<PAGE> 1
Filed pursuant to Rule 424(b)(5)
Registration No. 333-65555
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND HAS BEEN DECLARED EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 18, 1999
PROSPECTUS SUPPLEMENT
MAY , 1999
(TO PROSPECTUS DATED NOVEMBER 6, 1998)
<TABLE>
<S> <C> <C>
CARAUSTAR INDUSTRIES, INC.
$200,000,000 (CARAUSTAR LOGO)
% NOTES DUE , 2009
</TABLE>
ABOUT OUR COMPANY:
- - We are a major manufacturer of packaging products from recycled paper.
- - Our headquarters are located at
3100 Washington Street
Austell, Georgia 30106
Telephone: (770) 948-3101
THE OFFERING:
- - We intend to use the net proceeds from the offering to repay outstanding
indebtedness.
- - Closing: June , 1999
PROPOSED TRADING FORMAT:
- - The Notes will not be listed on any securities exchange or included in any
automated quotation system.
THE NOTES:
- - Maturity: , 2009
- - Interest Payments: We will pay interest on the Notes semi-annually in cash on
and beginning 1999.
- - Redemption: We may redeem the Notes prior to maturity, in whole or in part, at
a redemption price equal to the greater of the principal amount of the Notes
and the make-whole price described in this prospectus supplement. We will also
pay accrued interest to the date of redemption. See "Description of
Notes -- Optional Redemption" on page S-11.
- - Ranking of Notes: The Notes rank equally with all of our other unsecured and
unsubordinated indebtedness.
<TABLE>
<CAPTION>
PUBLIC OFFERING PRICE UNDERWRITING DISCOUNT(1) OUR PROCEEDS(2)
--------------------- ------------------------ ---------------
<S> <C> <C> <C>
Per note.......................... $ $ $
Total............................. $ $ $
</TABLE>
- ---------------
(1) We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of payable by us.
BEFORE MAKING ANY INVESTMENT IN OUR SECURITIES, YOU SHOULD READ THE BASE
PROSPECTUS TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES AND CAREFULLY CONSIDER
CERTAIN RISKS DESCRIBED IN THE RISK FACTORS BEGINNING ON PAGE 2 OF THE BASE
PROSPECTUS.
Neither the SEC nor any state securities commission has approved any of the
securities offered by this prospectus supplement or determined that this
prospectus supplement and the base prospectus to which it relates is accurate or
complete. Any representation to the contrary is a criminal offense.
-------------------------
Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC BT ALEX. BROWN
-------------------------
DONALDSON, LUFKIN & JENRETTE
SUNTRUST EQUITABLE SECURITIES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Incorporation by Reference.................................. S-1
Summary..................................................... S-2
Use of Proceeds............................................. S-6
Capitalization.............................................. S-7
Recent Developments......................................... S-7
Business.................................................... S-8
Description of Notes........................................ S-10
Underwriting................................................ S-13
Legal Matters............................................... S-14
Experts..................................................... S-14
PROSPECTUS
Risk Factors................................................ 2
Where You Can Find More Information; Incorporation by
Reference................................................. 4
Special Note of Caution Regarding Forward-Looking
Statements................................................ 5
The Company................................................. 6
The Offering................................................ 6
Prospectus Supplement....................................... 7
Use of Proceeds............................................. 7
Ratio of Earnings to Fixed Charges.......................... 7
Description of Debt Securities.............................. 8
Plan of Distribution........................................ 25
Registrar and Transfer Agent................................ 26
Legal Matters............................................... 26
Experts..................................................... 27
</TABLE>
This document is in two parts. The first part is the prospectus supplement,
which describes the specific terms of the Notes we are offering and certain
other matters relating to us and our business. The second part, the accompanying
base prospectus, gives more general information, some of which does not apply to
the Notes we are offering. Generally, when we refer to the prospectus, we are
referring to both parts combined. If the description of Notes varies between the
prospectus supplement and the description contained in the accompanying base
prospectus, you should rely on the information in the prospectus supplement.
i
<PAGE> 3
INCORPORATION BY REFERENCE
In addition to the information set forth in the accompanying base
prospectus under the heading "Where You Can Find More Information; Incorporation
by Reference," the base prospectus "incorporates by reference" the following
documents that we have filed with the Securities and Exchange Commission, as
well as other documents we file with the SEC under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended, after the date of this
supplement and prior to the closing of this offering:
- Caraustar's Annual Report on Form 10-K for the fiscal year ended December
31, 1998;
- Caraustar's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999; and
- Caraustar's Current Report on Form 8-K filed May 14, 1999.
The information incorporated by reference is an important part of the
prospectus. All documents incorporated by reference are available from us
without charge. You may obtain these documents by calling Caraustar at (770)
948-3101 or by writing to us at:
Caraustar Industries, Inc.
3100 Washington Street
Austell, Georgia 30106
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying base prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with additional or different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and the underwriters are not, making an offer to sell these Notes in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement and the accompanying
base prospectus, as well as information we previously filed or subsequently file
with the Securities and Exchange Commission that is incorporated by reference,
is accurate as of its date only. Our business, financial condition, results of
operations and prospects may have changed since the date of that information.
S-1
<PAGE> 4
SUMMARY
In this prospectus supplement, the words "Company," "Caraustar," "we,"
"our" and "us" refer to Caraustar Industries, Inc., a North Carolina
corporation, and its subsidiaries and predecessors, unless the context otherwise
requires. The following summary contains basic information about this offering.
It may not contain all the information that is important to you. The
"Description of Notes" section of this prospectus supplement and the
"Description of Debt Securities" section of the base prospectus contain more
detailed information regarding the terms and conditions of the Notes.
THE OFFERING
Issuer....................... Caraustar Industries, Inc.
Securities Offered........... $200,000,000 principal amount of % Notes
due , 2009.
Maturity..................... The Notes will mature , 2009.
Interest Rate................ The Notes will bear interest at % per
annum.
Interest Payment Dates....... We will pay interest on the Notes semi-annually
in cash on and
beginning 1999.
Optional Redemption.......... We may redeem the Notes prior to maturity, in
whole or in part, at a redemption price equal to
the greater of the principal amount of the Notes
and the make-whole price described in this
prospectus supplement. We will also pay accrued
interest to the date of redemption. See
"Description of Notes -- Optional Redemption"
beginning on page S-10.
Ranking...................... The Notes will be unsecured debt securities of
ours. As of March 31, 1999, and after giving
effect to this offering, we would have had
outstanding approximately $258.0 million
aggregate principal amount of long-term
indebtedness, none of which would have been
secured. None of that indebtedness would have
been senior to the Notes and the Notes would not
have been senior to that indebtedness. The
Notes, however, effectively will be subordinated
to any of our secured indebtedness with respect
to the assets pledged as collateral for that
indebtedness. The Notes will rank equally in
right of payment with all unsecured and
unsubordinated indebtedness of ours.
Certain Covenants............ The indenture governing the Notes will contain
covenants that will, among other things, limit
our ability to:
- incur, or permit our domestic subsidiaries to
incur, secured indebtedness;
- engage, or permit our domestic subsidiaries to
engage, in certain sale-leaseback
transactions; and
S-2
<PAGE> 5
- enter into certain mergers or consolidations
or dispose of stock or certain assets.
Use of Proceeds.............. The net proceeds of this offering will be used
to repay outstanding indebtedness.
Risk Factors................. See "Risk Factors" on page 2 of the base
prospectus for a discussion of certain factors
you should consider carefully before investing
in the Notes.
S-3
<PAGE> 6
SELECTED CONSOLIDATED FINANCIAL DATA
The selected financial data for us for the five years ended December 31,
1998 have been derived from our consolidated financial statements, which have
been audited by Arthur Andersen LLP, independent public accountants. The income
statement data for the three-month periods ended March 31, 1999 and 1998, and
the balance sheet data as of March 31, 1999 and 1998, are derived from our
unaudited consolidated financial statements and include, in the opinion of our
management, all normal recurring adjustments necessary to present fairly the
data for such periods. The operating results for the three months ended March
31, 1999 are not necessarily indicative of the results that you can expect for
the full fiscal year ending December 31, 1999. This information should be read
in conjunction with our audited consolidated financial statements and
accompanying notes, which are incorporated by reference into the prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement
Data:
Net sales............ $431,225 $544,628 $602,695 $668,131 $736,858 $176,871 $187,565
Gross profit......... 123,573 143,058 179,912 185,174 199,933 49,755 48,776
Operating income..... 64,326 75,697 98,909 96,196 94,881 24,929 20,306
Interest expense..... 6,870 6,955 10,698 14,111 16,072 3,699 4,071
Income before income
taxes and minority
interest........... 57,560 69,100 95,230 83,388 83,018 21,763 18,052
Net income........... 35,478 42,988 57,902 51,124 51,818 13,177 11,415
Balance Sheet Data:
Working capital...... $ 48,859 $ 56,786 $ 52,336 $ 71,820 $ 51,453 $ 81,704 $ 62,558
Property, plant and
equipment, net..... 150,391 181,930 256,834 291,036 324,470 311,482 325,032
Total assets......... 266,863 322,076 476,280 550,090 618,797 598,694 640,952
Long-term debt
(including current
maturities of long-
term debt)......... 83,518 93,416 183,290 212,138 255,984 232,348 257,956
Shareholders'
equity............. 102,274 139,243 170,570 213,931 233,374 221,408 246,680
Financial Ratios:
Ratio of earnings to
fixed charges(1)... 7.26x 8.11x 8.39x 6.04x 5.25x 5.84x 4.57x
Pro Forma ratio of
earnings to fixed
charges(2)......... -- -- -- -- 4.15x -- 3.65x
</TABLE>
- -------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes and
minority interest, plus fixed charges, minus equity in income of
less-than-50%-owned entities. Fixed charges consist of interest costs
(whether expensed or capitalized), amortization of debt issuance costs, and
an estimate of the interest cost in rental expense.
S-4
<PAGE> 7
(2) The pro forma ratio of earnings to fixed charges for the fiscal year ended
December 31, 1998 and the three months ended March 31, 1999 sets forth our
ratio of earnings to fixed charges on a pro forma basis assuming the
offering had been completed as of the beginning of each period, and that the
estimated net proceeds of approximately $198.1 million had been used to
repay borrowings outstanding during that period under our revolving credit
facility as described under "Use of Proceeds." The pro forma increase in
interest expense to reflect interest on the Notes reflects an assumed
interest rate of 7.5% and an assumed amortization period of costs of the
offering of ten years.
