<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
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 SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER: 0-20646
---------------------
CARAUSTAR INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NORTH CAROLINA 58-1388387
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3100 JOE JERKINS BLVD., AUSTELL, GEORGIA 30106
(Address of principal executive offices) (Zip Code)
</TABLE>
(770) 948-3101
(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 (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of issuer's classes of
common stock, as of the latest practicable date, November 8, 1999.
<TABLE>
<CAPTION>
COMMON STOCK, $.10 PAR VALUE 25,483,810
---------------------------- ----------
<S> <C>
(Class) (Outstanding)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
CARAUSTAR INDUSTRIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of September 30,
1999 and December 31, 1998................................ 3
Condensed Consolidated Statements of Income for the
three-month and nine-month periods ended September 30,
1999 and September 30, 1998............................... 4
Condensed Consolidated Statements of Cash Flows for the
nine-month periods ended September 30, 1999 and September
30, 1998.................................................. 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three-month and
nine-month periods ended September 30, 1999 and September
30, 1998.................................................. 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 17
PART OTHER INFORMATION
II --
Item 6. Exhibits and Reports on Form 8-K............................ 18
Signatures.............................................................. 19
Exhibit Index........................................................... 20
</TABLE>
2
<PAGE> 3
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998*
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 13,313 $ 2,610
Receivables, net.......................................... 115,590 76,394
Inventories............................................... 89,947 67,544
Refundable income taxes................................... 2,728 1,365
Other current assets...................................... 10,522 6,790
--------- ---------
Total current assets............................... 232,100 154,703
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................... 12,270 6,530
Buildings and improvements................................ 124,230 97,942
Machinery and equipment................................... 573,188 415,653
Furniture and fixtures.................................... 9,094 7,837
--------- ---------
718,782 527,962
Less accumulated depreciation............................. (234,614) (203,492)
--------- ---------
Property, plant and equipment, net........................ 484,168 324,470
--------- ---------
GOODWILL, net............................................... 133,980 120,127
--------- ---------
OTHER ASSETS................................................ 28,527 19,497
--------- ---------
$ 878,775 $ 618,797
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 90 $ 26,103
Accounts payable.......................................... 64,190 47,040
Accrued liabilities....................................... 45,090 25,631
Dividends payable......................................... 4,569 4,476
--------- ---------
Total current liabilities.......................... 113,939 103,250
--------- ---------
REVOLVING CREDIT LOANS...................................... 150,000 147,000
--------- ---------
LONG-TERM DEBT, less current maturities..................... 286,198 82,881
--------- ---------
DEFERRED INCOME TAXES....................................... 48,764 43,437
--------- ---------
DEFERRED COMPENSATION....................................... 3,498 3,889
--------- ---------
OTHER LIABILITIES........................................... 4,880 4,375
--------- ---------
MINORITY INTEREST........................................... 882 591
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value; 5,000,000 shares
authorized; none issued................................. 0 0
Common stock, $.10 par value; 60,000,000 shares
authorized, 25,483,116 and 24,681,358 shares issued and
outstanding at September 30, 1999 and December 31, 1998,
respectively............................................ 2,548 2,468
Additional paid-in capital................................ 149,182 130,240
Retained earnings......................................... 122,224 103,991
Accumulated other comprehensive income.................... (3,340) (3,325)
--------- ---------
270,614 233,374
--------- ---------
$ 878,775 $ 618,797
========= =========
</TABLE>
- ---------------
* Condensed from audited financial statements.
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE> 4
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
SALES................................................. $254,349 $198,148 $675,959 $582,762
FREIGHT............................................... 13,057 9,616 34,646 27,701
-------- -------- -------- --------
Net sales................................... 241,292 188,532 641,313 555,061
COST OF SALES......................................... 188,015 137,016 487,955 402,561
-------- -------- -------- --------
Gross profit................................ 53,277 51,516 153,358 152,500
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.......... 33,326 28,278 93,968 79,605
-------- -------- -------- --------
Operating income............................ 19,951 23,238 59,390 72,895
OTHER (EXPENSE) INCOME:
Interest expense.................................... (7,552) (4,294) (17,802) (11,983)
Interest income..................................... 100 92 465 268
Equity in income of unconsolidated affiliates....... 2,912 1,257 7,355 3,158
Other, net.......................................... (132) (274) (220) (597)
-------- -------- -------- --------
(4,672) (3,219) (10,202) (9,154)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST...... 15,279 20,019 49,188 63,741
MINORITY INTEREST..................................... (95) (36) (291) (594)
PROVISION FOR INCOME TAXES............................ 5,129 7,190 17,111 23,846
-------- -------- -------- --------
NET INCOME............................................ $ 10,055 $ 12,793 $ 31,786 $ 39,301
======== ======== ======== ========
BASIC
NET INCOME PER COMMON SHARE........................... $ 0.40 $ 0.50 $ 1.27 $ 1.55
======== ======== ======== ========
Weighted average number of shares outstanding......... 25,100 25,402 24,942 25,353
======== ======== ======== ========
DILUTED
NET INCOME PER COMMON SHARE........................... $ 0.40 $ 0.50 $ 1.27 $ 1.54
======== ======== ======== ========
Diluted weighted average number of shares
outstanding......................................... 25,212 25,539 25,069 25,545
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of income.
