Exhibit 99.1
FOR IMMEDIATE RELEASE
October 28, 2005
| CONTACT: | Ronald J. Domanico | |
| Senior Vice President and | ||
| Chief Financial Officer | ||
| (770) 948-3101 |
CARAUSTAR INDUSTRIES, INC. REPORTS
THIRD QUARTER 2005 RESULTS
ATLANTA, Georgia - Caraustar Industries, Inc. (NASDAQ-NMS Symbol: CSAR) today announced that sales for the third quarter ended September 30, 2005 were $267.8 million compared to sales of $273.8 million for the same quarter in 2004. Net income for the third quarter of 2005 was $0.1 million, or $0.00 per share, compared to the third quarter 2004 net loss of $0.6 million, or $0.02 per share. The third quarter 2005 and 2004 results included restructuring and impairment (benefits) costs of approximately ($0.5 million) and $5.1 million pre-tax, or ($0.01) and $0.11 per share, respectively. Negatively impacting third quarter 2005 results were nonrecurring costs of $0.6 million ($0.01 per share) to provide for certain retirement benefits and $0.5 million ($0.01 per share) related to accelerated depreciation for the previously announced closure of the Palmer, Massachusetts carton plant and the closure of the Mobile, Alabama tube and core plant in the third quarter of 2005. Results in the third quarter of 2004 were negatively impacted by approximately $0.17 per share (including the $0.11 per share in restructuring costs from above) related to rightsizing initiatives, Sarbanes-Oxley compliance preparation, hurricane damage in the Southeast, and costs associated with the repurchase of the company’s 9 7/8 percent Senior Subordinated Notes.
Mill volume, excluding joint ventures, in the third quarter was down approximately 12.4 thousand tons compared to the same quarter last year as demand softened across all paperboard substrates. Gypsum facing paper at the company’s 50-percent owned unconsolidated Premier Boxboard Limited LLC (PBL) joint venture increased in volume by 22.1 percent over third quarter 2004. Income from operations before restructuring and impairment costs in the third quarter 2005 versus the third quarter 2004 was favorably impacted by $2.0 million from higher pricing on mill tons sold as well as $0.8 million in improved net results from its tube and core converting business. This was more than offset by the $4.3 million impact from the decline in consolidated mill volume, $2.0 million in higher freight costs, $4.5 million in higher fuel and energy costs, and $1.0 million in higher pension and other employee costs.
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. P. O. BOX 115 . AUSTELL, GA 30168-0115
AUSTELL THREADMILL COMPLEX . 5000 AUSTELL-POWDER SPRINGS ROAD . SUITE 300
AUSTELL, GA 30106-3227 . PHONE 770 . 948 . 3101
www.caraustar.com
Caraustar Industries, Inc.
October 28, 2005
Page 2
Nine-Month Period Ended September 30, 2005
For the nine-month period ended September 30, 2005, sales were $806.6 million, an increase of 0.9 percent from sales of $799.4 million in 2004. Net income per share was $0.02 for the first nine months of 2005, including $0.01 in restructuring and impairment costs. Net loss for the first nine months of 2004 was $0.20 per share, including $0.23 in restructuring and impairment costs. A $10.7 million increase in equity in income of unconsolidated affiliates, combined with lower restructuring charges for the first nine months of 2005, drove the $12.3 million improvement in income (loss) before income taxes and minority interest over the first nine months of 2004. Strong pricing and volume growth in the two joint ventures more than offset volume declines in the company’s mill system and increased freight, energy and selling, general and administrative costs in the first nine months of 2005.
Michael J. Keough, president and chief executive officer of Caraustar, commented, “We began to see signs of an improved pricing environment late in the third quarter of 2005 as energy and freight increases reached critical levels. However, it remains unclear whether price increases and energy surcharges will be sufficient to keep pace with rapidly increasing input costs. Our mill group operated at 92.6 percent for the third quarter of 2005 compared to 96 percent for the same quarter last year. The industry operated at 93.5 percent versus 87.1 percent for the same periods. The bright spots for Caraustar continue to be the gypsum facing paper businesses at PBL (which produces light-weight gypsum facing paper) and the resumption of normal production at Sweetwater Paperboard (which produces specialty gypsum facing paper) following a machine upgrade that reduced efficiencies during much of the first half of this year. Our Standard Gypsum wallboard joint venture continues to perform at record levels.
“We continue to focus on operational efficiencies, cost reduction and other internal initiatives to mitigate rising costs, and we remain optimistic with regard to recent price increase announcements.”