S-5
<PAGE> 8
USE OF PROCEEDS
We will use the net proceeds from the sale of the Notes, estimated to be
$198.1 million, to repay outstanding debt under our $400 million revolving
credit facility, under which Bankers Trust Company is agent bank and a lender
and NationsBank, N.A. is a lender. At April 30, 1999, approximately $257.0
million was outstanding under the revolving credit facility. The facility may be
increased to $500 million and its maturity extended by up to 3 additional years
beyond the second quarter of 2002, subject to certain conditions and approvals.
Borrowings under the facility bear interest at our choice of: (a) the
Eurodollar rate, plus a margin, based on our choice of either our consolidated
leverage ratio or our investment grade rating, or (b) the higher of the Federal
Funds Rate, plus a margin, or our lender's prime lending rate. The weighted
average interest rate for borrowings under the facility was 5.80% for the year
ended December 31, 1998 and 5.37% for the quarter ended March 31, 1999.
During the fiscal year ended December 31, 1998 and the quarter ended March
31, 1999, we used borrowings under our revolving credit facility to finance
acquisitions and for general working capital requirements. We are permitted
under our revolving credit facility to subsequently reborrow amounts repaid. See
"Recent Developments" below for a general discussion of some of these
acquisitions.
S-6
<PAGE> 9
CAPITALIZATION
The following table sets forth our actual capitalization at March 31, 1999,
our capitalization as adjusted for the issuance of all of the Notes and the
application of the net proceeds as described under "Use of Proceeds". You should
read this table along with the Selected Consolidated Financial Data presented
elsewhere in this prospectus supplement as well as our unaudited consolidated
financial statements and accompanying notes that are incorporated into the
prospectus by reference from documents filed with the SEC.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Current portion of long-term debt..................... $ 26,103 $ 26,103
-------- --------
Long-term debt:
Revolving credit loans........................... 149,000 0
7.74% term notes................................. 82,750 82,750
Notes offered hereby............................. 0 200,000
Other............................................ 103 103
-------- --------
Total long-term debt........................... 257,956 308,956
-------- --------
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; 24,927,632 shares issued and
outstanding at March 31, 1999.................... 2,493 2,493
Additional paid-in capital.......................... 136,648 136,648
Retained earnings................................... 110,965 110,965
Accumulated other comprehensive income.............. (3,426) (3,426)
-------- --------
Total shareholders' equity..................... 246,680 246,680
-------- --------
Total capitalization........................... $504,636 $555,636
======== ========
</TABLE>
RECENT DEVELOPMENTS
On May 7, 1999, we entered into an agreement with Temple-Inland Inc. to
jointly own and operate, on a 50%-50% basis, Temple-Inland's containerboard mill
in Newport, Indiana. The agreement follows the completion of a four-month joint
engineering study to determine the feasibility of converting the Newport mill to
produce a new, lightweight gypsum facing paper. We and Temple-Inland will now
undertake a 14-month, $70 million project to modify the Newport Mill to produce
the new gypsum paper. The mill also will maintain its current containerboard
production capabilities. Pursuant to the agreement, we will manage the business
of the mill and market the gypsum facing paper and other non-containerboard
products produced there. Temple-Inland will continue to market the
containerboard produced by the mill. Our initial net investment in the project,
including our portion of the $70 million in estimated modification costs, is
expected to be approximately $50 million, which we expect to fund during the
first half of 2000 through borrowings under our revolving credit facility.
S-7
<PAGE> 10
On April 26, 1999, we entered into a definitive agreement with Tenneco
Packaging Inc. to acquire Tenneco's folding carton business for approximately
$72.5 million. Tenneco's folding carton business consists of five folding carton
plants and five related sales and technical support centers. The plants are
located in Mentor, Ohio, Grand Rapids, Michigan, St. Louis, Missouri, Denver,
Colorado and Salt Lake City, Utah. The completion of the transaction is subject
to customary conditions. The transaction is expected to close in late May 1999.
We plan to fund the costs of this acquisition through borrowings under our
revolving credit facility.
On April 8, 1999, we acquired all of the assets and business of
International Paper Company's Sprague boxboard mill for approximately $103.2
million in cash plus $4.7 million of assumed debt. The Sprague mill, located in
Versailles, Connecticut, produces clay-coated recycled boxboard used primarily
in the manufacture of folding cartons. We funded the cost of this acquisition
through borrowings under our revolving credit facility.
In addition to the acquisitions described above, since December 31, 1998 we
have completed the acquisitions of Carolina Component Concepts and Halifax Paper
Board Company, Inc. for an aggregate purchase price of approximately $12.4
million. These additional acquisitions were funded through the issuance of our
common stock and borrowings under our revolving credit facility.
The total purchase price of our acquisitions described above, excluding the
Temple-Inland and Tenneco transactions, which have not yet been completed, is
approximately $120 million.
For a further description of certain of the acquisitions discussed above,
you may refer to the documents incorporated by reference into the base
prospectus.
BUSINESS
The following summary of our business is qualified entirely by, and should
be read together with, the more detailed information and financial statements
incorporated by reference in the base prospectus to which this prospectus
supplement relates.
Caraustar Industries, Inc. is a major manufacturer of recycled paperboard
and converted paperboard products. We manufacture our products primarily from
recovered fiber, which is derived from recycled waste paper. We produce recycled
paperboard for internal use and for sale to customers in four principal markets:
- Tubes, cores and composite containers;
- Folding cartons;
- Gypsum wallboard facing paper; and
- Miscellaneous other specially and converted products.
S-8
<PAGE> 11
OPERATIONS AND PRODUCTS
Our principal manufacturing activity is the production of uncoated and
clay-coated recycled paperboard. In this manufacturing process, we reduce
paperstock to pulp, clean and refine it and then process it into various grades
of paperboard for internal consumption and for sale in the four principal
markets listed above. In 1998 approximately 36% of the recycled paperboard sold
by our paperboard mills was consumed internally by our converting facilities;
the other 64% was sold to manufacturers in a variety of industries, primarily
independent gypsum wallboard manufacturers, folding carton and set-up box
makers, tube, can and drum producers, and miscellaneous converters of recycled
paperboard. External sales of unconverted paperboard accounted for 37% and 43%
of our net sales in 1998 and 1997, respectively.
RAW MATERIALS
Recovered fiber is the only significant raw material we use in our mill
operations. We purchase approximately 66% of our paperstock requirements from
independent sources, such as major retail stores, distribution centers and
manufacturing plants and obtain the balance from a combination of other sources.
We closely monitor our recovered fiber costs.
S-9
<PAGE> 12
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent with, supersedes the
description of the general terms of the debt securities, of which the Notes are
a part, set forth under the heading "Description of Debt Securities" in the
accompanying base prospectus. You should read the base prospectus in conjunction
with this prospectus supplement. Because this is a summary, it does not contain
all the information that may be important to you. You should read the entire
indenture, including the definitions of certain terms, and this prospectus
supplement before you make any investment decision. Capitalized terms used below
and not otherwise defined have the meanings set forth in the indenture.
GENERAL
The Notes will be unsecured obligations of ours and are to be issued under
an indenture, to be dated as of , 1999 (the "indenture"), between us,
as issuer, and The Bank of New York, as trustee (the "trustee"). The principal
corporate trust office of the trustee is located in New York, New York. The
Notes will mature on , 2009. Interest on the Notes will accrue from
, 1999. Interest will be payable semi-annually in cash
on and , beginning
, 1999, and at maturity to the persons in whose names
the Notes are registered at the close of business on the
or prior to the applicable payment
date, at the annual rate set forth on the cover page of this prospectus
supplement.
The Notes will not be listed on any securities exchange. The Notes will be
new issues of securities with no established trading market. We cannot assure
you as to whether any market will develop, the liquidity of any markets that may
develop or the prices at which holders of the Notes would be able to sell the
Notes.
BOOK-ENTRY SYSTEM
The Notes will be issued in whole or part in the form of one or more global
debt securities, which will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York ("DTC") or other successor depositary that we
may appoint, and registered in the name of the depositary's nominee. Payments on
the Notes will be made to DTC. Global debt securities may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC or by DTC or any nominee to a successor of DTC or a
nominee of the successor. A further description of DTC's procedures regarding
global debt securities representing the Notes is set forth in the base
prospectus under "Description of Debt Securities -- Book-Entry Securities."
RANKING
The Notes will rank on a parity with all our other unsecured and
unsubordinated indebtedness.
COVENANTS
The Notes will be subject to the restrictive covenants described under
"Description of Debt Securities -- Certain Covenants of the Company" in the
accompanying base prospectus.
S-10
<PAGE> 13
DEFEASANCE AND DISCHARGE
Article Fourteen of the indenture, which relates to defeasance and
discharge of obligations in respect of the Notes and defeasance of certain
covenants, will apply to the Notes. See "Description of Debt
Securities -- Defeasance of Offered Debt Securities or Certain Covenants in
Certain Circumstances" in the base prospectus.
RESTRICTIONS ON CONSOLIDATION, MERGER AND SALE OF ASSETS
The Notes will be subject to the restrictions described under "Description
of Debt Securities -- Consolidation, Merger and Sale of Assets" in the
accompanying base prospectus.
OPTIONAL REDEMPTION
The Notes will be redeemable, in whole or in part, at our option at any
time at a redemption price equal to the greater of (i) 100% of the principal
amount of the Notes, and (ii) as determined by the Quotation Agent (as defined
below), the sum of the present values of the remaining scheduled payments of
principal and interest on the Notes (not including any portion of those payments
of interest accrued as of the redemption date) discounted to the redemption date
on a semi-annual basis assuming a 360 day year consisting of twelve 30 day
months at the Adjusted Treasury Rate (as defined below) plus
basis points plus, in each case, accrued and unpaid interest on the Notes to the
redemption date.
In the case of a partial redemption, selection of the Notes for redemption
will be made pro rata, by lot or such other method as the trustee in its sole
discretion deems appropriate and fair; however, any redemption relating to a
public equity offering of equity securities will be made on a pro rata basis or
on as nearly a pro rata basis as practicable (subject to DTC procedures). No
Notes of a principal amount of $1,000 or less will be redeemed in part. Notice
of any redemption will be mailed by first class mail at least 30 days but not
more than 60 days before the redemption date to each holder of the Notes to be
redeemed at its registered address. If any Note is to be redeemed in part only,
the notice of redemption that relates to the Note will state the portion of the
principal amount of the Note to be redeemed. A new Note in a principal amount
equal to the unredeemed portion of the Note will be issued in the name of the
holder of the Note upon surrender for cancellation of the original Note. Unless
we default in payment of the redemption price, on and after the redemption date,
interest will cease to accrue on the Notes or the portions of the Notes called
for redemption.
NO MANDATORY REDEMPTION
We will not be required to make any sinking fund payments with regard to
the Notes.