4
<PAGE> 5
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1999 1998
----------- ----------
(UNAUDITED)
<S> <C> <C>
Cash provided by (used in)
Operating activities:
Net income............................................. $ 31,786 $ 39,301
Depreciation and amortization.......................... 37,283 28,887
Other noncash adjustments.............................. (2,250) (2,816)
Changes in current assets and liabilities.............. (7,517) 877
--------- --------
Net cash provided by operating activities......... 59,302 66,249
--------- --------
Investing activities:
Purchases of property, plant and equipment............. (25,923) (28,741)
Acquisitions of businesses............................. (177,881) (14,433)
Other.................................................. 2,160 1,424
--------- --------
Net cash used in investing activities............. (201,644) (41,750)
--------- --------
Financing activities:
Proceeds from revolving credit loans................... 153,000 47,000
Repayments of revolving credit loans................... (150,000) (35,000)
Net proceeds from public offering of 10 year notes..... 196,733 0
Repayments of long and short-term debt................. (33,672) (10,325)
Dividends paid......................................... (13,424) (12,165)
Proceeds from issuances of stock....................... 1,024 602
Purchases of stock..................................... 0 (8,895)
Distributions to CPI partner........................... 0 (3,100)
Other.................................................. (616) (586)
--------- --------
Net cash provided by (used in) financing
activities...................................... 153,045 (22,469)
--------- --------
Net increase in cash and cash equivalents................. 10,703 2,030
Cash and cash equivalents at beginning of period.......... 2,610 1,391
--------- --------
Cash and cash equivalents at end of period................ $ 13,313 $ 3,421
========= ========
Supplemental Disclosures:
Cash payments for interest............................. $ 12,261 $ 9,794
========= ========
Cash payments for income taxes......................... $ 14,373 $ 21,171
========= ========
Stock issued for acquisitions.......................... $ 17,963 $ 4,660
========= ========
Note payable issued for acquisition.................... $ 0 $ 26,000
========= ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of cash flows.
5
<PAGE> 6
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
CARAUSTAR INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of results for the interim periods. The results of
operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
NOTE 2. ACQUISITIONS
Each of the following acquisitions is being accounted for under the
purchase method of accounting, applying the provisions of Accounting
Principles Board Opinion No. 16. As a result, the Company records the
assets and liabilities of the acquired companies at their estimated
fair values with the excess of the purchase price over these amounts
being recorded as goodwill. Actual allocations of goodwill and other
identifiable assets will be based on further studies and may change
during the allocation period, generally one year following the date of
acquisition.
In March 1999, the Company acquired 67 percent of the outstanding stock
of Carolina Component Concepts ("CCC") in exchange for 225,000 shares
of the Company's common stock, valued at approximately $6.0 million. As
a result of this transaction, the Company now owns 100 percent of CCC's
common stock. CCC operates a specialty converting facility, located in
Mooresville, North Carolina. Goodwill of approximately $5.1 million was
recorded in connection with the acquisition and is being amortized over
40 years.
In April 1999, the Company acquired the assets and assumed certain
liabilities of International Paper Company's Sprague boxboard mill for
approximately $103.2 million in cash plus $4.7 million of assumed debt.
Sprague, located in Versailles, Connecticut, produces clay-coated
recycled boxboard used primarily in the manufacture of folding cartons.
Goodwill of approximately $400 thousand was recorded in connection with
the acquisition and is being amortized over 40 years.
Also in April 1999, the Company acquired the assets and assumed certain
liabilities of Halifax Paper Board Company, Inc. in exchange for 34,256
shares of the Company's common stock valued at $802 thousand and
repayment of $5.6 million of Halifax's debt. Halifax operates a
paperboard mill in Roanoke Rapids, North Carolina that produces
specialty paperboard and a specialty paperboard converting plant in
Richmond, Virginia. No goodwill was recorded in connection with the
Halifax acquisition.
In June 1999, the Company acquired the assets and assumed certain
liabilities of Tenneco Packaging Inc.'s folding carton division for
approximately $72.7 million in cash. The division consists of five
folding carton plants located in Mentor, Ohio; Grand Rapids, Michigan;
St. Louis, Missouri; Denver, Colorado; Salt Lake City, Utah and five
sales and technical support centers. Goodwill of approximately $900
thousand was recorded in connection with the acquisition and is being
amortized over 40 years.
In September 1999, the Company acquired all of the outstanding stock of
Carolina Converting Inc. ("CCI") in exchange for 480,309 shares of the
Company's common stock, subject to a post-closing working capital
adjustment, valued at approximately $11.2 million and repayment of $2.0
million of CCI's debt. CCI operates a specialty converting and contract
packaging facility located in
6
<PAGE> 7
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
Fayetteville, North Carolina. Goodwill of approximately $9.4 million
was recorded in connection with the acquisition and is being amortized
over 40 years.
NOTE 3. LONG-TERM DEBT
In 1998, the Company registered with the Securities and Exchange
Commission a total of $300 million in public debt securities for
issuance in one or more series and with such specific terms to be
determined from time to time. On June 1, 1999, the Company issued $200
million in aggregate principal amount of its 7.375 percent notes due
June 1, 2009. The effective interest rate on these notes, giving effect
to the original issue discount, is 7.473 percent. Interest is payable
semiannually beginning December 1, 1999. As of September 30, 1999, the
carrying amount of the notes, net of the $1.3 million unamortized
discount, was $198.7 million. Underwriting and other costs of
approximately $1.9 million are being amortized over the term of the
notes. The notes are unsecured obligations and are redeemable, in whole
or in part, prior to maturity at the option of the Company. The price
of any notes redeemed is the greater of the principal amount and a
make-whole price as described in the prospectus supplement. The notes
indenture contains certain restrictive covenants regarding, among other
matters, limitations of the incurrence of certain liens and entering
certain sale and leaseback transactions, as defined in the indenture.
NOTE 4. COMPREHENSIVE INCOME
Total comprehensive income, consisting of net income plus other
nonowner changes in equity, for the three months ended September 30,
1999 and 1998 was $10,190,000 and $12,885,000, respectively. For the
nine months ended September 30, 1999 and 1998, total comprehensive
income was $31,771,000 and $39,420,000, respectively.
NOTE 5. NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging
activities. It also requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position
and measure those instruments at fair value. In June 1999, the FASB
issued SFAS No. 137 which defers the effective date of SFAS No. 133 for
the Company until its fiscal year ending December 31, 2001. Management
does not expect SFAS No. 133 to have a significant impact on the
Company's financial statements.
NOTE 6. SEGMENT INFORMATION
The Company operates principally in three business segments organized
by products. The paperboard segment consists of facilities that
manufacture recycled uncoated and clay-coated paperboard and facilities
that collect recycled paper and broker recycled paper and other paper
rolls. The tube, core and composite container segment is principally
made up of facilities that produce spiral and convolute-wound tubes,
cores and cans. The carton and custom packaging segment consists of
facilities that produce printed and unprinted folding and set-up
cartons and facilities that provide contract manufacturing and contract
packaging services. Intersegment sales are recorded at prices which
approximate market prices. Operating income includes all costs and
expenses directly related to the segment involved. Corporate expenses
include corporate general, administrative and unallocated information
systems expenses.
