 14.3%, over the same period of
fiscal 1999. Approximately 67% of the increase in net sales was attributable to
increased demand for the Companys products in
virtually all end-use markets in North America. The balance of the increase in
net sales was due to the successful integration with the Company of Berry Packaging, Inc. in
Sallisaw, Oklahoma in February 1999 and Lane Container Company in Dallas, Texas
in September 1999 and to higher selling prices for many of the Companys
products, particularly during the second fiscal quarter. Higher selling prices were necessitated by increased raw material
costs, particularly for expandable polystyrene resins and corrugated paper.

Gross profit increased 16.2%
to $14.0 million for the three months
ended February 29, 2000, as compared to $12.0 million in
the three months
ended February 28, 1999. Despite the increases in raw material costs, gross profit
as a percentage of net sales increased to 22.8% in the current three month
period from 22.4% in the same period of the prior fiscal year. The Companys
increased profitability demonstrates its continued focus on improving the
operating efficiency of many of its manufacturing facilities.

Selling and administrative expenses for the three months ended February
29, 2000 increased 16.7%, or $1.3 million, to $9.0 million. This increase is
primarily attributable to higher employee costs which were added in the latter
half of fiscal 1999 and to costs added with the current fiscal year acquisition of
Lane Container Company in September 1999.

Net sales and operating loss for the United Kingdom operations for the
three months ended February 29, 2000 were $5.6 million and ($271,587),
respectively, compared to $5.9 million and ($104,133), respectively, in the
same period of fiscal 1999. Despite the decrease in net sales, gross profit as
a percentage of net sales increased to 15.4% in the second
quarter of fiscal 2000 from 14.5% in the second quarter of fiscal
1999. The
increased gross profit margin demonstrates continued modest improvements in the
operating efficiency in the manufacturing facilities in the United Kingdom.
The increase in operating loss was a result of higher selling and
administrative expenses for the period due to costs incurred to redistribute
certain business more efficiently among the manufacturing
facilities in the United Kingdom.

Net sales and operating income for the Mexican operations for the three
months ended February 29, 2000 were $5.5 million and $107,965, respectively,
compared to $3.7 million and ($482,114), respectively, in the same period of
fiscal 1999. The increase in net sales resulted from growth in
business from existing customers as well as business from customers
relocating their manufacturing facilities to Mexico. During the three
months ended February 29, 2000, gross profit for the Mexican
operations amounted to $853,016 million or 15.4% of net sales
compared to a gross profit of $45,873 or 1.3% of net sales in the
same period of the prior fiscal year. Operating income for the fiscal 1999 period was adversely impacted
by start up costs of the Companys Tijuana facility. The significant
improvement in operating income during the fiscal 2000 period is due to the
Tijuana facility being fully operational during that period.

Interest expense for the three months ended February 29, 2000 increased to
$1.3 million from $1.2 million in the same period of the prior fiscal year,
while remaining a constant 2.2% of net sales. The increase resulted
from an additional borrowing during the current period of $9.5
million under the Company's revolving credit facility.

Income before income taxes for the three months ended February 29, 2000
increased to $3.8 million from $3.1 million in the same period of fiscal 1999,
an increase of 21.6%. The effective tax rate decreased from 38.8% in
the prior period to 38.3% in the current period.

10



---



Results of Operations  Six Months Ended February 29, 2000
Compared to Six Months Ended February 28, 1999

Net income for the six months
ended
February 29, 2000 was $6.7
million, or $0.71 per diluted share, compared with net income of 5.9 million,
or $0.61 per diluted share, for the same period in fiscal 1999. This represents
an increase in net income of 15.0% and an increase in diluted net
income per share of 16.4% over the net income and diluted net income
per share for the six months ended February 28, 1999. 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 sales increased $11.9 million, or 10.4%, to $126.0 million in the
first six months of fiscal 2000 from $114.1 million in the first six months of
fiscal 1999. Approximately 54% of the increase in net sales is attributable to
an increased demand for the Companys products. The balance of the increase is
due to the acquisitions of Berry Packaging, Inc. in February 1999 and
Lane Container Company in September 1999 as well as the higher
selling prices for many of the Companys products referred to in
the discussion above of the results for the second fiscal quarter.