SAME DAY SETTLEMENT AND PAYMENT
We will make all payments of principal and interest under the Notes in
immediately available funds. Secondary trading in the long-term notes and notes
of corporate issuers is generally settled in clearing house or next-day funds.
In contrast, the Notes will trade in DTC's Same-Day Funds Settlement System
until maturity or until the Notes are issued in certificated form, and secondary
market trading activity in the Notes will therefore be required by DTC to settle
in immediately available funds. No assurance can be given as to the effect, if
any, of settlement in immediately available funds on trading activity in the
Notes.
S-11
<PAGE> 14
DEFINITIONS
Set forth below are definitions of some of the terms used in this section
of the prospectus supplement. Other terms used in this section are defined in
the base prospectus. See "Description of Debt Securities -- Certain Definitions"
in the base prospectus.
"Adjusted Treasury Rate" means, with respect to any redemption date, the
rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price of the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for that redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term of the Notes to be redeemed that would be utilized, at the time of a
selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Notes.
"Comparable Treasury Price" means, with respect to any redemption date, (i)
the average of the Reference Treasury Dealer Quotations for that redemption
date, after excluding the highest and lowest Reference Treasury Dealer
Quotation, or (ii) if the Trustee obtains fewer than three Reference Treasury
Dealer Quotations, the average of the quotations.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means (i) each of Banc of America Securities
LLC, BT Alex. Brown Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation and Suntrust Equitable Securities Corporation and their respective
successors; however, if any of the foregoing shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), we
will substitute another Primary Treasury Dealer; and (ii) any other Primary
Treasury Dealer selected by us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
us, of the bid and asked prices for the Comparable Treasury Issue (expressed in
each case as a percentage of its principal amount) quoted in writing to the
trustee by the Reference Treasury Dealer at 5:00 p.m., New York City time, on
the third business day preceding the redemption date.
S-12
<PAGE> 15
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
and the terms agreement among us and the underwriters named below, we have
agreed to sell to each of the underwriters, and each of the underwriters has
severally agreed to purchase from us, the principal amount of the Notes set
forth opposite its name below. The underwriting agreement provides that the
obligations of the underwriters are subject to certain conditions and that the
underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT OF NOTES
----------- -------------------------
<S> <C>
Banc of America Securities LLC.......................... $
BT Alex. Brown Incorporated............................. $
Donaldson, Lufkin & Jenrette Securities Corporation..... $
SunTrust Equitable Securities Corporation............... $
---------
Total................................................. $
=========
</TABLE>
The underwriters propose to offer the Notes to the public at the public
offering price set forth on the cover page of this prospectus supplement and to
dealers at that price less a concession of no more than % of the principal
amount of the Notes. The underwriters may allow, and the dealers may reallow, a
discount of no more than % of the principal amount of the Notes to other
dealers. The public offering price, concession and discount may be changed after
the offering to the public of the Notes.
The Notes are a new issue of securities with no established trading market.
We do not intend to apply for listing of the Notes on any national securities
exchange or for quotation of the Notes on any automated dealer quotation system.
The underwriters have advised us that they intend to make a market in the Notes
after the offering, although they are under no obligation to do so. The
underwriters may discontinue any market-making activities at any time without
any notice. We can give no assurance as to the liquidity of the trading market
for the Notes or that a public trading market for the Notes will develop. If no
active public trading market develops, the market price and liquidity of the
Notes may be adversely affected. If the Notes are traded, they may trade at a
discount from their initial offering price, depending on factors such as
prevailing interest rates, the market for similar securities, our performance
and other factors not listed here.
We have agreed to indemnify the underwriters against, or to contribute to
payments that the underwriters may be required to make with respect to, certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The underwriters, as well as dealers and agents, may purchase and sell
Notes in the open market. These transactions may include stabilizing
transactions and purchases to cover syndicate short positions created in
connection with the offering. Stabilizing transactions consist of bids and
purchases made to prevent or slow a decline in the market price of the Notes.
Syndicate short positions arise when the underwriters or agents sell more Notes
than we are required to sell to them in the offering. The underwriters may also
impose penalty bids whereby the underwriting syndicate may reclaim selling
concessions allowed either syndicate members or broker dealers who sell Notes in
the offering for their own account if the syndicate repurchases the Notes in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Notes, which may be higher as a
result of these activities than it might otherwise be in the open market. These
activities, if commenced, may be discontinued at any time without notice.
S-13
<PAGE> 16
We and the underwriters make no representation or prediction as to the
direction or magnitude of any effect that the transactions described above may
have on the price of the Notes. In addition, we and the underwriters make no
representation that the underwriters will engage in those types of transactions
or that those transactions, once commenced, will not be discontinued without
notice.
The underwriters, and certain of their affiliates, have provided, and may
continue to provide, investment banking, financial advisory, commercial banking
and other services to us and have received, and may continue to receive,
customary fees in connection with those services. In addition, Bankers Trust
Company, an affiliate of BT Alex. Brown Incorporated, is the agent bank under
our revolving credit facility described under "Use of Proceeds", and both it and
NationsBank, N.A., an affiliate of Banc of America Securities LLC, are lenders
to us under our revolving credit facility. Mr. James H. Hance, Jr., Vice
Chairman and Chief Financial Officer of Bank of America Corporation, an
affiliate of Banc of America Securities LLC, is a director of our Company.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $ .
LEGAL MATTERS
Robinson, Bradshaw & Hinson, P.A., Charlotte, North Carolina, will issue an
opinion for us regarding the validity of the Notes and certain other legal
matters. Russell M. Robinson, II, a shareholder in the firm of Robinson,
Bradshaw & Hinson, P.A., is Chairman of our Board of Directors. Robinson,
Bradshaw & Hinson, P.A. is our principal outside legal counsel. Certain members
of such firm beneficially owned approximately 114,637 shares of our common stock
as of the date of this prospectus supplement.
McGuire, Woods, Battle & Boothe LLP, Charlotte, North Carolina, will issue
opinions to the underwriters regarding certain legal matters relating to the
Notes.
EXPERTS
Our consolidated financial statements and schedules appearing in our Annual
Report on Form 10-K for the year ended December 31, 1998, which are incorporated
by reference in the prospectus of which this prospectus supplement is a part,
and elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
to those financial statements and schedules, and are incorporated by reference
in reliance upon the authority of that firm as experts in giving those reports.
S-14
<PAGE> 17
PROSPECTUS
$300,000,000
CARAUSTAR INDUSTRIES, INC.
(CARAUSTAR LOGO)
DEBT SECURITIES
<TABLE>
<S> <C>
DEBT SECURITIES-- We are based in Austell,
- We may use this prospectus from time to time to Georgia and primarily
offer unsecured debt in one or more series. manufacture packaging products
- The debt will be issued under the terms of an from recycled paper
indenture, which is described in this The trading symbol for our
prospectus. common stock on the Nasdaq is
- The specific terms of each series of debt "CSAR"
securities issued will be described in detail in We do not expect our debt
a supplement to this prospectus. securities to officially trade
- We may sell debt securities directly to in any public market
purchasers, through underwriters, dealers or
agents or through any combination of these
methods. Before making any investment
- A supplement to this prospectus will name any in our company, you should
underwriters, dealers or agents involved in the consider carefully the risk
sale of our debt securities and describe their factors beginning on page 2
compensation. and read the applicable
We may use this prospectus to offer up to supplement to this prospectus.
$300,000,000 total (or an equivalent amount in a
foreign currency or unit) of debt securities.
</TABLE>
This prospectus may not be used to consummate sales of these debt
securities unless accompanied by a prospectus supplement. The prospectus
supplement may update or change information contained in this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved any of these securities or determined that this
prospectus or any supplement to it is accurate or complete. Any representation
to the contrary is a criminal offense.
The date of this prospectus is November 6, 1998.
<PAGE> 18
RISK FACTORS
In addition to the other information contained in this Prospectus, you
should consider carefully the following risk factors before investing in any of
our debt securities.
POSSIBLE FUTURE INCREASES IN RAW MATERIAL COSTS; ECONOMIC CONDITIONS
Our primary raw material is recycled waste paper, which is known in our
industry as "recovered fiber." The cost of recovered fiber has at times
fluctuated greatly because of factors such as shortages or surpluses created by
market or industry conditions. Although in the past we have raised the selling
prices of our products in response to raw material price increases, sometimes
raw material prices have increased so quickly or to such levels that we have
been unable to maintain our operating margins or pass the price increases
through to our customers on a timely basis. We cannot assure you that we will be
able to maintain our margins in the face of raw material price fluctuations or
that we will be able to pass such price changes through to our customers on a
timely basis. Demand for our products generally is dependent upon production
levels and consumer demand, which fluctuate with U.S. and global economic
conditions and cycles. Demand is generally higher during periods of economic
strength and lower during periods of economic weakness or uncertainty. Adverse
economic conditions could have a material adverse effect on us.
ABILITY TO CONTROL GROWTH; EXPANSION AND ACQUISITION RISKS
We intend to increase our production capacity in the next several years.
This strategy involves risks and depends on the availability of funds to permit
us to make capital expenditures and acquisitions. We have made numerous
acquisitions in recent years and actively seek new acquisitions that meet our
criteria. Acquired businesses may not achieve the same levels of revenue, profit
or productivity as our existing locations and may not otherwise perform as we
expect. To make acquisitions, we might incur additional debt, issue additional
stock (which would dilute the relative stock holdings of our existing
shareholders), or both.
Acquisitions also involve special risks. Some of these risks include:
- assumption of unanticipated liabilities and contingencies
- diversion of management's attention
- possible reduction of our reported earnings because of:
- increased goodwill write-offs
- increased interest costs
- issuances of additional securities
- difficulties of integrating acquired businesses
As we grow, we can give no assurance that we will be able to:
- use increased production capacity at our facilities
- identify suitable acquisition candidates
- complete additional acquisitions
- integrate acquired businesses into our operations
ENVIRONMENTAL LIABILITIES OR COSTS
Compliance with the environmental requirements of federal, state and local
governments significantly affects our business. Among other things, these
requirements regulate the
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<PAGE> 19
discharge of materials into the water, air and land and govern the use and
disposal of hazardous substances. Under environmental laws, we can be held
strictly liable if hazardous substances are found on real property we have ever
owned or operated or used as a disposal site. In recent years, we have adopted a
policy of assessing real property for environmental risks prior to purchase. We
are aware of issues regarding hazardous substances at some of our facilities and
one of our disposal sites, and we have put in place a remedial plan at each site
where we believe such a plan is necessary. We regularly make capital and
operating expenditures to stay in compliance with environmental laws. Despite
these compliance efforts, risk of environmental liability is part of the nature
of our business. We cannot assure you that environmental liabilities, including
compliance and remediation costs, will not have a material adverse effect on us
in the future. In addition, future events may lead to additional compliance or
other costs that could have a material adverse effect on us. Such future events
could include changes in, or new interpretations of, existing laws or
enforcement policies or further investigation of the potential health hazards of
certain products or business activities.