Joint Ventures
Caraustar’s 50-percent interest in the PBL mill and the two Standard Gypsum wallboard manufacturing facilities contributed $9.6 million and $27.5 million of equity in income of unconsolidated affiliates for the three-month and nine-month periods ended September 30, 2005, an increase of 24.1 percent and 63.8 percent, respectively. Cash distributions to Caraustar were $29.0 million for the nine-month period ended September 30, 2005 versus $11.5 million for the same period in 2004.
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Caraustar Industries, Inc.
October 28, 2005
Page 3
Liquidity
The company ended the third quarter of 2005 with a cash balance of $90.7 million after making a $13.2 million pension contribution on September 15, 2005. For the nine-month period ended September 30, 2005, Caraustar generated $17.9 million of cash from operating activities, compared to $28.9 million the previous year. Capital expenditures increased year-over-year from $15.6 million to $18.0 million in 2005. As of September 30, 2005 the company had no borrowings outstanding under its $75.0 million revolving credit facility but does have $38.3 million of letters of credit outstanding that reduce availability. During October 2005, the company repurchased $5.0 million of its 9.875 percent Senior Subordinated Notes.
Caraustar, a recycled packaging company, is one of the world’s largest integrated manufacturers of converted recycled paperboard. Caraustar has developed its leadership position in the industry through diversification and integration from raw materials to finished products. Caraustar serves the four principal recycled boxboard product end-use markets: tubes, cores and composite cans; folding cartons; gypsum facing paper and specialty paperboard products. For additional information on Caraustar, please visit the company’s website at www.caraustar.com.
Caraustar Industries, Inc. (NASDAQ-NMS: CSAR) will host a conference call to review third quarter 2005 financial results on Friday, October 28, 2005 beginning at 9:00 a.m. (EDT) that will be webcast live. In order to listen to the webcast of its conference call, participants can log on to the Caraustar website at www.caraustar.com and look for the webcast button/icon on the “Investor Relations” page.
This press release may contain certain “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, that represent the company’s expectations, anticipations or beliefs about future events, operating results, financial condition, business opportunities, cost reduction initiatives or the impact of pricing and cost trends on the company’s business. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially depending on a variety of important factors, including, but not limited to, fluctuations in raw material prices and energy costs, increases in pension and insurance costs, downturns in industrial production, housing and construction and the consumption of durable and nondurable goods, the degree and nature of competition, the degree of market receptiveness to price increases and energy surcharges demand for the company’s products, the degree of success achieved by the company’s new product initiatives, changes in government regulations, the company’s ability to complete acquisitions and successfully integrate the operations of acquired businesses, the company’s ability to service its substantial indebtedness and unforeseen difficulties with the consolidation, integration or relocation of the company’s accounting and control operations, IT systems or legal function. Additional relevant risk factors that could cause actual results to differ materially are discussed in the company’s registration statements and its most recent reports on Form 10-K, 10-Q and 8-K, as amended, filed with or furnished to, the Securities Commission. These documents may be accessed through the web site of the Securities and Exchange Commission (www.sec.gov). The company does not undertake any obligation to update any forward-looking statements and is not responsible for any changes made to this press release by wire or Internet services.
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Caraustar Industries, Inc.
