EXHIBT 99.1
Welcome . . .
26th Annual Meeting of Shareholders
May 18, 2005
Presented by
Michael J. Keough President & Chief Executive Officer
2004 HIGHLIGHTS
Year of Transformation
Returned to Profitability
Improved Market Backdrop
SAFETY PERFORMANCE
Cases/200,000 Man Hours
20
15
10
5
0
19.2
16.1
13.7
12.2
9.7
7.6
7.2
6.5
7.3
5.4
5.3
5.3
4.4
3.9
3.5
2.8
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
Thru Apr 05
CARAUSTAR vs. RECYCLED BOXBOARD INDUSTRY
Mill Volume Growth 2004 vs. 2003
Business
Caraustar
Industry
Tube & Core
4.6%
4.9%
Folding
-2.8%
-1.1%
Gypsum Facings
30.8%
8.2%
Specialty Paperboard
19.8%
0.2%
Total Volume Gains
9.1%
2.6%
Annual Review
Presented by
Ronald J. Domanico Senior VP and Chief Financial Officer
2004 ACCOMPLISHMENTS
Governance
Four Initiatives
Investor Returns
Organization Initiatives
Strategic Initiatives
2004 ACCOMPLISHMENTS:
Governance Initiatives
Policies and procedures
IT systems improvements
S.E.C. review
Sarbanes-Oxley (SOX)
THE SARBANES-OXLEY ACT OF 2002 – “SOX”
Requirements
The CEO and CFO must certify that periodic reports fully comply with the Securities Exchange Act of 1934 and they fairly present, in all material respects, the financial position and results of the Company
The CEO and CFO must certify that Internal Controls are effective
Illegal for any officer or director to fraudulently influence, coerce, manipulate or mislead any auditor
Financial disclosure requirements
“Rapid and current” disclosure of material changes in the financial condition or operations of the Company
SOX ACCOMPLISHMENTS
410 key controls identified
3,300 individual key control audits completed
Over 18,000 individual data sources reviewed
Testing Coverage
53% of Total Assets
51% of Total Revenues
84% of Total Inventory
Results
NO Material Weaknesses
NO Significant Deficiencies
17 Deficiencies (8 financial, 9 IT)
We PASSED!
SOX IMPLICATIONS FOR 2005
Make it a habit – the “NEW” way of doing business
Automate it make it less work make it difficult to “mess up”
Communicate, communicate, communicate – no surprises!
The “Fed Sox” — “Reverse the Curse”
We must get back to building our business!!!
SOX – WHAT IT COST
($000’s)
Permanent:
One-Time:
Audit Fees 400
8 Accountants/Analysts 600
18 IT Employees 1,500
2,500
Consultants 1,500
FOUR INITIATIVES
Caraustar is on the way to returning to historic levels of profitability through four key initiatives
1. Right-sizing
2. Procurement Leverage
3. SG&A Reduction/centralized process
4. Working Capital Optimization
FOUR INITIATIVES: Right-sizing
Matching supply to demand
Running more product on fewer, more efficient machines
One-Time Costs
Year
Cash
Non-Cash
Total
Annual Cash Savings
2002 $9.3 $8.0 $17.3 -
2003 $6.2 $10.5 $16.7 $15.7
2004 $6.3 $15.2 $21.5 $24.0
Total $21.8 $33.7 $55.5 $25.5
FOUR INITIATIVES: Procurement Leverage
Use our scale as a billion dollar company
Centralized Process
External Annual 2004 2005 ($ millions) Spend Savings Savings Savings
Fiber, Freight & Fuel $339 ??? $2 $2
Chemicals, Corrugated & Clothing (1) $71 $9 $4 $9
Coatings, Ink, Temp Labor, IT (2) $85 $9 $0 $5
Non-sourceable (taxes, benefits) $25 $0 $0 $0
Future sourceable $247 $12 $0 $0 $767 $30 $6 $16
(1) MRO, starch, lift trucks, electrical, travel, screens & plates, cell phones, FedEx, oil, propane, office supplies (2) Pallets, adhesives, plates & dies, labels & graphics, communications, waste disposal
FOUR INITIATIVES: SG&A Reduction
Centralized Support Services
Aggressively address insurances, professional services, etc.