7
<PAGE> 8
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 1.
The following table presents certain business segment information for the
periods indicated (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales (external customers):
Paperboard................................. $105,045 $ 79,142 $272,772 $232,478
Tube, core and composite container......... 64,150 63,404 190,925 190,868
Carton and custom packaging................ 72,097 45,986 177,616 131,715
-------- -------- -------- --------
Total.............................. $241,292 $188,532 $641,313 $555,061
======== ======== ======== ========
Net sales (intersegment)
Paperboard................................. $ 32,654 $ 29,197 $ 88,896 $ 86,040
Tube, core and composite container......... 814 768 2,106 1,727
Carton and custom packaging................ 161 137 318 156
-------- -------- -------- --------
Total.............................. $ 33,629 $ 30,102 $ 91,320 $ 87,923
======== ======== ======== ========
Operating income:
Paperboard................................. $ 13,714 $ 19,594 $ 43,216 $ 60,632
Tube, core and composite container......... 5,373 4,614 15,592 14,205
Carton and custom packaging................ 4,158 2,091 9,383 6,341
-------- -------- -------- --------
23,245 26,299 68,191 81,178
Corporate expense............................ (3,294) (3,061) (8,801) (8,283)
-------- -------- -------- --------
Operating income............................. 19,951 23,238 59,390 72,895
Interest expense........................... (7,552) (4,294) (17,802) (11,983)
Interest income............................ 100 92 465 268
Equity in income of unconsolidated
affiliates.............................. 2,912 1,257 7,355 3,158
Other (net)................................ (132) (274) (220) (597)
-------- -------- -------- --------
Income before income taxes and minority
interest................................... $ 15,279 $ 20,019 $ 49,188 $ 63,741
======== ======== ======== ========
</TABLE>
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is involved in certain litigation arising in the ordinary
course of business. In the opinion of management, the ultimate
resolution of these matters will not have a material adverse effect on
the Company's financial condition or results of operations.
8
<PAGE> 9
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
CARAUSTAR INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
GENERAL
The Company is a major manufacturer of recycled paperboard and converted
paperboard products, operating principally in three business segments. The
paperboard segment consists of facilities that manufacture recycled uncoated and
clay-coated paperboard and facilities that collect recycled paper and broker
recycled paper and other paper rolls. The tube, core and composite container
segment is principally made up of facilities that produce spiral and
convolute-wound tubes, cores and cans. The carton and custom packaging segment
consists of facilities that produce printed and unprinted folding and set-up
cartons and facilities that provide contract manufacturing and contract
packaging services.
The Company is vertically integrated to the extent that a large portion of its
paperboard production is consumed internally by its converting segments
(approximately 34 percent in the first nine months of 1999). As part of its
strategy to optimize capacity utilization, the Company regularly purchases
paperboard from other manufacturers in an effort to minimize the potential
impact of demand declines on the Company's own mill system. Additionally, each
of the Company's mills can produce recycled paperboard for more than one end-use
product market, which allows it to shift production between mills in response to
customer or market demands. The Company is also the only major manufacturer to
serve all four recycled boxboard end-use markets: tube and core, folding carton,
gypsum wallboard facing paper and other specialty.
Recovered fiber, which is derived from recycled paper stock, is the Company's
only significant raw material. Historically, the cost of recovered fiber has
fluctuated significantly due to market and industry conditions. For example, the
Company's average recovered fiber cost per ton of paperboard produced increased
from $43 per ton in 1993 to $144 per ton in 1995, an increase of 235 percent,
before dropping to $66 per ton in 1996. Recovered fiber cost per ton averaged
$71 during 1998 and $73 during the first nine months of 1999. Although the
Company raises its selling prices in response to increases in raw material
costs, it often is unable to maintain its operating margins in the face of
dramatic cost increases, and it experiences short-term margin shrinkage during
all periods of price increases due to customary time lags in the implementation
of price increases. There can be no assurance that the Company will be able to
recoup any future increases in the cost of recovered fiber by raising the prices
of its products. There also can be no assurance that, even if the Company is
able to recoup such cost increases, its operating margins and results of
operations will not be materially and adversely affected by time delays in the
implementation of price increases.
9
<PAGE> 10
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The following tables set forth certain operating data regarding the Company's
volume and gross paper margins for the periods indicated. The volume information
shown below includes shipments of unconverted paperboard and converted
paperboard products. Tonnage volumes from the Company's business segments are
combined and presented along end-use market lines. Net sales and operating
income are reported by segment in Note 6 to the consolidated financial
statements as part of Part 1, Item 1 of this report.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30,
--------------- %
1999 1998 CHANGE CHANGE
------ ------ ------ -------
<S> <C> <C> <C> <C>
Production source of paperboard tons sold (in thousands):
From paperboard mill production........................... 293.2 231.8 61.4 26.5%
Outside purchases......................................... 24.7 20.0 4.7 23.5%
------ ------ ------
Total paperboard tonnage.......................... 317.9 251.8 66.1 26.3%
====== ====== ======
Tons sold by market (in thousands):
Tube, core and can volume
Paperboard (internal).................................. 52.1 51.2 0.9 1.8%
Outside purchases...................................... 5.3 5.4 (0.1) -1.9%
------ ------ ------
Tube, core and can converted products..................... 57.4 56.6 0.8 1.4%
Unconverted paperboard.................................... 9.7 9.5 0.2 2.1%
------ ------ ------
Tube, core and can volume......................... 67.1 66.1 1.0 1.5%
Folding carton volume
Paperboard (internal).................................. 20.1 13.1 7.0 53.4%
Outside purchases...................................... 16.2 10.2 6.0 58.8%
------ ------ ------
Folding cartons........................................... 36.3 23.3 13.0 55.8%
Unconverted paperboard.................................... 84.0 49.7 34.3 69.0%
------ ------ ------
Folding carton volume............................. 120.3 73.0 47.3 64.8%
Gypsum facing paper volume
Unconverted paperboard................................. 73.0 61.6 11.4 18.5%
Outside purchases (for resale)......................... 0.6 2.8 (2.2) -78.6%
------ ------ ------
Gypsum facing volume.............................. 73.6 64.4 9.2 14.3%
Other specialty volume
Paperboard (internal).................................. 24.2 19.3 4.9 25.4%
Outside purchases...................................... 2.6 1.6 1.0 62.5%
------ ------ ------
Other specialty converted products........................ 26.8 20.9 5.9 28.2%
Unconverted paperboard.................................... 30.1 27.4 2.7 9.9%
------ ------ ------
Other specialty volume............................ 56.9 48.3 8.6 17.8%
------ ------ ------
Total paperboard tonnage.......................... 317.9 251.8 66.1 26.3%
====== ====== ======
Gross paper margins ($/ton):
Paperboard mill:
Average same-mill net selling price.................... $ 414 $ 414 $ -- --
Average same-mill recovered fiber cost................. 91 67 24 35.8%
------ ------ ------
Paperboard mill gross paper margin................ $ 323 $ 347 $ (24) - 6.9%
====== ====== ======
Tube and core:
Average net selling price.............................. $ 724 $ 732 $ (8) - 1.1%
Average paperboard cost................................ 388 409 (21) - 5.1%
------ ------ ------
Tube and core gross paper margin.................. $ 336 $ 323 $ 13 4.0%
====== ====== ======
</TABLE>
10
<PAGE> 11
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
Consolidated net sales for the quarter ended September 30, 1999 increased 28.0
percent to $241.3 million from $188.5 million in 1998. Acquisitions accounted
for $47.5 million of sales during the third quarter of 1999. Excluding
acquisitions, net sales increased 2.8 percent. This increase was due to higher
volume in the paperboard segment and higher sales from the tube, core and
composite containers and carton and custom packaging segments.