Unaudited Supplemental Data
For the Eight Quarters Ending September 30, 2005
| Volume Sold (tons 000’s): |
Q3 2005 |
Q2 2005 |
Q1 2005 |
Q4 2004 |
Q3 2004 |
Q2 2004 |
Q1 2004 |
Q4 2003 | ||||||||||||||||
| CSAR Mill Tons Sold (Market) * |
188.1 | 182.1 | 183.6 | 176.2 | 182.3 | 175.1 | 168.4 | 152.4 | ||||||||||||||||
| CSAR Mill Tons Converted |
102.7 | 109.0 | 109.6 | 100.9 | 111.4 | 109.8 | 105.8 | 95.8 | ||||||||||||||||
| Total CSAR Mill Tons * |
290.8 | 291.1 | 293.2 | 277.1 | 293.7 | 284.9 | 274.2 | 248.2 | ||||||||||||||||
| Outside Paperboard Purchased |
29.5 | 30.3 | 31.5 | 33.0 | 34.1 | 34.9 | 32.4 | 29.7 | ||||||||||||||||
| Total Paperboard Controlled * |
320.3 | 321.4 | 324.7 | 310.1 | 327.8 | 319.8 | 306.6 | 277.9 | ||||||||||||||||
| Tube & Core Tons |
79.7 | 83.4 | 83.4 | 81.7 | 86.9 | 85.8 | 84.5 | 80.7 | ||||||||||||||||
| Folding Carton Tons |
96.6 | 99.1 | 105.5 | 97.2 | 103.1 | 100.3 | 105.7 | 91.1 | ||||||||||||||||
| Gypsum Paper Tons * |
74.5 | 65.1 | 65.4 | 66.2 | 65.7 | 60.9 | 52.2 | 49.0 | ||||||||||||||||
| Other Specialty Tons * |
69.5 | 73.8 | 70.4 | 65.0 | 72.1 | 72.8 | 64.2 | 57.1 | ||||||||||||||||
| Total Paperboard Controlled * |
320.3 | 321.4 | 324.7 | 310.1 | 327.8 | 319.8 | 306.6 | 277.9 | ||||||||||||||||
| PBL gypsum facing and other specialty paper sold * |
52.0 | 51.1 | 49.1 | 44.4 | 42.6 | 36.6 | 28.3 | 24.5 | ||||||||||||||||
| EBITDA ($ in millions) |
$ | 20.5 | $ | 24.7 | $ | 14.3 | $ | 20.3 | $ | 17.8 | $ | 17.4 | $ | 9.0 | $ | 10.5 | ||||||||
| Changes in Selling Price and Costs ($/ton): |
||||||||||||||||||||||||
| Q3 2005 vs. Q3 2004 |
Q3 2005 vs. Q2 2005 |
|||||||
| Mill Average Selling Price |
$ | 8.0 | $ | 2.6 | ||||
| Mill Average Fiber Cost |
0 | 3.8 | ||||||
| Mill Average Fuel & Energy Cost |
16.9 | 8.9 | ||||||
| Net Increase (Decrease) |
$ | (8.9 | ) | $ | (10.1 | ) | ||
| Tubes and Cores Average Selling Price |
$ | 54.1 | $ | 8.5 | ||||
| Tubes & Cores Average Paperboard Cost |
(2.4 | ) | (5.4 | ) | ||||
| Net Increase (Decrease) |
$ | 56.5 | $ | 13.9 | ||||
| * | Includes gypsum facing and other specialty paper sold by Caraustar’s 50% owned unconsolidated Premier Boxboard (“PBL”) joint venture. |
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2005 |
2004 |
2005 |
2004 |
|||||||||||||
| SALES |
$ | 267,761 | $ | 273,789 | $ | 806,597 | $ | 799,355 | ||||||||
| COST OF SALES |
234,475 | 232,900 | 694,156 | 678,481 | ||||||||||||
| Gross profit |
33,286 | 40,889 | 112,441 | 120,874 | ||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
33,589 | 33,831 | 105,453 | 103,098 | ||||||||||||
| (Loss) income from operations before restructuring and impairment costs |
(303 | ) | 7,058 | 6,988 | 17,776 | |||||||||||
| RESTRUCTURING AND IMPAIRMENT |
566 | (5,121 | ) | (342 | ) | (10,654 | ) | |||||||||
| Income from operations |
263 | 1,937 | 6,646 | 7,122 | ||||||||||||
| OTHER (EXPENSE) INCOME: |
||||||||||||||||
| Interest expense |
(10,466 | ) | (10,336 | ) | (31,568 | ) | (31,597 | ) | ||||||||
| Interest income |
748 | 249 | 1,811 | 596 | ||||||||||||
| Equity in income of unconsolidated affiliates |
9,615 | 7,746 | 27,531 | 16,810 | ||||||||||||
| Other, net |
35 | (81 | ) | 381 | (400 | ) | ||||||||||
| (68 | ) | (2,422 | ) | (1,845 | ) | (14,591 | ) | |||||||||
| INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST |
195 | (485 | ) | 4,801 | (7,469 | ) | ||||||||||
| (PROVISION) BENEFIT FOR INCOME TAXES |
(118 | ) | (79 | ) | (4,050 | ) | 1,988 | |||||||||
| MINORITY INTEREST IN INCOME |
(32 | ) | (32 | ) | (138 | ) | (145 | ) | ||||||||
| NET INCOME (LOSS) |
$ | 45 | $ | (596 | ) | $ | 613 | $ | (5,626 | ) | ||||||
| BASIC |