As Reported ($ millions)
Year Sales SG&A %
Excluding Nonrecur.
Items*
2002 $936.8 $136.9 14.6% 14.6%
2003 $992.2 $148.0 14.9% 13.8%
2004 $1,060.3 $136.4 12.9% 12.4%
Caraustar Peer Group 10.2%
Gap to average $28.3 2.7%
See supplemental information regarding non-GAAP measures included in the Company’s Form 8-K furnished on May 18, 2005.
FOUR INITIATIVES: Working Capital Optimization
Proactively manage the supply chain
Collect and pay at industry norms
Amount ($ millions) Days
2002 2003 2004 2002 2003 2004
Inventories $107.6 $87.6 $89.0 45.5 39.0 36.1
Receivables 106.1 93.9 102.6 37.1 34.5 35.3
Payables (60.0) (75.0) ($84.9) 25.0 33.4 34.4
Total $153.7 $106.5 $106.8
FOUR INITIATIVES: 2004 Impact
Income (Loss) From Operations Before Restructuring Costs ($ millions)
Incremental Savings Incremental Spending Restructuring 2004 Impact
Right-sizing $8.3 $21.5 $19.4 $6.2
Procurement Leverage $6.0 $1.0 $0.0 $5.0
SG&A Reduction $11.6 $9.5 $2.7 $4.8 $25.9 $32.0 $22.1 $16.0
FOUR INITIATIVES: 2005 Impact
Income (Loss) From Operations Before Restructuring Costs ($ millions)
Incremental Savings Incremental Spending Restructuring 2005 Impact
Right-sizing $1.5 ($16.5) ($14.4) $3.6
Procurement Leverage $10.0 $1.0 $0.0 $9.0
SG&A Reduction $0.0 ($3.0) ($1.2) $1.8 $11.5 ($18.5) ($15.6) $14.4
Energy (Fuel, Freight, Petroleum-based Raw Materials) up $6.5 million in Q1.
2004 ACCOMPLISHMENTS
Full Year Ending Dec. 31, 2003 Dec. 31, 2004 Change
Total Volume * (tons in thousands) 1,158 1,264 9.1%
Sales $992.2 $1,060.3 6.9%
Gross Profit $156.9 $159.9 1.9%
SG&A Expense $148.0 $136.4 ($7.8)
Income from operations ($6.2) $11.7 $17.9M
J.V.’s (EIUA) $8.4 $25.3 $16.9M
EPS ($0.97) ($0.14) $0.83M
Capital Expenditures $20.0 $20.9 $0.9M
EBITDA** $45.4 $65.0 $19.1M
*Includes gypsum and other specialty volume from our 50% owned PBL joint venture. **See supplemental information regarding non-GAAP financial measures included in the Company’s Form 8-K furnished on May 18, 2005.
2004 ACCOMPLISHMENTS:
Investor Returns
Our stock price increased 21.9%
Our bond prices increased
Cash increased from $85.6 million to $89.8 million
Renegotiated the revolving credit facility
2004 ACCOMPLISHMENTS:
Organization Initiatives
Safety improved to record levels
Consolidation of Finance and Accounting
Centralization of Human Resources
IT transformation project
2004 ACCOMPLISHMENTS:
Organization Initiatives (continued)
New senior management structure
First in-house legal department
New pension plan
New healthcare provider
2004 ACCOMPLISHMENTS:
Strategic Initiatives
“Balance Sheet Initiative” developed
PBL gypsum facing paper increased 78.7%
Formation of the PaperLink joint venture
Implemented the “Caraustar Compass”
Thank you . . .