Total paperboard tonnage for the quarter increased 26.3 percent to 317.9
thousand tons from 251.8 thousand tons. Excluding acquisitions, total paperboard
tonnage increased 3.5 percent to 260.6 thousand tons. This increase was the
result of higher shipments of unconverted paperboard to external customers,
primarily to customers in the gypsum facings market. Excluding acquisitions,
outside purchases decreased 22.6 percent to 15.5 thousand tons. Tons sold from
paperboard mill production increased 26.5 percent for the quarter to 293.2
thousand tons compared with 231.8 thousand tons in the third quarter last year
and increased 4.6 percent excluding the Sprague and Halifax acquisitions. Total
tonnage converted increased 19.3 percent in the third quarter of 1999 to 120.3
thousand tons versus 100.8 thousand tons in 1998 but was essentially unchanged
from last year excluding acquisitions. Excluding acquisitions, volumes in the
folding carton and other specialty end-use markets decreased 3.0 percent and
increased 1.7 percent, respectively.
Gross margin for the third quarter of 1999 decreased to 22.1 percent of net
sales from 27.3 percent in 1998. This margin decrease was due primarily to the
acquisition of operations with lower margins, as a percent of sales, than the
Company's other operations. The margin decrease was also caused by lower margins
in the paperboard segment partially offset by higher margins in the tube, core
and composite containers segment.
Operating income for the third quarter of 1999 was $20.0 million, a decrease of
$3.3 million, or 14.1 percent from the year-earlier period. Operating income at
comparable facilities was essentially unchanged from last year. Lower margins in
the paperboard segment were offset by improved results in the tube, core and
composite containers and carton and custom packaging segments. Selling, general
and administrative expenses increased $5.0 million in the third quarter of 1999
versus 1998 due primarily to acquisitions and increased information technology
costs.
Interest expense increased 75.9 percent to $7.6 million for the third quarter of
1999 from $4.3 million in 1998 due to the June 1, 1999 public debt securities
offering and higher average borrowings under the revolving credit facility.
Equity income from unconsolidated affiliates for the third quarter was $2.9
million, up 131.7 percent from 1998 due to improved results for the Company's
gypsum wallboard joint venture with Temple-Inland.
Net income decreased 21.4 percent to $10.1 million in the third quarter of 1999
from $12.8 million last year. Diluted net income per common share decreased 20.0
percent to $0.40 for the third quarter of 1999 from $0.50 in the same period of
1998.
11
<PAGE> 12
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The following tables set forth certain operating data regarding the Company's
volume and gross paper margins for the periods indicated. The volume information
shown below includes shipments of unconverted paperboard and converted
paperboard products. Tonnage volumes from the Company's business segments are
combined and presented along end-use market lines.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
--------------- %
1999 1998 CHANGE CHANGE
------ ------ ------ -------
<S> <C> <C> <C> <C>
Production source of paperboard tons sold (in thousands):
From paperboard mill production........................... 791.8 694.1 97.7 14.1%
Outside purchases......................................... 62.6 66.4 (3.8) -5.7%
------ ------ -----
Total paperboard tonnage.......................... 854.4 760.5 93.9 12.3%
====== ====== =====
Tons sold by market (in thousands):
Tube, core and can volume
Paperboard (internal).................................. 153.9 150.4 3.5 2.3%
Outside purchases...................................... 14.3 18.6 (4.3) -23.1%
------ ------ -----
Tube, core and can converted products..................... 168.2 169.0 (0.8) -0.5%
Unconverted paperboard.................................... 32.1 30.9 1.2 3.9%
------ ------ -----
Tube, core and can volume......................... 200.3 199.9 0.4 0.2%
Folding carton volume
Paperboard (internal).................................. 49.4 38.7 10.7 27.6%
Outside purchases...................................... 38.8 29.6 9.2 31.1%
------ ------ -----
Folding cartons........................................... 88.2 68.3 19.9 29.1%
Unconverted paperboard.................................... 213.0 153.8 59.2 38.5%
------ ------ -----
Folding carton volume............................. 301.2 222.1 79.1 35.6%
Gypsum facing paper volume
Unconverted paperboard................................. 194.8 179.7 15.1 8.4%
Outside purchases (for resale)......................... 3.5 13.2 (9.7) -73.5%
------ ------ -----
Gypsum facing volume.............................. 198.3 192.9 5.4 2.8%
Other specialty volume
Paperboard (internal).................................. 67.0 56.7 10.3 18.2%
Outside purchases...................................... 6.0 5.0 1.0 20.0%
------ ------ -----
Other specialty converted products........................ 73.0 61.7 11.3 18.3%
Unconverted paperboard.................................... 81.6 83.9 (2.3) -2.7%
------ ------ -----
Other specialty volume............................ 154.6 145.6 9.0 6.2%
------ ------ -----
Total paperboard tonnage.......................... 854.4 760.5 93.9 12.3%
====== ====== =====
Gross paper margins ($/ton):
Paperboard mill:
Average same-mill net selling price.................... $ 405 $ 415 $ (10) -2.4%
Average same-mill recovered fiber cost................. 73 76 (3) -3.9%
------ ------ -----
Paperboard mill gross paper margin................ $ 332 $ 339 $ (7) -2.1%
====== ====== =====
Tube and core:
Average net selling price.............................. $ 719 $ 738 $ (19) -2.6%
Average paperboard cost................................ 383 411 (28) -6.8%
------ ------ -----
Tube and core gross paper margin.................. $ 336 $ 327 $ 9 2.8%
====== ====== =====
</TABLE>
12
<PAGE> 13
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
Consolidated net sales for the nine months ended September 30, 1999 increased
15.5 percent to $641.3 million from $555.1 million in 1998. Acquisitions
accounted for $89.9 million of sales during the first nine months of 1999.