HIGHLY COMPETITIVE MARKETS
The manufacture and sale of our products are highly competitive. We compete
with a variety of companies, some of which are larger and have greater resources
than we do. In most of our markets, our competitors are capable of supplying
products that would meet the needs of our customers. We cannot assure you that
we will be able to compete successfully in the future.
DEPENDENCE ON KEY PERSONNEL
We depend on the continued efforts of our executive officers and senior
management. In addition, we depend on the performance and productivity of our
local managers. The loss of executive officers, members of senior management or
key local managers could have a material adverse effect on our operations,
including our ability to establish and maintain customer relationships. We
maintain no key person insurance policies on any of our executive officers or
other senior managers. If we are unable to attract or retain key employees to
perform these services, our business could be materially and adversely affected.
3
<PAGE> 20
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC"). You may
read and copy (upon the payment of fees prescribed by the SEC) any document that
we file with the SEC at its public reference rooms in Washington, D.C. (450
Fifth Street, N.W. 20549), New York, New York, (7 World Trade Center, Suite 1300
10048) and Chicago, Illinois (500 West Madison Street, Suite 1400 60661). You
may call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our filings are also available to the public on the internet,
through the SEC's EDGAR database. You may access the EDGAR database at the SEC's
web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus the
information we file with them. This means that we can disclose important
financial and other information in our SEC filings by referring you to the
documents containing this information. All information incorporated by reference
is part of this prospectus, unless that information is updated and superseded by
the information contained in this prospectus or by any information filed
subsequently that is incorporated by reference or by any prospectus supplement.
Any prospectus supplement or any information that we subsequently file with the
SEC that is incorporated by reference will automatically update and supersede
any previous information that is part of this prospectus or any prior prospectus
supplement. We incorporate by reference the documents listed below and any
future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of
the Securities Exchange Act of 1934 until we sell all the securities we offer
with this prospectus:
- Annual Report on Form 10-K for the year ended December 31, 1997; and
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998 and
June 30, 1998.
This prospectus is part of a registration statement (on Form S-3) we have
filed with the SEC relating to the debt securities. As permitted by SEC rules,
this prospectus does not contain all the information contained in the
registration statement and accompanying exhibits and schedules we file with the
SEC. You may refer to the registration statement, the exhibits and schedules for
more information about us and our debt securities. The registration statement,
exhibits and schedules also are available at the SEC's public reference rooms or
through its EDGAR database on the internet.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Caraustar Industries, Inc.
3100 Washington Street
Austell, Georgia 30106
Attn: Corporate Secretary
Telephone: (770) 948-3101
You should rely only on the information provided in this prospectus or any
prospectus supplement or that is incorporated by reference. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. Information is accurate only as of the date of the documents
containing the information, unless the information specifically indicates that
another date applies.
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<PAGE> 21
SPECIAL NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in (a) this prospectus under the caption "Risk Factors,"
(b) any applicable prospectus supplement and (c) the documents incorporated by
reference into this prospectus may constitute "forward-looking statements"
within the meaning of federal securities laws. Forward-looking statements are
based on our management's beliefs, assumptions, and expectations of our future
economic performance, taking into account the information currently available to
them. These statements are not statements of historical fact. Forward-looking
statements involve risks and uncertainties that may cause our actual results,
performance or financial condition to be materially different from the
expectations of future results, performance or financial condition we express or
imply in any forward-looking statements. Some of the important factors that
could cause our actual results, performance or financial condition to differ
materially from our expectations are:
- Fluctuations in our raw material prices
- Our ability to identify and complete acquisitions and successfully
integrate the businesses we acquire
- Changes in government regulations, particularly environmental regulations
- Changes in demand for our products
- Changes in the industrial sector or the general domestic or global
economy
- Degree and nature of our competition
- Other factors described in this prospectus, any prospectus supplement or
the documents we file with the SEC and incorporate by reference into this
prospectus
When used in our documents or oral presentations, the words "anticipate,"
"estimate," "expect," "objective," "projection," "forecast," "goal" or similar
words are intended to identify forward-looking statements. We qualify any such
forward-looking statements entirely by these cautionary factors.
5
<PAGE> 22
THE COMPANY
Caraustar Industries, Inc.:
- Is a major manufacturer of recycled paperboard and converted paperboard
products
- Manufactures products primarily from recovered fiber, which is derived
from recycled waste paper
- Produces recycled paperboard for internal use and sale to customers in
four principal markets:
- Tubes, cores and composite containers
- Folding cartons
- Gypsum wallboard facing paper
- Miscellaneous other specialty and converted products
- Operates facilities in the U.S., Mexico and the United Kingdom,
including:
- Paperboard mills
- Converting plants, consisting of
- tube and core converting plants
- composite container plants
- specialty converting plants
- Plastics manufacturing plants
- A composite extrusion manufacturing plant
- Paperstock recycling and processing facilities
- Contract manufacturing and packaging plants
- Various special services facilities, including
- transportation
- packaging, engineering and procurement
- industrial adhesives manufacturing
- Has an equity interest as the non-operating partner in a gypsum wallboard
manufacturing plant, which has a related gypsum quarry, a specialty
paperboard converting plant and a tube plant
- Was incorporated in North Carolina in 1980 through the consolidation of 6
corporations in the recycled paperboard industry previously related by
common ownership and administration
Our executive offices are located at 3100 Washington Street, Austell,
Georgia. Our phone number is (770) 948-3101.
THE OFFERING
We may offer and sell from time to time, in one or more series, unsecured
debt securities, which may consist of notes, debentures or other evidences of
indebtedness.
The total initial offering prices of the debt securities we may offer and
sell pursuant to this prospectus and supplements to it will not be greater than
$300,000,000 (or the equivalent amount in a foreign currency or currency unit at
the time of sale). We will offer these securities in amounts, at prices and on
terms that we determine in light of market conditions at the time of sale and
specify in a prospectus supplement.
6
<PAGE> 23
PROSPECTUS SUPPLEMENT
The prospectus supplement for each offering of debt securities will contain
specific information and terms for that offering. The prospectus supplement may
also add to, update or change information contained in this prospectus. It is
important for you to consider the information contained in this prospectus and
the prospectus supplement in making your investment decision.
USE OF PROCEEDS
Unless we state otherwise in a prospectus supplement, the net proceeds from
the sale of the debt securities will be added to our general funds and will be
available for general corporate purposes, which may include, but are not limited
to, repayment of debt, working capital, capital expenditures and acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table shows our ratio of earnings to fixed charges for each
of the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ----------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 5.91x 7.26x 8.11x 8.39x 6.04x 5.94x
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes, minority
interest, reversal of loss on discontinued operations, and cumulative effect of
accounting changes, plus fixed charges, minus equity in income of
less-than-50%-owned entities. Fixed charges consist of interest expense,
amortization of debt issuance costs, and an estimate of the interest cost in
rental expense.
During the periods presented, the Company had no preferred stock
outstanding. Therefore, the ratio of earnings to combined fixed charges and
preference dividends was the same as the ratio of earnings to fixed charges for
each of the periods presented.
7
<PAGE> 24
DESCRIPTION OF DEBT SECURITIES
We may issue the debt securities at various times in one or more series
under an indenture between us and the trustee, which is The Bank of New York.
References in this prospectus to the indenture include amendments that may be
made to the indenture from time to time. A copy of the indenture is filed as an
exhibit to the registration statement of which this prospectus is a part.
The following summary sets forth certain general terms and provisions of
the debt securities and the indenture. A prospectus supplement will provide the
particular terms of offered debt securities and will describe the extent, if
any, to which the general terms and provisions described in this prospectus do
not apply to those particular securities. Because this is a summary, it does not
contain all the information that may be important to you. You should read the
entire indenture, including the definitions of certain terms, and the applicable
prospectus supplement before you make any investment decision. Where this
summary or any prospectus supplement refers to particular sections, provisions
or defined terms in the indenture, those sections, provisions or defined terms
are incorporated by reference into this summary or the applicable prospectus
supplement. Section references used in this summary are references to the
indenture.
The covenants in the indenture do not necessarily protect you from a
decline in our credit quality due to highly leveraged or other transactions
involving the Company.
GENERAL
The indenture provides that we may issue separate series of debt securities
from time to time without limitation as to aggregate principal amount. We may
specify a maximum aggregate principal amount for the debt securities of any
series; however, we may increase the specified maximum aggregate principal
amount by resolution of our board of directors. (Section 301). We will determine
certain terms and provisions of the debt securities, including terms relating to
maturity, principal and interest. These terms will not be inconsistent with the
Indenture.
The debt securities will be our direct, unsecured obligations and will rank
on a parity with all of our current and future outstanding unsecured and
unsubordinated indebtedness. Except as described under "Certain Covenants of the
Company," the indenture does not limit us or any of our subsidiaries from
incurring more indebtedness or issuing more securities, and does not contain
financial or similar restrictions on us or any of our subsidiaries. Our rights
and the rights of our creditors, including holders of debt securities, to
participate in any distribution of assets of any of our subsidiaries upon the
subsidiary's liquidation or reorganization or otherwise are effectively
subordinated to the claims of the subsidiary's creditors, except to the extent
that we or any of our creditors may be a creditor of that subsidiary.
We may issue the debt securities of any series in certificated form
registered in the name of the debt security holder. If provided in the
applicable prospectus supplement, the debt securities may be represented in
whole or part by a global security or securities, which will be deposited with,
or on behalf of, The Depository Trust Company, New York, New York or other
successor depository that we may appoint, and registered in the name of the
depositary's nominee. The Depository Trust Company or other depository appointed
by us is referred to in this prospectus as the "depositary." Each debt security
represented by a global security is referred to in this prospectus as a
"book-entry security." See "Book Entry Securities."