for your presence here today and for your continuing interest and support for our company. www.caraustar.com
Note Regarding Non-GAAP Financial Measures
This presentation includes the following financial measures: “EBITDA Reconciliation” and “SG&A as a percentage of sales”. These items were discussed during the Company’s 2005 Annual Meeting of Shareholders in Austell, Georgia on May 18, 2005. These items are not financial measures under generally accepted accounting principles in the United States. Because these items are not GAAP financial measures, other companies may present similarly titled items determined with differing adjustments. Accordingly, these measures as presented herein should not be used to evaluate the Company’s performance by comparison to any similarly titled measures presented by other companies. The Company has included these non-GAAP financial measures because it uses these measures, and believes these measures are useful, in evaluating the Company’s cash position and its ability to generate cash, as well as its position and performance with regard to SG&A items. The following tables include a reconciliation of these non-GAAP financial measures with the most comparable GAAP measurement. Investors are strongly urged to review these reconciliations. In addition, the exclusion of certain adjustment items in the calculation of these non-GAAP measures does not imply that such items are non-recurring, infrequent or unusual. The Company has experienced such items in prior periods, and may experience similar items in future periods.
Carustar Industries, Inc.
Reconciliation of GAAP Income (Loss) to EBITDA
(in thousands)
| Twelve Months Ended December 31, 2004 |
||||
| Net (Loss) Income GAAP |
($3,979 | ) | ||
| Plus: Tax Provision (Benefit) |
($1,534 | ) | ||
| Plus: Interest Expense |
$ | 42,160 | ||
| Plus: Depreciation and Amortization |
$ | 30,089 | ||
| Less: Income from Unconsolidated Affiliates |
($25,251 | ) | ||
| Plus: Distributions from Unconsolidated Affiliates |
$ | 20,250 | ||
| Less Gain on Sale of Real Estate |
($10,323 | ) | ||
| Plus: Non-Cash Restructuring and Impairment |
$ | 13,079 | ||
| Plus: Other-Miscellaneous |
$ | 500 | ||
| EBITDA (Non-GAAP) |
$ | 64,991 | ||
| Twelve Months Ended December 31, 2003 |
||||
| Net (Loss) Income GAAP |
($27,035 | ) | ||
| Plus: Tax Provision (Benefit) |
($15,099 | ) | ||
| Plus: Interest Expense |
$ | 43,905 | ||
| Plus: Depreciation and Amortization |
$ | 30,991 | ||
| Less: Income from Unconsolidated Affiliates |
($8,354 | ) | ||
| Plus: Distributions from Unconsolidated Affiliates |
$ | 6,150 | ||
| Less Gain on Sale of Real Estate |
$ | 0 | ||
| Plus: Non-Cash Restructuring and Impairment |
$ | 14,816 | ||
| Plus: Other-Miscellaneous |
$ | 0 | ||
| EBITDA (Non-GAAP) |
$ | 45,374 | ||
Caraustar Industries, Inc.
Reconciliation of SG&A as a Percentage of Sales
(In Thousands)
| For the Year Ended December 31, 2003 |
For the Year Ended December 31, 2004 |
|||||||
| Sales (GAAP) |
$ | 992,200 | $ | 1,060,275 | ||||
| Selling, General and Administrative Expenses (GAAP) |
$ | 147,998 | $ | 136,445 | ||||
| Selling, General and Administrative Expenses as a Percentage of Sales |
14.9 | % | 12.9 | % | ||||
| Non-Recurring Items (Non-GAAP) |
$ | (11,500 | ) | $ | (5,500 | ) | ||
| Adjusted Selling, General and Administrative |
||||||||
| Expenses (Non-GAAP) |
$ | 136,498 | $ | 130,945 | ||||
| Adjusted Selling, General and Administrative |
||||||||
| Expenses as a Percentage of Sales (Non-GAAP) |
13.8 | % | 12.4 | % | ||||