Excluding acquisitions, net sales declined 0.7 percent. This decline was due
primarily to lower selling prices in the paperboard segment, partially offset by
higher sales from the carton and custom packaging segment.
Total paperboard tonnage for the first nine months of 1999 increased 12.3
percent to 854.4 thousand tons from 760.5 thousand tons. Excluding acquisitions,
total paperboard tonnage declined 2.1 percent to 744.6 thousand tons. This
decline was the result of lower shipments of unconverted paperboard to external
customers, primarily to customers in the folding carton and other specialty
end-use markets, partially offset by higher shipments to gypsum facing paper
customers. Excluding acquisitions, outside purchases decreased 31.2 percent to
45.7 thousand tons. Tons sold from paperboard mill production increased 14.1
percent for the first nine months of 1999 to 791.8 thousand tons compared with
694.1 thousand tons in the first nine months of last year and increased 0.7
percent excluding acquisitions. Total tonnage converted increased 10.1 percent
in the first nine months of 1999 to 329.3 thousand tons versus 299.1 thousand
tons in 1998 but decreased 1.3 percent excluding acquisitions. Excluding
acquisitions, volumes in the folding carton and other specialty end-use markets
decreased 6.5 percent and 4.9 percent, respectively.
Gross margin for the first nine months of 1999 decreased to 23.9 percent of net
sales from 27.5 percent in 1998. This margin decrease was due primarily to the
acquisition of operations with lower margins, as a percent of sales, than the
Company's other operations combined with lower margins in the paperboard segment
partially offset by higher margins in the tube, core and composite containers
segment.
Operating income for the first nine months of 1999 was $59.4 million, a decrease
of $13.5 million, or 18.5 percent from the year-earlier period. Operating income
at comparable facilities declined $7.9 million, or 10.8 percent. This decline
was due primarily to lower margins in the paperboard segment, partially offset
by improved results in the tube, core and composite containers and carton and
custom packaging segments. Selling, general and administrative expenses
increased $14.4 million in the first nine months of 1999 versus 1998 due
primarily to acquisitions and increased information technology costs.
Interest expense increased 48.6 percent to $17.8 million for the first nine
months of 1999 from $12.0 million in 1998 due to higher average borrowings under
the revolving credit facility and the June 1, 1999 public debt securities
offering.
Equity income from unconsolidated affiliates for the first nine months of the
year was $7.4 million, up 132.9 percent from 1998 due to improved results for
the Company's gypsum wallboard joint venture with Temple-Inland.
Net income decreased 19.1 percent to $31.8 million in 1999 from $39.3 million
last year. Diluted net income per common share decreased 17.5 percent to $1.27
for the first nine months of 1999 from $1.54 in the same period of 1998.
13
<PAGE> 14
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1999, the Company had loans of $150.0 million outstanding under
its revolving credit facility versus $141.0 million on September 30, 1998 and
$147.0 million on December 31, 1998. Loans under the revolving credit facility
bear interest, payable monthly, at the Eurodollar rate plus a margin based upon
the Company's investment grade rating, as defined in the revolving credit
agreement. For the nine months ended September 30, 1999 and 1998 and for the
year ended December 31, 1998, the weighted average borrowings outstanding under
the revolving credit facility during such periods bore interest at 5.36 percent,
5.93 percent and 5.80 percent, respectively. Other long-term debt, less current
maturities, consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------ ------------
1999 1998 1998
-------- ------- ------------
<S> <C> <C> <C>
7.74 percent senior notes................................... $ 82,750 $82,750 $82,750
7.375 percent 10-year notes (net of unamortized discount)... 198,667 -- --
Other notes payable......................................... 4,781 290 131
-------- ------- -------
$286,198 $83,040 $82,881
======== ======= =======
</TABLE>
In 1998, the Company registered with the Securities and Exchange Commission a
total of $300 million in public debt securities for issuance in one or more
series and with such specific terms as to be determined from time to time. On
June 1, 1999, the Company issued $200 million in aggregate principal amount of
its 7.375% notes due June 1, 2009. The notes were issued at a discount to yield
an effective interest rate of 7.473 percent and will pay interest semiannually
beginning December 1, 1999. The notes are unsecured obligations of the Company.
Proceeds, net of the issuance discount and after deducting underwriting and
other costs, were $196.7 million and were largely used to repay revolving credit
loans.
The Company has a $400 million, five-year bank revolving credit facility which
may be increased up to $500 million and its maturity extended by up to three
additional years beyond the second quarter of 2002, subject to certain
conditions and approvals. The Company can use the facility to fund ongoing
working capital needs and for general corporate purposes, including
acquisitions. Interest under the facility is computed using the Company's choice
of: (a) the Eurodollar rate plus a margin; or (b) the higher of the Federal
Funds Rate plus a margin or the bank's prime lending rate. The Company can also
choose the basis for determining the margin above the Eurodollar rate as either:
(a) its consolidated leverage ratio; or (b) its investment grade rating. The
credit agreement contains certain restrictive covenants regarding, among other
matters, the incurrence of additional indebtedness and the maintenance of
certain leverage and interest coverage ratios, as defined in the agreement.