8
<PAGE> 25
The applicable prospectus supplement relating to each particular series of
offered debt securities will provide the following terms or additional
provisions of the offered debt securities:
- the title and designation of the offered debt securities;
- any limit on the aggregate principal amount of the offered debt
securities;
- the person to whom any interest on an offered debt security is payable,
if other than the person in whose name that security is registered;
- the price (expressed as a percentage of the aggregate principal amount of
offered debt securities) at which the offered debt securities will be
issued;
- the date or dates on which the principal of the offered debt securities
will be payable or the method by which those dates will be determined or
extended;
- the rate or rates (which may be fixed or variable) at which the offered
debt securities will bear interest, if any, or the method of
determination of those rates;
- the basis on which interest will be calculated if other than a 360-day
year consisting of twelve 30-day months;
- the date or dates from which the interest, if any, on the offered debt
securities will accrue or the method of determination of such date or
dates;
- the dates on which the interest, if any, will be payable, or the method
by which those dates will be determined;
- the date on which payment of the interest, if any, will commence, or the
method by which that date will be determined;
- the regular record dates for the interest payment dates, if any, or the
method by which those dates will be determined;
- the place or places where the principal of, and any premium and interest
on, any of the offered debt securities will be payable, where the offered
debt securities may be presented for registration of transfer or
exchange, and where notices and demands to or upon us in respect of the
offered debt securities may be made;
- the periods within or the dates, prices and terms and conditions on which
the offered debt securities may be redeemed, in whole or in part, at our
option, and the manner in which any election by us to redeem the offered
debt securities will be evidenced (if other than by board resolution);
- our obligation or right, if any, to redeem or purchase offered debt
securities pursuant to any sinking fund, amortization or analogous
provisions, or at the option of a holder of debt securities to require
such a redemption or purchase, and the periods within, prices at,
currency (including currency units) in which and the other terms and
conditions upon which the offered debt securities will be redeemed or
purchased, in whole or in part, pursuant to any such obligation;
- the denominations in which any of the offered debt securities will be
issuable, if other than denominations of $1,000 and any integral multiple
thereof;
- if other than the principal amount of the offered debt securities, the
amount of offered debt securities which will be payable upon declaration
of acceleration of the offered debt securities' maturity;
- if other than U.S. dollars, the currency (including composite currencies
or currency units) in which payment of principal of (and premium, if any)
and/or interest on the offered debt securities will be payable (and the
manner in which the equivalent of the
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<PAGE> 26
principal amount in U.S. dollars is to be determined for any purpose,
including for the purpose of determining the principal amount deemed to
be outstanding at any time);
- any currency (including composite currencies or currency units) other
than the stated currency of the offered debt securities in which the
principal of (and premium, if any) and/or interest on the offered debt
securities may, at our or the holders' of debt securities election, be
payable, and the periods within, or the dates on, and terms and
conditions upon which such election may be made and the amount so payable
(or the manner in which such amount is to be determined);
- if the amount of payments of principal of (and premium, if any) and/or
interest on the offered debt securities may be determined with reference
to an index or pursuant to a formula (including by reference to currency
or interest rates), the manner in which such amounts will be determined;
- if the principal amount payable at the stated maturity of any of the
offered debt securities will not be determinable as of any one or more
dates prior to the stated maturity, the amount which will be deemed to be
such principal amount as of any such date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding
as of any such date (or, in any such case, the manner in which such
deemed principal amount is to be determined);
- whether any of the offered debt securities will initially be issuable in
whole or in part in the form of a temporary global security representing
those debt securities and provisions for the exchange of such temporary
global security for debt securities in certificated form;
- whether any of the offered debt securities will be issuable in whole or
in part in the form of one or more global securities and, if so, the
respective depositaries for such global securities, the form of any
legend or legends to be borne by any such global security, any
circumstances under which any such global security may be exchanged, in
whole or in part, for debt securities registered, and whether and under
what circumstances any transfer of such global security, in whole or in
part, may be registered, in the names of persons other than the
depositary for such global security or its nominee;
- whether any of the offered debt securities will be subject to certain
optional interest rate reset provisions;
- whether any of the offered debt securities will be subject to certain
optional extension of maturity provisions;
- any addition to or change in the events of default applicable to any of
the offered debt securities and any change in the right of the trustee or
the holders of any of the offered debt securities to declare the
principal amount of any of the offered debt securities due and payable;
- any addition to or change in the covenants in the indenture applicable to
any of the offered debt securities;
- the additions or changes, if any, to the indenture with respect to the
offered debt securities as are necessary to permit or facilitate the
issuance of the offered debt securities in bearer form, registrable or
not registrable as to principal, and with or without interest coupons;
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<PAGE> 27
- our right, if any, to, and the manner in which we may, defease the
offered debt securities or certain covenants under the indenture;
- the appointment of any paying agent for the offered debt securities;
- the terms of any right to convert or exchange the offered debt securities
into any other of our securities or property;
- the terms and conditions, if any, pursuant to which any of the offered
debt securities are secured;
- any restriction or condition on the transferability of the offered debt
securities; and
- any other terms relating to the offered debt securities (which are not
inconsistent with the indenture). (Section 301)
Unless otherwise provided and except with respect to book-entry securities,
the principal of and premium, if any, and interest, if any, on the debt
securities will be payable at the office of our security registrar. However, at
our option, interest may be paid by mailing a check to, or by wire transfer to,
the holders of record of debt securities entitled to receive the interest. We
have appointed the trustee, The Bank of New York, as security registrar.
(Sections 301 and 305)
For a description of payments of principal of, premium, if any, and
interest on, and transfer of, book-entry securities, and exchanges of global
securities representing book-entry securities, see "Book Entry Securities."
At the option of the holder of debt securities, subject to the terms of the
indenture and the limitations applicable to book-entry securities, debt
securities of each series will be exchangeable for other debt securities of the
same series, of any authorized denomination and of a like tenor and aggregate
principal amount. (Section 305)
Unless otherwise indicated in the applicable prospectus supplement and
except with respect to book-entry securities, we will issue the debt securities
only in fully registered form without coupons and in denominations of $1,000 or
any multiple thereof. Subject to the terms of the indenture and the limitations
applicable to global securities, the debt securities may be presented for
exchange as provided above or for registration of transfer (duly endorsed or
with the form of transfer endorsed on the debt securities duly executed) at the
office of the security registrar or at the office of any transfer agent
designated by us for that purpose. No service charge will be made for any
registration of transfer or exchange of offered debt securities, but we may
require payment of an amount sufficient to cover any applicable tax or other
governmental charge. (Sections 301, 302 and 305)
Those transfers or exchanges will be effected when the security registrar
or the transfer agent is satisfied with the documents of title and identity of
the person making the request. The applicable prospectus supplement will name
any transfer agent (in addition to the security registrar) initially designated
by us for any debt securities. (Section 305) We may at any time designate
additional transfer agents or rescind the designation of any transfer agent or
approve a change in the office through which any transfer agent acts, except
that we will be required to maintain a transfer agent in each place of payment
for the debt securities of each series. (Sections 305 and 1002)
We may offer and sell debt securities, including Original Issue Discount
Securities, at a substantial discount below their stated principal amount. The
applicable prospectus supplement may describe the U.S. federal income tax
consequences and other special considerations applicable to debt securities sold
at an original issue discount. "Original Issue Discount
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<PAGE> 28
Security" means any security which provides for the declaration of acceleration
of the maturity of an amount less than the principal amount thereof upon the
occurrence of an event of default and the continuation thereof. (Section 101)
In addition, the applicable prospectus supplement may describe certain
special U.S. federal income tax or other considerations (if any) applicable to
any debt securities which are denominated in a currency or currency unit other
than United States dollars.
CERTAIN COVENANTS OF THE COMPANY
Restrictions on Liens. So long as any debt securities are outstanding, we
will not be permitted to issue, assume or guarantee, and will not permit any
domestic subsidiary to issue, assume or guarantee, any indebtedness secured by a
mortgage, pledge, security interest, lien or encumbrance (referred to in this
section as "liens") of or on any of our or a domestic subsidiary's Principal
Property, or on the shares of stock or debt of any domestic subsidiary, whether
owned now or acquired subsequently. However, this restriction will not apply if
we effectively provide that the debt securities (together, if we determine, with
any of our other indebtedness ranking equally with the debt securities) are
secured by a lien ranking ratably with and equal to (or at our option, prior to)
the secured indebtedness. In any event, the foregoing restriction will not apply
to the following:
- liens on indebtedness existing on the date of the indenture;
- liens on any assets of any corporation existing at the time such
corporation becomes a domestic subsidiary;
- liens on any assets existing at the time we or a domestic subsidiary
acquire those assets;
- liens to secure the payment of all or any part of the purchase price of
those assets upon the acquisition of those assets by us or a domestic
subsidiary;
- liens to secure any indebtedness incurred, assumed or guaranteed by us or
a domestic subsidiary prior to, at the time of, or within 180 days after
an acquisition of assets (or in the case of real property, the completion
of construction (including any improvements on an existing asset) or
commencement of full operation of the asset, whichever is later) which
indebtedness is incurred, assumed or guaranteed for the purpose of
financing all or any part of the purchase price or, in the case of real
property, construction or improvements on the asset. However, in the case
of such an acquisition, construction or improvement, the lien will not
apply to any of our or a domestic subsidiary's Principal Property or
shares of stock or debt of a domestic subsidiary owned prior to the
acquisition, construction or improvement, other than, in the case of any
construction or improvement, any real property on which the property
constructed, or the improvement, is located;
- liens on any assets to secure indebtedness of a domestic subsidiary to us
or to any wholly owned domestic subsidiary;
- liens on any assets of a corporation existing at the time such
corporation is merged into or consolidated with us or a domestic
subsidiary or at the time we or a domestic subsidiary purchase, lease or
otherwise acquire all or substantially all of the assets of a corporation
or firm;
- liens on any of our or a domestic subsidiary's assets in favor of the
United States or any State, or any department, agency or instrumentality
or political subdivision of the United States or any State, or in favor
of any other country, or any political
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subdivision of the United States or any State, to secure partial,
progress, advance or other payments pursuant to any contract or statute
or to secure any indebtedness incurred or guaranteed for the purpose of
financing all or any part of the purchase price (or, in the case of real
property, the cost of construction) of the assets subject to such liens
(including, but not limited to, liens incurred in connection with
pollution control, industrial revenue or similar financings);
- Mechanics', materialmen's, carriers' or similar liens arising in the
ordinary course of business (including in the construction of facilities)
relating to obligations not due or which are being contested;
- liens for taxes not due or being contested, landlords' liens, tenants'
rights under leases, and similar liens not impairing the use or value of
the property involved;
- any extension, renewal or replacement (or successive extensions, renewals
or replacements) in whole or in part of any lien referred to in the
foregoing clauses of this section; provided, however, that the principal
amount of indebtedness secured by such a lien will not exceed the
principal amount of indebtedness so secured at the time of such
extension, renewal or replacement, and that such extension, renewal or
replacement will be limited to all or a part of the assets which secured
the lien so extended, renewed or replaced (plus improvements and
construction on real property); and
- liens not permitted by the foregoing clauses of this section if at the
time of, and after giving effect to, the creation or assumption of any
such lien, the aggregate amount of all of our or the domestic
subsidiaries' indebtedness secured by all of those liens not permitted by
the foregoing clauses of this section, together with the Attributable
Debt relating to Sale and Lease-Back Transactions permitted by the
indenture, does not exceed 15% of Consolidated Net Tangible Assets, as
those terms are defined below. (Section 1008)
The indenture will not restrict us or our subsidiaries from incurring unsecured
indebtedness.