Gross profit for the six months ended February 29, 2000 was $30.3 million,
an increase of $3.2 million from $27.1 million in the same period of fiscal
1999. Gross profit as a percentage of net sales rose to 24.0% during the six
months ended February 29, 2000 from 23.8% in the same period of the
prior fiscal year as a result of the Companys focus on continually improving
the efficiency of its manufacturing process despite the increases in raw
material costs.

Selling and administrative
expenses for the six months ended
February 29, 2000 rose 12.2% to $17.3 million compared to $15.4 million in the
same period last fiscal year and increased as a percentage of net sales to
13.7% from 13.5% 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 second fiscal quarter.

The United Kingdom operations continued to demonstrate improvements in
manufacturing efficiency despite lower net sales. For the six months ended
February 29, 2000, net sales decreased 3.3% to $12.1 million from $12.5 million
in the same period last fiscal year. Gross profit in the United Kingdom rose
5.7% to $1.9 million in the six months ended February 29, 2000, up from
$1.8 million for the six months ended February 28, 1999. Due to
increases in selling and administrative expenses as a result of costs incurred
to redistribute certain business more efficiently among the
manufacturing facilities in the United Kingdom, operating losses increased to
($330,137) from ($130,141) for the six months ended February 29, 2000 and
February 28, 1999 respectively.

Net sales and gross profit of the Mexican operations improved by 30.4% and
93.7%, respectively, for the first six 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. During the six months ended February 29, 2000, gross profit for the Mexican operations amounted to $1.9 million, or
16.3% of net sales of $11.6 million, compared to a gross profit of $1.0
million, or 11.0% of net sales of $8.9 million, in the same
period of the prior fiscal year. Operating income of the Mexican operations improved to $469,515 in
the current six month period as compared to an operating loss of ($165,463) 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 to $2.5 million in the first six months of
fiscal 2000, up 4.9% from $2.4 million for the first six months of fiscal 1999
but decreased slightly as a percentage of net sales to 2.0% in the current
period compared to 2.1% in the prior period. The increase resulted
from an additional borrowing during the current period of $13.0
million under the Company's revolving credit facility.

Income before income taxes for the six months ended February 29, 2000
increased 14.7% to $10.8 million, up from $9.4 million in the same period of
fiscal 1999. The effective tax rate decreased from 37.9% in the prior
period to 37.8% in the current period.

The Company continues to be pleased with the results of operations. Record
sales and net income for each of the first and second 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.

11



---



Liquidity and Capital Resources

Cash provided by operating
activities amounted to $4.7 million and ($2.6) million
during the three months ended November 30, 1999 and
February 29, 2000, respectively, compared to $2.3 million
and $6.2 million during the three months ended November 30,
1998 and February 28, 1999, respectively. The negative cash flow
from operating activities during the three months ended
February 29, 2000 was caused by very substantial purchases of
EPS resins during the fiscal quarter in advance of announced price
increases by the Company's raw material suppliers. As a result of the
raw material purchases, inventories at February 29, 2000
increased to $32.8 million from $22.5 million at
August 31, 1999 and $26.7 million at November 30, 1999.

Depreciation and amortization amounted to $9.2 million for the
six months ended February 29, 2000 compared to $8.5 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 February 29, 2000 increased to
$39.4 million and $17.6 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 six
months ended February 29, 2000 amounted to $9.9 million, including
approximately $613,000 for environmental control equipment. Approximately 40.8%
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 has
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.

In September 1999, the
Company purchased the specialty corrugated
container, heavy wall corrugated and custom wood crating business of Lane
Container Company (see Note 5 to the Condensed Consolidated
Financial Statements). In February 2000, the Company purchased the custom wood
pallet and container business of Erickson Wood Products (see Note 5 to Condensed Consolidated
Financial Statements). During
the six months ended February 29, 2000, expenditures for business acquisitions,
net of cash acquired, substantially all of which related to such acquisitions,
amounted to $3.7 million. On March 1, 2000, the Company
purchased the interior
foam custom fabricating business of Cushion Packaging Company
(see Note 10 to the Condensed Consolidated Financial Statements). The
Company will continue to look for acquisitions which will mesh well with the
Companys business.

During the six months ended
February 29, 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
fabricated 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.