Cash generated from operations was $59.3 million for the nine months ended
September 30, 1999 compared with $66.2 million for the same period last year.
The decrease in 1999 compared to the same period last year was due primarily to
lower net income and unfavorable changes in working capital.
Capital expenditures, excluding acquisitions, were $25.9 million in the first
nine months of 1999 versus $28.7 million for the same period last year.
Aggregate capital expenditures of approximately $37.0 million are anticipated
for 1999.
In March 1999, the Company acquired 67 percent of the outstanding stock of
Carolina Component Concepts Inc. in exchange 225,000 shares of the Company's
common stock, valued at approximately $6.0 million. As a result of this
transaction, the Company now owns 100 percent of CCC's common stock. CCC
operates a specialty converting facility, located in Mooresville, North
Carolina.
In April 1999, the Company acquired the assets and assumed certain liabilities
of International Paper Company's Sprague boxboard mill for approximately $103.2
million in cash plus $4.7 million of assumed debt. Sprague, located in
Versailles, Connecticut, produces clay-coated recycled boxboard used primarily
in the manufacture of folding cartons.
14
<PAGE> 15
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
Also in April 1999, the Company acquired the assets and assumed certain
liabilities of Halifax Paper Board Company, Inc. in exchange for 34,256 shares
of the Company's common stock valued at $802 thousand and repayment of $5.6
million of Halifax's debt. Halifax operates a paperboard mill in Roanoke Rapids,
North Carolina that produces specialty paperboard and a specialty paperboard
converting plant in Richmond, Virginia.
In June 1999, the Company acquired the assets and assumed certain liabilities of
Tenneco Packaging Inc.'s folding carton division for approximately $72.7 million
in cash. The division consists of five folding carton plants located in Mentor,
Ohio; Grand Rapids, Michigan; St. Louis, Missouri; Denver, Colorado; Salt Lake
City, Utah and five sales and technical support centers.
In September 1999, the Company acquired all of the outstanding stock of Carolina
Converting Inc. in exchange for 480,309 shares of the Company's common stock,
subject to a post-closing working capital adjustment, valued at approximately
$11.2 million and repayment of $2.0 million of CCI's debt. CCI operates a
specialty converting and packaging facility located in Fayetteville, North
Carolina.
Cash dividends of $13.4 million were paid in the first nine months of 1999
versus $12.2 million in the same period last year. The Company's Senior Notes
agreement and its revolving credit agreement contain no specific limitations on
the payment of dividends.
The Company did not purchase any shares of its common stock during the first
nine months of 1999 pursuant to its common stock purchase plan. The Company has
cumulatively purchased 3,169,000 shares since January 1996. The Company's board
of directors has authorized purchases of up to 831,000 additional shares, and
the Company intends to continue such purchases, subject to market conditions and
availability, but there can be no assurance as to the completion, timing or
prices of such future purchases.
The Company anticipates that it will be able to meet its funding needs for the
possible acquisition of additional facilities, working capital, capital
expenditures and additional stock purchases through internally generated cash
and borrowings under its revolving credit facility and the issuance of debt
securities in the public markets.
YEAR 2000
The Company uses software and related information technologies and other
equipment throughout its businesses that may be affected by the date change in
the year 2000. The use of systems and equipment that cannot correctly interpret
and process dates after 1999 could result in system or equipment failures. Such
failures could cause disruptions of operations including, among other things,
inaccurate processing of financial information and/or temporary inabilities to
process transactions, manufacture products or engage in similar normal business
activities.
The Company has attempted to identify and assess its areas of risk related to
the year 2000 issue. As called for in its overall plan to prepare for the year
2000, the Company has conducted a comprehensive inventory and evaluation of its
information technology ("IT") systems to determine their year 2000 compliance.
The primary financial computer systems were upgraded in December of 1997 and are
year 2000 compliant, as are the Company's computerized financial software
systems. Certain systems at individual operating company sites, primarily
involving order entry, shipping and inventory control, have undergone
remediation or replacement as needed. Non-IT electronic equipment, including
equipment engaged in manufacturing and other processes, has been tested and
modified or replaced as needed. The remediation and replacement efforts are
complete and the Company believes that all critical systems, as well as
essential non-IT electronic equipment are year 2000 compliant. Ongoing efforts
are being made to identify third parties that may be unable to become year 2000
compliant and to make contingency plans. However, the Company has no means of
ensuring that third parties with whom it deals will be year 2000 compliant or
that the information obtained from such third parties regarding year 2000
compliance will prove to be accurate.
15
<PAGE> 16
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 2.
The total cost associated with required modifications and replacement of the
Company's systems in response to the year 2000 issue is not expected to
materially affect the Company's financial condition or results of operations.
The total cost of the year 2000 effort is estimated to be approximately $4.2
million, all of which has been expended as of September 30, 1999. This amount
does not include costs to replace or upgrade systems that were previously
planned and not accelerated due to the year 2000 issue. The Company's year 2000
efforts were funded primarily from the existing IT budget and have been ongoing
since 1997. The total cost of these efforts represents approximately 20 percent
of the total IT budget for the three-year period 1997-1999.
The Company believes the most reasonably likely worst case year 2000 scenario
would be the failure of key customers or suppliers (e.g., utility providers) to
achieve year 2000 compliance, resulting in lost sales to such key customers or
lost production due to forced shutdowns at one or more mill operations for an
indefinite period of time. Such failures could materially and adversely affect
the Company's financial condition or results of operations. Currently, based on
responses obtained from third parties to date, the Company is not aware of any
material third parties that do not expect to be year 2000 compliant. However,
due to uncertainty surrounding the readiness of third parties, the Company is
unable to determine whether the consequences of year 2000 failures will
materially impact the Company's financial condition or results of operations,
and can give no assurances that year 2000 failures will not do so.