Restrictions on Sale and Lease-Back Transactions. The indenture further
provides that we will not, and will not permit any domestic subsidiary to, lease
any Principal Property, other than with a lease for a term (including renewal
rights) for three years or less, whereby we or the domestic subsidiary sell or
transfer the Principal Property (referred to as a "Sale and Lease-Back
Transaction"), unless:
- we or the domestic subsidiary would, at the time of entering into a Sale
and Lease-Back Transaction, be entitled to incur indebtedness secured by
a lien on the Principal Property to be leased in an amount at least equal
to the Attributable Debt in respect of such Sale and Lease-Back
Transaction without equally and ratably securing the Debt Securities
pursuant to the indenture; or
- we promptly inform the trustee of the transaction, the proceeds of the
sale of the Principal Property to be leased are at least equal to the
fair value of the Principal Property (as determined by our board of
directors), and an amount equal to the net proceeds from the sale of the
Principal Property is applied, within 180 days of the effective date of
the Sale and Lease-Back Transaction, to the purchase or acquisition (or,
in the case of property, the construction) of property or assets or to
the retirement (other than at maturity or pursuant to a mandatory sinking
fund or redemption provision) of debt securities or our or a consolidated
domestic subsidiary's Funded Indebtedness ranking on a parity with or
senior to the debt securities. (Section 1009)
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CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of the debt securities,
consolidate with or merge into any other person or transfer or lease all or
substantially all of our properties or assets to any person or to allow any
other person to consolidate with or merge into us or to transfer or lease all or
substantially all of its properties or assets to us, provided that:
- the successor is a corporation, partnership, trust or other entity
organized and validly existing under the laws of any United States
domestic jurisdiction;
- the successor assumes our obligations on the debt securities under the
indenture;
- immediately after giving effect to the transaction no event of default,
and no event which, after notice or lapse of time or both, would become
an event of default, will have occurred and be continuing;
- we have delivered the certificates and opinions required under the
indenture to the trustee; and
- certain other conditions are met. (Sections 801 and 802)
Applicability of Covenants. Any series of debt securities may provide that
any one or more of the covenants described above will not be applicable to that
series of securities (Section 1011)
Certain Definitions (Section 101). Set forth below are definitions of some
of the terms used in this section of the prospectus.
"Attributable Debt" when used in connection with a Sale and Lease-Back
transaction referred to above, means, as of any particular time, the aggregate
of present values (discounted at a rate per annum equal to the average interest
borne by all outstanding debt securities determined on a weighted average basis
and compounded semi-annually) of our or any of the subsidiaries' obligations for
net rental payments during the remaining term of the lease (including any period
for which a lease has been extended or may, at the option of the lessor, be
extended).
- The term "net rental payments" under any lease of any period means the
sum of the rental and other payments required to be paid in such period
by the lessee, not including, however, any amounts required to be paid by
such lessee (whether or not designated as rental or additional rental) on
account of maintenance and repairs, reconstruction, insurance, taxes,
assessments, water rates or similar charges required to be paid by the
lessee or any amounts required to be paid by the lessee contingent on the
amount of sales, maintenance and repairs, reconstruction, insurance,
taxes, assessments, water rates or similar charges.
"Consolidated Net Tangible Assets" means at any date, the total assets
appearing on our and the subsidiaries' most recently prepared consolidated
balance sheet as of the end of a fiscal quarter, prepared in accordance with
generally accepted accounting principles at the time of calculation, less (a)
all current liabilities as shown on such balance sheet and (b) intangible
assets.
- "Intangible assets" means the value (net of any applicable reserves), as
shown on or reflected in such balance sheet of:
- all trade names, trademarks, licenses, patents, copyrights and
goodwill;
- organizational costs; and
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- deferred charges (other than prepaid items such as insurance, taxes,
interest, commissions, rents and similar items and tangible assets
being amortized); but in no event will the term "intangible assets"
include product development costs.
"domestic subsidiary" means any subsidiary:
- organized and existing under the laws of the United States or any
state, territory or possession thereof, or the Commonwealth of Puerto
Rico,
- the operations of which are substantially conducted in the United
States or its territories or possessions, or in the Commonwealth of
Puerto Rico, or
- a substantial portion of the assets of which are located in the United
States or its territories or possessions or in the Commonwealth of
Puerto Rico.
- A "wholly owned domestic subsidiary" is any domestic subsidiary
all of whose outstanding securities having the voting power to
elect the Board of Directors of the domestic subsidiary
(irrespective of whether or not at the time securities of any
other class or classes of the domestic subsidiary will have or
might have voting power by reason of the happening of any
contingency) are at the time directly or indirectly owned or
controlled by us and/or by one or more wholly owned domestic
subsidiaries.
"Funded Indebtedness" means any indebtedness maturing by its terms more
than one year from the date of its determination, including any indebtedness
renewable or extendible at the option of the obligor to a date later than one
year from the date of its determination.
"indebtedness" means:
- all obligations for borrowed money;
- all obligations evidenced by bonds, debentures, notes or other similar
instruments;
- all obligations in respect of letters of credit or bankers acceptances
or similar instruments (or reimbursement obligations with respect
thereto);
- all obligations to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course
of business;
- all obligations as lessee which are capitalized in accordance with
generally accepted accounting principles at the time of calculation;
and
- all indebtedness of others that we or any of the subsidiaries
guarantee or for which we or any of the subsidiaries are otherwise
responsible or liable (whether by agreement to purchase indebtedness
of, or to supply funds or to invest in, others).
"Principal Property" means any mill, manufacturing plant, building,
structure or other facility (together with the land on which it is erected and
improvements and fixtures comprising a part of it) or other real property
interest located in the United States (all of such facilities or interests that
form an integral part of a single development or operation being considered as
one interest), owned or leased and having a gross book value as of the date of
its determination in excess of 1% of Consolidated Net Tangible Assets, other
than a facility or portion of a facility (i) financed by means of industrial
revenue bonds or (ii) which, as determined in good faith by resolution of our
board of directors, is not of material importance to the total business
conducted by us and our subsidiaries as a whole.
"subsidiary" means any corporation, association or other entity of which at
least a majority of outstanding securities having the voting power to elect a
majority of the board of directors of such entity (irrespective of whether or
not at the time securities of any other class
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or classes of such entity will have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by us, and/or by one or more of our subsidiaries.
EVENTS OF DEFAULT
The indenture defines an "Event of Default" with respect to any series of
debt securities as:
- default in payment of principal of or premium, if any, on any debt
security of that series when due and payable at maturity;
- default for 30 days in payment of interest on any debt security of that
series;
- default in the deposit of any sinking fund payment when due for that
series;
- failure or breach by us in the performance of any other of the covenants
or warranties in the indenture (other than a covenant or warranty
included in the indenture solely for the benefit of a series of debt
securities other than that series) continued for 45 days after we have
been given written notice by the trustee, or we and the trustee have been
given written notice by the holders of at least 25% in aggregate
principal amount of the outstanding debt securities of that series,
specifying the default or breach and requiring it to be remedied and
stating that the notice is a notice of default under the indenture;
- a default under any bond, debenture, note or other evidence of our
indebtedness (including a default with respect to another series of debt
securities) or under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any of
our indebtedness (including the indenture), whether the indebtedness now
exists or is created later, which default will:
- constitute a failure to pay the indebtedness in a principal amount in
excess of $15 million when due and payable at final maturity after the
expiration of any applicable grace period or will have resulted in
indebtedness in a principal amount in excess of $15 million becoming
or being declared due and payable prior to the date on which it would
otherwise have become due and payable, without the indebtedness having
been discharged, or the acceleration having been rescinded or
annulled, within a period of 15 days after there has been given, by
overnight mail or other same day or overnight delivery service which
can provide evidence of delivery, to us by the trustee, or to us and
the trustee by the holders of at least 25% in aggregate principal
amount of the outstanding debt securities of that series, a written
notice specifying the default and requiring us to cause the
indebtedness to be discharged or to cause the acceleration to be
rescinded or annulled and stating that the notice is a notice of
default under the indenture;
- certain events of bankruptcy, insolvency or reorganization; and
- any other event of default with respect to debt securities of that
series. (Section 501)
If any event of default with respect to debt securities of any series at
the time outstanding occurs and is continuing, either the trustee or the holders
of not less than 25% in aggregate principal amount of the outstanding debt
securities of that series may declare the principal amount (or, if the debt
securities of that series are Original Issue Discount Securities, the portion of
the principal amount of the debt securities as may be specified in the terms of
those debt securities) of all debt securities of that series to be due and
payable immediately by a written notice to us (and to the trustee if given by
holders of debt securities), and upon
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that declaration the aggregate principal amount (or specified amount) will
become immediately due and payable. If an event of default described in the
fourth bullet point above or another event of default specified in the last
bullet point above that is applicable to all outstanding debt securities occurs
and is continuing, or an event of default specified in the next to last bullet
point above occurs and is continuing, either the trustee or the holders of not
less than 25% in aggregate principal amount of all the debt securities then
outstanding (treated as one class) may declare the principal amount (or, if any
debt securities are Original Issue Discount Securities, the portion of the
principal amount as may be specified in the terms of those debt securities) of
all the debt securities then outstanding to be due and payable immediately, and
upon any such declaration the principal amount will become immediately due and
payable. Upon certain conditions the declarations may be annulled and past
defaults (except, unless previously cured, a default in payment of principal of
or premium, if any, or interest, if any, on the debt securities of that series
and certain other specified defaults, which cannot be amended without the
consent of the holder of each outstanding debt security of that series) may be
waived by the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series on behalf of the holders of all debt
securities of that series. (Sections 502 and 513)
Reference is made to the prospectus supplement relating to each series of
outstanding debt securities that are Original Issue Discount Securities for the
particular provisions relating to acceleration of the maturity of a portion of
the principal amount of the Original Issue Discount Securities upon the
occurrence and continuation of an event of default.
The trustee is required, within 90 days after the occurrence of a default
with respect to debt securities of any series at the time outstanding, to give
to the holders of the outstanding debt securities of that series notice of the
default actually known to it if not cured or waived. However, except in the case
of default in the payment of principal of or premium, if any, or interest on any
debt security of that series, or in the deposit of any sinking fund payment
which is provided, the trustee will be protected in withholding the notice if
the trustee in good faith determines that the withholding of the notice is in
the interest of the holders of the outstanding debt securities of that series.