Long-term debt has increased from $60.1 million at August 31, 1999 to $70.5
million at February 29, 2000. Of the amount outstanding at
February 29, 2000, $67.8 million was borrowed under the
new credit agreement, including $29.5 million of the
$45.0 million available under the revolving credit facility. During the six months ended February
29, 2000, $13.0 million was borrowed under both the previous and the new
revolving credit facility. Of this amount, $3.5 million was
borrowed during the three months ended November 30, 1999 primarily to fund the acquisition of Lane
Container
Company in September 1999 and $9.5 million was borrowed
during the three months ended February 29, 2000 primarily to
fund raw material purchases and capital expenditures.

12



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During the six months ended February 29, 2000, the Company spent
$1,432,538 in connection with its share repurchase program (see Note 6 to the
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. 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 new 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.

Impact of Year 2000

In prior reports, the Company discussed the nature and progress of its plans
to become Year 2000 ready. In the fourth quarter of fiscal 1999, the Company
completed remediation and testing of its systems. As a result of those planning
and implementation efforts, the Company experienced no significant disruptions
in mission critical information technology, or non-information
technology,
systems and believes those systems successfully responded to the Year 2000 date
change. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products
and services of third parties with which it does business. Expenses relating to Year 2000 remediation have
not been and are not expected to be material to the results of operations of
the Company. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.

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 FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. In 1999, the FASB issued SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities: Deferral of the
Effective Date of SFAS Statement No. 133. SFAS No. 137 defers for one year the
effective date of SFAS No. 133. SFAS No. 133 will apply to all fiscal quarters
of all fiscal years beginning after June 15, 2000, and, when adopted by the
Company, is not expected to have a material effect on the consolidated
financial statements.

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 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.

13



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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 16,
1999. The holders of 8,185,891 shares of the Companys Common Stock
(approximately 87.02% 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 three persons to serve as directors for a three-year term
expiring at the annual meeting of shareholders in 2002 and (ii) the
ratification of the appointment of Ernst & Young, LLP as the independent public
accountants to audit the financial statements of the Company and its
subsidiaries for the 2000 fiscal year.

Jeffery L. Leininger, David C. OLeary and Thomas P. Woolaway, the
nominees of the Companys Board of Directors, were elected to serve as
directors until 2002. There were no other nominees. Shares were voted as
follows:

|                     |  |     |           |          |  |          |         | 
|-------------------- |  | --- | --------- | -------- |  | -------- | ------- | 
|                     |  |     |           |          |  | Withhold
|Name                 |  | For |           | Vote For
|                     |  |     |           |         
|Jeffery L. Leininger |  |     | 8,152,087 |          |  |          | 33,806  | 
|                    
|                    
|                    
|                    
|David C. OLeary     |  |     | 8,084,116 |          |  |          | 101,775 | 
|                    
|                    
|                    
|                    
|Thomas P. Woolaway   |  |     | 8,156,101 |          |  |          | 29,790  | 

The appointment of Ernst & Young, LLP as the independent public
accountants for the 2000 fiscal year was ratified: affirmative votes,
8,162,472 shares; negative votes, 17,550 shares; and abstained, 5,870 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
|            |  |         
|27          |  |          | Financial Data Schedule for the six months ended February 29, 2000.

A copy of the exhibit filed as a part of this quarterly report is
available at a cost of $.20 per page to any shareholder upon written request to
Brian C. Mullins, Senior Vice President, Chief Financial Officer and Treasurer,
Tuscarora Incorporated, 800 Fifth Avenue, New Brighton, PA 15066.

(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 29, 2000.

14



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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 14, 2000 |  |  |  |  |  | By /s/ John P. OLeary, Jr.
     John P. OLeary, Jr.,
     President and
     Chief Executive Officer                                                                                                  
|                    
|Date: April 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)

15



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Tuscarora Incorporated
FORM 10-Q FOR QUARTER ENDED FEBRUARY 29, 2000

EXHIBIT INDEX

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

|            |  |          |                                                                     | 
|----------- |  | -------- | ------------------------------------------------------------------- | 
|Exhibit No. |  | Document
|            |  |          |                                                                    
|27          |  |          | Financial Data Schedule for the six months ended February 29, 2000. |