The Company has developed contingency plans to address potential material year
2000 issues primarily arising from failures of third party suppliers or
customers to become year 2000 compliant. These contingency plans include plans
to minimize the impact of any lost mill production. The Company normally
schedules downtime for regular maintenance and capital improvements during the
year-end period. To the extent possible, the Company plans to take a more
flexible approach to such scheduling to allow maintenance and capital-
improvement downtime to coincide with any year 2000 related forced downtime. In
addition, the Company can increase inventory levels prior to year-end 1999 to
mitigate any forced downtime based on assessments made closer to the end of
1999. The Company also plans to minimize the impact of any lost mill production
by shifting production from any facilities affected by year 2000 failures to
unaffected facilities.
Readers are cautioned that the year 2000 disclosures above contain certain
forward-looking statements and should be read in conjunction with
"Forward-Looking Information" which follows.
FORWARD-LOOKING INFORMATION
This Report on Form 10-Q, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the
Securities Exchange Act of 1934, that are based on management's belief and
assumptions, as well as information currently available to management. When used
in this document, the words "anticipate," "estimate," "expect," and similar
expressions may identify forward-looking statements. Although the Company
believes that the expectations reflected in any such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to be
correct. Any such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, the Company's actual financial
results, performance or condition may vary materially from those anticipated,
estimated or expected. Among the key factors that may have a direct bearing on
the Company's actual financial results, performance or condition are
fluctuations in raw material prices and the economy in general, the degree and
nature of competition, demand for the Company's products, changes in government
regulations, the Company's ability to complete acquisitions and integrate the
operations of acquired businesses, the ability of the Company and third parties
with whom the Company deals to achieve year 2000 compliance, as described above,
and other matters discussed in this report and the Company's other filings with
the Securities and Exchange Commission.
16
<PAGE> 17
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I, ITEM 3.
CARAUSTAR INDUSTRIES, INC.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. At September 30, 1999 the
Company had $150.0 million outstanding under a $400 million bank revolving
credit facility, which matures in 2002. Borrowings under this credit facility
are at variable rates, and, accordingly, the fair value of this instrument
approximates its carrying value.
The Company has $82.8 million in senior notes that bear interest at 7.74
percent, which approximates the current rates available to the Company for debt
of the same remaining maturity. Interest on the senior notes is payable
semiannually, and five annual principal installments of $16.6 million are due
beginning in 2000. Market risk is estimated as the potential increase in fair
value of the senior notes resulting from a hypothetical 10 percent decrease in
interest rates and amounts to approximately $2.1 million.
In June, 1999, the Company issued $200 million of aggregate principal 7.375
percent notes. These notes were issued at a discount to yield an effective
interest rate of 7.473 percent. Interest on the notes is payable semiannually,
with the principal due June 1, 2009. Market risk is estimated as the potential
increase in fair value of the notes resulting from a hypothetical 10 percent
decrease in interest rates and amounts to approximately $10.3 million.
17
<PAGE> 18
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART II, ITEM 6.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The Exhibits to this Report on Form 10-Q are listed in the accompanying Exhibit
Index.
(b) Reports on Form 8-K
The Company filed no current reports on Form 8-K during the quarter ended
September 30, 1999.
18
<PAGE> 19
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
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.
CARAUSTAR INDUSTRIES, INC.
By: /s/ H. LEE THRASH, III
------------------------------------
H. Lee Thrash, III
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)
Dated: November 10, 1999
19
<PAGE> 20
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.01 Amended and Restated Articles of Incorporation of the
Company (Incorporated by reference -- Exhibit 3.01 to Annual
Report for 1992 on Form 10-K [SEC File No. 0-20646])
3.02 Second Amended and Restated Bylaws of the Company
(Incorporated by reference -- Exhibit 3.02 to Registration
Statement on Form S-4 [SEC File No. 333-29937])
4.01 Specimen Common Stock Certificate (Incorporated by
reference -- Exhibit 4.01 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
4.02 Articles 3 and 4 of the Company's Amended and Restated
Articles of Incorporation (included in Exhibit 3.01)
4.03 Article II of the Company's Second Amended and Restated
Bylaws (included in Exhibit 3.02)
4.04 Amended and Restated Rights Agreement, dated as of May 24,
1999, between Caraustar Industries, Inc. and The Bank of New
York as Rights Agent (Incorporated by reference -- Exhibit
10.1 to current report on Form 8-K dated June 1, 1999 [SEC
File No. 020646])
4.05 Indenture, dated as of June 1, 1999, between Caraustar
Industries, Inc. and The Bank of New York, as Trustee
(Incorporated by reference -- Exhibit 4.05 to report on Form
10-Q for the quarter ended June 30, 1999 [SEC File No.
0-20646])
4.06 First Supplemental Indenture, dated as of June 1, 1999,
between Caraustar Industries, Inc. and The Bank of New York,
as Trustee (Incorporated by reference -- Exhibit 4.06 to
report on Form 10-Q for the quarter ended June 30, 1999 [SEC
File No. 0-20646])
10.01 Note Agreement, dated as of October 1, 1992, between the
Company and the Prudential Insurance Company of America,
regarding the Company's 7.89% Senior Subordinated Notes
(Incorporated by reference -- Exhibit 10.02 to Annual Report
for 1992 on Form 10-K [SEC File No. 0-20646])
10.02 Amendment Agreement, dated as of June 2, 1995, between the
Company and the Prudential Insurance Company of America
regarding the Company's 7.89% Senior Subordinated Notes
(Incorporated by reference -- Exhibit 10.03 to report on
Form 10-Q for the quarter ended September 30, 1995 [SEC File
No. 0-20646])
10.03 Amendment Agreement, dated as of July 23, 1997, between the
Company and the Prudential Insurance Company of America
regarding the Company's 7.89% Senior Subordinated Notes
(Incorporated by reference -- Exhibit 10.03 to report on
Form 10-Q for the quarter ended June 30, 1997 [SEC File No.