In addition, the notice will not be given until at least (a) 45 days after the
occurrence of a default with respect to outstanding debt securities of any
series in the performance of a covenant or warranty in the indenture other than
for the payment of the principal of or premium, if any, or interest on any debt
security of that series or the deposit of any sinking fund payment with respect
to the debt securities of that series or (b) 15 days after the occurrence of a
default with respect to the failure to pay at maturity, or the acceleration of,
indebtedness in a principal amount in excess of $15 million. The term default
with respect to any series of outstanding debt securities for the purpose of
this provision only means the happening of any of the events of default
specified in the indenture relating to that series of outstanding debt
securities, excluding any grace periods and irrespective of any notice
requirements. (Section 602)
The trustee, subject to its duty during default to act with the required
standard of care, is entitled to be offered indemnity satisfactory to the
trustee in its reasonable judgment by the holders of any series of outstanding
debt securities before exercising any right or power under the indenture at the
request of the holders of that series of debt securities. (Section 603) Subject
to those provisions for the indemnification of the trustee, the holders of a
majority in aggregate principal amount of outstanding debt securities of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee, or exercising any trust or other power
conferred on the trustee, with respect to the debt securities
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of that series. The trustee, however, may decline to act if that direction is
contrary to law or the indenture or may be unduly prejudicial to the holder of
outstanding debt securities not joining in the direction. In the case of
book-entry securities, the trustee is required to establish a record date for
purposes of determining which holders are entitled to join in that direction.
(Section 512)
No holder of a debt security will have any right to institute any
proceeding with respect to the indenture, or for the appointment of a receiver,
assignee, trustee, liquidator or sequestrator (or other similar official), or
for any other remedy thereunder, unless:
- the holder has previously given to the trustee written notice of a
continuing event of default with respect to the debt securities of that
series;
- holders of at least 25% in aggregate principal amount of the outstanding
debt securities of that series have made a written request to the trustee
to institute the proceeding and the holder or holders have offered
indemnity satisfactory to the trustee in its reasonable judgment; and
- the trustee has failed to institute the proceeding, and has not received
from the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series a direction inconsistent with
that request, within 60 days after the notice, request and offer.
(Section 507)
However, these limitations do not apply to a suit instituted by a holder of a
debt security to enforce payment of the principal of, premium, if any, or
interest on the debt security on or after the applicable due date specified in
the debt security. (Section 508)
We are required to file annually with the trustee a certificate of no
default. (Section 1004)
MODIFICATION OF THE INDENTURE AND WAIVER OF COVENANTS
We and the trustee are permitted to enter into one or more supplemental
indentures without the consent of the holders of any of the debt securities in
order to:
- evidence the succession to us of another person, or successive
successions, and the assumption of our covenants, agreements and
obligations by a successor;
- add to our covenants for the benefit of the holders of debt securities or
to surrender any of our rights or powers;
- add additional events of default;
- add or change any provisions of the indenture to the extent necessary to
facilitate the issuance of debt securities in bearer or uncertificated
form;
- add to, change or eliminate any provision of the indenture in respect of
one or more series of debt securities; however, if the action adversely
affects the interests of any holders of debt securities of any series,
the addition, change or elimination (i) will not apply to any debt
securities created prior to the action and entitled to the benefit of the
provision or modify the rights of any holder of those debt securities, or
(ii) will become effective with respect to that series only when no
security of that series remains outstanding;
- convey, transfer, assign, mortgage or pledge any property to or with the
trustee or to surrender any right or power conferred upon us;
- secure securities pursuant to the terms of the indenture;
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- establish the form or terms of debt securities;
- provide for uncertificated securities in addition to certificated
securities;
- evidence and provide for successor trustees or to add or change any
provisions to the extent necessary to permit or facilitate the
appointment of a separate trustee or trustees for specific series of debt
securities and the administration of trusts pursuant to the indenture;
- cure any ambiguity, to correct any defect or supplement any inconsistent
provisions or to make any other provisions with respect to matters or
questions arising under the indenture, provided that the action does not
adversely affect the interests of the holders of debt securities of any
series;
- supplement any provisions of the indenture necessary to permit or
facilitate the defeasance and discharge of any series of debt securities,
provided that the action does not adversely affect the interests of the
holders of debt securities of that series or any other series;
- comply with the rules or regulations of any securities exchange or
automated quotation system on which any of the debt securities may be
listed or traded; or
- add, change or eliminate any provisions of the indenture as is necessary
or desirable in accordance with any amendments to the Trust Indenture
Act, provided that the action does not adversely affect the rights or
interests of any holder of debt securities. (Section 901)
We and the trustee are permitted, with the consent of the holders of not
less than a majority in principal amount of outstanding debt securities of each
series (treated as one class) affected, to execute supplemental indentures
adding any provisions to or changing or eliminating any of the provisions of the
indenture or modifying the rights of the holders of outstanding debt securities
of that series. However, no supplemental indenture may, without the consent of
the holder of each outstanding debt security affected:
- except to the extent permitted pursuant to the indenture, change the
stated maturity of the principal of, or any installment of principal of
or interest on, any debt security of any series;
- reduce the principal amount of, the premium, if any, or interest on, any
debt security of any series;
- reduce the amount of principal of an Original Issue Discount Security or
any other debt security payable upon acceleration of its maturity;
- change the place or currency of payment of principal of, or any premium
or interest on, any debt security of any series;
- impair the right to institute suit for the enforcement of any payment on
or with respect to any debt security of any series;
- reduce the percentage as stated above of the holders of outstanding debt
securities of any series whose consent is required for any supplemental
indenture or for amendment or waiver of compliance with certain
provisions of the indenture or certain defaults; or
- effect certain other changes. (Section 902)
We are permitted to omit compliance with certain covenants in the indenture
with respect to debt securities of any series upon waiver by the holders of not
less than a majority in principal amount of outstanding debt securities of that
series. (Section 1010)
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In determining whether the holders of the requisite principal amount of the
outstanding debt securities have given or taken any direction, notice, consent,
waiver or other action under the indenture as of any date:
- the principal amount of an Original Issue Discount Security deemed to be
outstanding will be the amount of the principal that would be due and
payable as of that date upon acceleration of the maturity of that
security to that date;
- if, at that date, the principal amount payable at the stated maturity of
a debt security is not determinable (for example, because it is based on
an index), the principal amount of the debt security deemed to be
outstanding as of that date will be an amount determined in the manner
prescribed for that debt security;
- the principal amount of a debt security denominated in one or more
foreign currencies or currency units deemed to be outstanding will be the
U.S. dollar equivalent, determined as of that date in the manner
prescribed for that debt security, of the principal amount of the debt
security (or, in the case of a debt security described in the clauses
above, of the amount so described);
- debt securities owned by us, or any other obligor on the debt securities
or any of their affiliates, will be disregarded and deemed not to be
outstanding; and
- certain debt securities, including those for whose payment or redemption
money has been deposited or set aside in trust for the holders of the
debt securities and those that have been fully defeased pursuant to
Section 1402 of the indenture, will not be deemed to be outstanding.
(Section 101)
Except in certain limited circumstances, we are entitled to set any day as
a record date for the purpose of determining the holders of outstanding debt
securities of any series entitled to give or take any direction, notice,
consent, waiver or other action under the indenture, in the manner and subject
to the limitations provided in the indenture. In certain limited circumstances,
the trustee will be entitled to set a record date for action by holders of debt
securities. If a record date is set for any action to be taken by holders of a
particular series, only the persons who are holders of outstanding debt
securities of that series on the record date may take that action. To be
effective, holders of the requisite principal amount of the debt securities must
take the action within a specified period following the record date. (Section
104)
BOOK-ENTRY SECURITIES
The following description of book-entry securities will apply to any series
of debt securities issued in whole or in part in the form of a global security
or securities, except as otherwise provided in the applicable prospectus
supplement.
Book-entry securities of like tenor and having the same date of original
issue will be represented by one or more global securities. Each global security
representing book-entry securities will be deposited with, or on behalf of, the
depositary. This means that we will not issue certificates to each holder of
those debt securities. The global security will be registered in the name of the
depositary or its nominee.
The Depository Trust Company ("DTC") is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the United States Federal
Reserve System, a "clearing corporation" within the meaning of the New York
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act.
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DTC holds securities that its participants ("Participants") deposit with DTC.
DTC will keep a computerized record of its Participants (for example, your
broker) whose clients have purchased book-entry securities. The Participant will
then keep a record of its clients who have purchased the book-entry securities.
DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations.
DTC is owned by a number of Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc., and the National Association
of securities Dealers, Inc. Access to DTC's book-entry system is also available
to others, such as securities brokers and dealers, banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the SEC.
Upon issuance by us of book-entry securities, purchases of debt securities
under the DTC System must be made by or through Direct Participants, which will
receive a credit for the debt securities on DTC's records. The ownership
interest of each actual purchaser of each debt security (referred to as a
"beneficial owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial owners will not receive written confirmation
from DTC of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the beneficial owner entered into the transaction. Transfers of ownership
interests in the debt securities are to be accomplished by entries made on the
books of Participants acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership interests in debt
securities, except in the event that use of the book-entry system for the debt
securities is discontinued. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such laws may impair the ability to transfer beneficial interests in such
a global security.
So long as DTC, or its nominee, is the registered owner of the global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the book-entry securities for all purposes under the
indenture. Except as described in this section, beneficial owners will not be
entitled to have book-entry securities registered in their names, will not
receive or be entitled to receive physical delivery of securities in definitive
form and will not be considered the owners or holders of the securities under
the indenture.
To facilitate subsequent transfers, all debt securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of debt securities with DTC and their registration in the
name of Cede & Co. do not effect any change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the debt securities. DTC's records
reflect only the identity of the Direct Participants to whose accounts the debt
securities are credited, which may or may not be the beneficial owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers. Conveyance of notices and other communications by DTC
to Direct Participants, by Direct Participants to Indirect Participants, and by
Direct Participants and Indirect Participants to beneficial owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect at various times.