0-20646])
10.04 Amendment Agreement, dated as of August 12, 1998, between
the Company and the Prudential Insurance Company of America
regarding the Company's 7.89% Senior Subordinated Notes
(Incorporated by reference -- Exhibit 10.04 to report on
Form 10-Q for the quarter ended September 30, 1998 [SEC File
No. 0-20646])
10.05 Employment Agreement, dated December 31, 1990, between the
Company and Thomas V. Brown (Incorporated by
reference -- Exhibit 10.06 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
10.06 Asset Purchase Agreement, dated August 7, 1992, between the
Company and Domtar Gypsum Inc. (Incorporated by
reference -- Exhibit 10.07 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
10.07 Deferred Compensation Plan, together with copies of existing
individual deferred compensation agreements (Incorporated by
reference -- Exhibit 10.08 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
</TABLE>
20
<PAGE> 21
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
10.08 1987 Executive Stock Option Plan (Incorporated by
reference -- Exhibit 10.09 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
10.09 1993 Key Employees' Share Ownership Plan (Incorporated by
reference -- Exhibit 10.10 to Registration Statement on Form
S-1 [SEC File No. 33-50582])
10.10 Energy Purchase Agreement, dated December 18, 1989, between
Camden Paperboard Corporation and Camden Cogen, L.P.
(Incorporated by reference -- Exhibit 10.11 to Registration
Statement on Form S-1 [SEC File No. 33-50582])
10.11 Incentive Bonus Plan of the Company (Incorporated by
reference -- Exhibit 10.10 to Annual Report for 1993 on Form
10-K [SEC File No. 0-20646])
10.12 1996 Director Equity Plan of the Company (Incorporated by
reference -- Exhibit 10.12 to report on Form 10-Q for the
quarter ended March 31, 1996 [SEC File No. 0-20646])
10.13 Amendment No. 1 to the Company's 1996 Director Equity Plan,
dated July 16, 1998 (Incorporated by reference -- Exhibit
10.2 to Current Report on Form 8-K dated June 1, 1999 [SEC
File No. 0-20646])
10.14 Credit Agreement, dated as of July 23, 1997, by and among
the Company, as Borrower, the banks listed therein, Bankers
Trust Company, as Administrative Agent, NationsBank, N.A.,
as Syndication Agent, SunTrust Bank, Atlanta, as
Documentation Agent, First Union National Bank, as Managing
Agent and each of Credit Lyonnais, The Bank of New York, The
Bank of Nova Scotia, The Bank of Tokyo -- Mitsubishi, Ltd.,
and Wachovia Bank, as Co-Agents (Incorporated by
Reference -- Exhibit 10.13 to report on Form 10-Q for the
Quarter Ended June 30, 1997 (SEC File No. 0-20646])
10.15 1998 Key Employee Incentive Compensation Plan (Incorporated
by reference -- Exhibit 10.14 to Annual Report for 1997 on
Form 10-K [SEC File No. 0-20646])
10.16 Amendment No. 1 to Credit Agreement, dated as of October 8,
1997, by and among the Company, as Borrower, the banks
listed therein, Bankers Trust Company, as Administrative
Agent, NationsBank, N.A., as Syndication Agent, SunTrust
Bank, Atlanta, as Documentation Agent, First Union National
Bank, as Managing Agent and each of Credit Lyannais, The
Bank of New York, The Bank of Nova Scotia, The Bank of
Tokyo -- Mitsubishi, Ltd., and Wachovia Bank, as Co-Agents
(Incorporated by reference -- Exhibit 10.15 to report on
Form 10-Q for the quarter ended September 30, 1998 [SEC File
No. 0-20646])
10.17 Amendment No. 2 to Credit Agreement, dated as of October 30,
1998, by and among the Company, as Borrower, the banks
listed therein, Bankers Trust Company, as Administrative
Agent, NationsBank, N.A., as Syndication Agent, SunTrust
Bank, Atlanta, as Documentation Agent, First Union National
Bank, as Managing Agent and each of Credit Lyannais, The
Bank of New York, The Bank of Nova Scotia, The Bank of
Tokyo -- Mitsubishi, Ltd., and Wachovia Bank, as Co-Agents
(Incorporated by reference -- Exhibit 10.16 to report on
Form 10-Q for the quarter ended September 30, 1998 [SEC File
No. 0-20646])
10.18 Asset Purchase Agreement between Caraustar Industries, Inc.,
Sprague Paperboard, Inc. and International Paper Company,
dated as of March 4, 1999 (Incorporated by reference --
Exhibit 10.17 to report on Form 10-Q for the quarter ended
March 31, 1999 [SEC File No. 0-20646])
11.01+ Computation of Earnings Per Share
27.01+ Financial Data Schedule (For SEC purposes only)
</TABLE>
- ---------------
+ Filed herewith
21
<PAGE> 1
EXHIBIT 11.01
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999
CARAUSTAR INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
COMPUTATION OF BASIC AND DILUTED EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -----------------
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Earnings:
Net income available to common stock.................... $10,055 $12,793 $31,786 $39,301
------- ------- ------- -------
Shares:
Weighted average common shares outstanding.............. 25,100 25,402 24,942 25,353
Dilutive effect of stock options........................ 112 137 127 192
------- ------- ------- -------
Average diluted shares outstanding and equivalents...... 25,212 25,539 25,069 25,545
------- ------- ------- -------
Basic earnings per common share:
Net income.............................................. $ 0.40 $ 0.50 $ 1.27 $ 1.55
======= ======= ======= =======
Diluted earnings per common share:
Net income.............................................. $ 0.40 $ 0.50 $ 1.27 $ 1.54
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1999 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,313
<SECURITIES> 0
<RECEIVABLES> 115,590<F1>
<ALLOWANCES> 0
<INVENTORY> 89,947
<CURRENT-ASSETS> 232,100
<PP&E> 718,782
<DEPRECIATION> 234,614
<TOTAL-ASSETS> 878,775
<CURRENT-LIABILITIES> 113,939
<BONDS> 436,198<F2>
0
0
<COMMON> 2,548
<OTHER-SE> 268,066
<TOTAL-LIABILITY-AND-EQUITY> 878,775
<SALES> 641,313
<TOTAL-REVENUES> 641,313
<CGS> 487,955
<TOTAL-COSTS> 487,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,802
<INCOME-PRETAX> 49,188
<INCOME-TAX> 17,111
<INCOME-CONTINUING> 31,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,786
<EPS-BASIC> 1.27
<EPS-DILUTED> 1.27
<FN>
<F1>RECEIVABLES ARE PRESENTED NET OF THE ALLOWANCES FOR DOUBTFUL ACCOUNTS.
<F2>BONDS REPRESENT REVOLVING CREDIT LOANS AND LONG-TERM DEBT, LESS CURRENT
MATURITIES.
</FN>
</TABLE>