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Neither DTC nor Cede & Co. will consent or vote with respect to debt
securities. Under its usual procedures, DTC mails us an Omnibus Proxy as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
debt securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payment of principal of and any premium and interest on book-entry
securities represented by any global security registered in the name of or held
by the depositary or its nominee will be made by us through the trustee or
through a paying agent (the "Paying Agent"), which may also be the trustee under
the indenture, to DTC or its nominee. We, the trustee and the Paying Agent will
treat DTC or its nominee as the registered owner and holder of the global
security representing the book-entry securities for all purposes. Accordingly,
we, the trustee and the Paying Agent will have no responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests in a global security representing the book-entry
securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
DTC will credit Direct Participants' accounts on the payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to beneficial owners will be governed by standing instructions
and customary practices, as in the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the Paying Agent, or us,
subject to any statutory or regulatory requirements as may be in effect from
time to time. Payment of principal and interest to DTC is our responsibility or
that of the Paying Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
No global security described above may be transferred except as a whole by
the depositary for such global security to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary.
Notwithstanding any provision of the indenture or any debt security
described in this prospectus, a global security representing book-entry
securities is exchangeable for certificated debt securities in registered form,
of like tenor and of an equal aggregate principal amount only if:
- the depositary notifies us that it is unwilling or unable to continue as
depositary for the global security or if the depositary ceases to be a
clearing agency registered under the Exchange Act or to be qualified to
act as depositary as required by the indenture;
- we determine in our sole discretion that such global security shall be
exchangeable for certificated debt securities in registered form; or
- an event of default with respect to the debt securities debt securities
has occurred and is continuing. Any global security that is exchangeable
pursuant to the preceding clause will be exchangeable in whole for
certificated debt securities in registered form, of like tenor and of an
equal aggregate principal amount, and, unless otherwise specified in the
applicable prospectus supplement, in denominations of $1,000 and integral
multiples thereof.
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Such certificated debt securities will be registered in the name or names
of such person or persons as instructed by the depositary to the trustee. It is
expected that such instructions may be based upon directions received by the
depositary from its Participants with respect to ownership of beneficial
interests in such global security.
Except as provided above, no global security representing book-entry
securities will be exchangeable, except for another global security of like
denomination and tenor to be registered in the name of the depositary or its
nominee. Accordingly, to exercise any rights of a holder under the indenture,
each beneficial owner of an interest in the global security must rely on the
procedures of the depositary and, if that person is not a Participant, on the
procedures of the Participant through which such person owns its interest. We
understand that under existing industry practices, in the event that we request
any action of holders of debt securities or a beneficial owner of an interest in
the global security desires to give or take any action that a holder is entitled
to give or take under the indenture, the depositary would authorize the
Participants holding the relevant beneficial interests to give or take such
action, and the Participants would authorize beneficial owners owning through
the Participant to give or take action or would otherwise act upon the
instructions of beneficial owners owning through them.
The information contained in this section regarding DTC and its procedures
is based on publicly available information reviewed by us.
DEFEASANCE OF OFFERED DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN
CIRCUMSTANCES
Defeasance and Discharge. The terms of any series of debt securities may
provide that under certain conditions we will be discharged from any and all
obligations in respect of the debt securities of that series (except for certain
obligations to register the transfer or exchange of debt securities, to replace
stolen, lost or mutilated debt securities, to maintain paying agencies and to
hold moneys for payment in trust) upon the deposit with the trustee, in trust
for the benefit of the holders of the debt securities, of money and/or U.S.
government obligations or, in the case of debt securities denominated in foreign
currencies, money and/or foreign government securities which, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient to pay any installment of principal (and premium,
if any) and interest on, and any mandatory sinking fund payments in respect of,
the debt securities of that series on the stated maturity of the payment in
accordance with the terms of the indenture and the debt securities.
This discharge may only occur if, among other things, we have delivered to
the trustee an opinion of counsel to the effect that we have received from, or
there has been published by, the United States Internal Revenue Service a
ruling, or there has been a change in tax law, in either case to the effect that
holders of the debt securities will not recognize gain or loss for federal
income tax purposes as a result of the deposit, defeasance and discharge and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would have been the case if the deposit, defeasance and
discharge were not to occur. (Sections 1402 and 1404) This discharge will not be
applicable to any debt securities of that series then listed on any securities
exchange if the provision would cause the debt securities to be de-listed.
(Section 1404)
Defeasance of Certain Covenants. The indenture provides that the terms of
any series of debt securities may provide us with the option of not complying
with certain restrictive
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covenants described in Sections 801, 1008 and 1009 of the indenture, including
any that may be described in the applicable prospectus supplement. In those
circumstances, the occurrence of certain events of default, which are described
above in the fourth bullet point (with respect to those restrictive covenants)
under "Events of Default," and any that may be described in the applicable
prospectus supplement will be deemed not to be or result in an event of default
with respect to such debt securities. (Section 1403) To exercise this option, we
will be required to deposit with the trustee money and/or U.S. government
obligations (or, in the case of debt securities denominated in foreign
currencies, money and/or foreign government securities), which, through the
payment of interest and principal in accordance with their terms, will provide
money in an amount sufficient to pay principal (and premium, if any) and
interest on, and any mandatory sinking fund payments in respect of, the debt
securities of such series on the stated maturity of such payments in accordance
with the terms of the indenture and those debt securities. (Section 1404)
We will also be required to deliver to the trustee an opinion of counsel to
the effect that the deposit and related covenant defeasance will not cause the
holders of the debt securities of that series to recognize income, gain or loss
for federal income tax purposes and that such holders will be subject to federal
income tax on the same amount, in the same manner and at the same times as would
have been the case if such deposit and defeasance were not to occur. (Section
1404) In the event we exercise this option and the debt securities of that
series are declared due and payable because of the occurrence of any event of
default, the amount of money and U.S. government obligations or foreign
government securities, as the case may be, on deposit with the trustee will be
sufficient to pay amounts due on the debt securities of that series at the time
of their stated maturity. However, the amount on deposit with the trustee may
not be sufficient to pay amounts due on the debt securities of that series at
the time of the acceleration resulting from the event of default. In that case
we would remain liable for the payments.
The prospectus supplement will state if any defeasance provision will apply
to the offered debt securities.
NOTICES
Notices to holders of debt securities will be given by mail to the
addresses of such holders as they may appear in our security register. (Sections
101 and 106)
TITLE
We, the trustee and any agent of ours or of the trustee may treat the
person in whose name a debt security is registered on the applicable record date
as the owner of the debt security (whether or not the debt security may be
overdue) for the purpose of making payment and for all other purposes. (Section
309)
GOVERNING LAW
The indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York without regard to principles
of conflicts of laws. (Section 112)
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TRUSTEE
The trustee may resign or be removed with respect to one or more series of
debt securities and we may appoint a successor trustee to act with respect to
such series. (Section 610) In the event that two or more persons are acting as
trustee with respect to different series of debt securities, each trustee will
be a trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee (Section 611), and any action described in
this prospectus to be taken by the "trustee" may then be taken by each trustee
with respect to, and only with respect to, the one or more series of securities
for which it is trustee.
We maintain customary banking relationships with the trustee. The trustee
also serves as our registrar and transfer agent.
PLAN OF DISTRIBUTION
We may sell our debt securities:
- through agents,
- through underwriters or dealers,
- directly to one or more purchasers, or
- through some combination of these methods.
BY AGENTS
The debt securities may be sold through agents we designate. Except as
otherwise set forth in a prospectus supplement, the agents will agree to use
their reasonable best efforts to solicit purchases for the period of their
appointment.
BY UNDERWRITERS
If underwriters are used in the sale, the underwriters will acquire the
debt securities for their own account. The underwriters may resell the
securities in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The obligations of the underwriters to purchase the securities will be subject
to certain conditions. The underwriters will be obligated to purchase all the
securities of the series offered if any of the securities are purchased. Any
initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time.
BY DEALERS
If dealers are used in the sale, we will sell the debt securities to the
dealers, as principal. The dealers may then resell the debt securities to the
public at varying prices to be determined by them at the time of sale.
DIRECT SALES
We may also directly sell debt securities. In this case, no underwriters,
dealers or agents would be involved.
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GENERAL INFORMATION
Underwriters, dealers and agents that participate in the distribution of
the offered securities may be deemed underwriters under the Securities Act of
1933, and any discounts or commissions they receive from us and any profit on
their resale of the debt securities may be treated as underwriting discounts and
commissions under the Securities Act of 1933. Any underwriters, dealers or
agents will be identified and their compensation described in a prospectus
supplement.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, or to contribute to payments that the underwriters,
dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
Each series of debt securities will be a new issue with no established
trading market. We do not intend to list any of the debt securities on a
national securities exchange or quotation system. It is possible that one or
more underwriters or broker-dealers may make a market in the debt securities,
but will not be obligated to do so and may discontinue any market making at any
time without notice. Therefore, we can give you no assurance as to the existence
or liquidity of a trading market for any of the debt securities.
In connection with an offering of our debt securities, underwriters,
dealers or agents may purchase and sell them in the open market. These
transactions may include stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or slowing a decline in the market price of the debt securities; and syndicate
short positions involve the sale by the underwriters or agents, as the case may
be, of a greater number of securities than they are required to purchase from us
in the offering. Underwriters also may impose a penalty bid, which means that
the underwriting syndicate may reclaim selling concessions allowed to syndicate
members or other broker dealers who sell securities in the offering for their
account if the syndicate repurchases the securities in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the debt securities, which may be higher than the price that
might otherwise prevail in the open market. These activities, if commenced, may
be discontinued at any time without notice. These transactions may be effected
on any securities exchange on which the debt securities may be listed, in the
over-the-counter market or otherwise.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the Common Stock is The Bank of New
York, New York, New York.
LEGAL MATTERS
Robinson, Bradshaw & Hinson, P.A., Charlotte North Carolina, will issue an
opinion for us regarding the validity of the debt securities and certain other
legal matters. Russell M. Robinson, II, a shareholder in the firm of Robinson,
Bradshaw & Hinson, P.A., is Chairman of our Board of Directors. Robinson,
Bradshaw & Hinson, P.A. is our principal outside legal counsel. Certain members
of such firm beneficially owned approximately 113,680 shares of
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our common stock as of the date of this prospectus. Certain legal matters in
connection with the debt securities will be passed on for any underwriters,
dealers and agents named in the prospectus supplement by Fennebresque, Clark,
Swindell & Hay, Charlotte, North Carolina or any other counsel named in the
prospectus supplement.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect to such financial statements and schedules, and are
incorporated by reference in reliance upon the authority of such firm as experts
in giving such reports.
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, 1999
$200,000,000
CARAUSTAR INDUSTRIES, INC.
(CARAUSTAR LOGO)
% NOTES DUE , 2009
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PROSPECTUS SUPPLEMENT
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Joint Book-Running Managers
BANC OF AMERICA SECURITIES LLC BT ALEX. BROWN
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DONALDSON, LUFKIN & JENRETTE
SUNTRUST EQUITABLE SECURITIES CORPORATION
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