||||||||||||||||
| NET INCOME (LOSS) PER COMMON SHARE |
$ | 0.00 | $ | (0.02 | ) | $ | 0.02 | $ | (0.20 | ) | ||||||
| Weighted average number of shares outstanding |
28,780 | 28,506 | 28,769 | 28,449 | ||||||||||||
| DILUTED |
||||||||||||||||
| NET INCOME (LOSS) PER COMMON SHARE |
$ | 0.00 | $ | (0.02 | ) | $ | 0.02 | $ | (0.20 | ) | ||||||
| Weighted average number of shares outstanding |
28,878 | 28,506 | 28,887 | 28,449 | ||||||||||||
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
| September 30, 2005 |
December 31, 2004 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 90,670 | $ | 89,756 | ||||
| Receivables, net of allowances |
119,485 | 102,644 | ||||||
| Inventories |
86,134 | 89,044 | ||||||
| Refundable income taxes |
399 | 409 | ||||||
| Current deferred tax asset |
9,060 | 11,035 | ||||||
| Other current assets |
14,138 | 11,059 | ||||||
| Total current assets |
319,886 | 303,947 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: |
||||||||
| Land |
11,802 | 11,856 | ||||||
| Buildings and improvements |
139,103 | 138,872 | ||||||
| Machinery and equipment |
629,245 | 616,791 | ||||||
| Furniture and fixtures |
16,583 | 15,725 | ||||||
| 796,733 | 783,244 | |||||||
| Less accumulated depreciation |
(411,783 | ) | (395,110 | ) | ||||
| Property, plant and equipment, net |
384,950 | 388,134 | ||||||
| GOODWILL |
183,130 | 183,130 | ||||||
| INVESTMENT IN UNCONSOLIDATED AFFILIATES |
58,246 | 59,676 | ||||||
| OTHER ASSETS |
22,979 | 24,818 | ||||||
| $ | 969,191 | $ | 959,705 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current maturities of debt |
$ | 80 | $ | 80 | ||||
| Accounts payable |
90,505 | 84,890 | ||||||
| Accrued interest |
20,113 | 8,810 | ||||||
| Accrued compensation |
11,042 | 11,742 | ||||||
| Capital lease obligations |
510 | 79 | ||||||
| Other accrued liabilities |
33,153 | 34,880 | ||||||
| Total current liabilities |
155,403 | 140,481 | ||||||
| LONG-TERM DEBT, less current maturities |
502,800 | 506,141 | ||||||
| LONG-TERM CAPITAL LEASE OBLIGATIONS |
721 | 0 | ||||||
| DEFERRED INCOME TAXES |
59,411 | 57,320 | ||||||
| PENSION LIABILITY |
26,898 | 32,897 | ||||||
| OTHER LIABILITIES |
5,303 | 5,614 | ||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Common stock |
2,878 | 2,875 | ||||||
| Additional paid in capital |
192,023 | 191,903 | ||||||
| Unearned compensation |
(3,690 | ) | (4,334 | ) | ||||
| Retained earnings |
49,165 | 48,552 | ||||||
| Accumulated other comprehensive loss |
(21,721 | ) | (21,744 | ) | ||||
| Total shareholders’ equity |
218,655 | 217,252 | ||||||
| $ | 969,191 | $ | 959,705 | |||||
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
| For the Nine Months Ended September 30 |
||||||||
| 2005 |
2004 |
|||||||
| Cash provided by |
||||||||
| Operating activities: |
||||||||
| Net income (loss) |
$ | 613 | $ | (5,626 | ) | |||
| Depreciation and amortization |
21,305 | 22,558 | ||||||
| Stock-based compensation expense |
640 | 1,610 | ||||||
| (Gain) loss on repurchase of debt |
(121 | ) | 301 | |||||
| Restructuring and impairment costs |
(171 | ) | 2,967 | |||||
| Deferred income taxes |
3,936 | (3,413 | ) | |||||
| Equity in income of unconsolidated affiliates, net of distributions |
1,469 | (5,310 | ) | |||||
| Changes in operating assets and liabilities |
(9,810 | ) | 15,795 | |||||
| Net cash provided by operating activities |
17,861 | 28,882 | ||||||
| Investing activities: |
||||||||
| Purchases of property, plant and equipment |
(17,982 | ) | (15,644 | ) | ||||
| Proceeds from disposal of property, plant and equipment 2,811 |
|
2,041 | ||||||
| Investment in unconsolidated affiliates |
(40 | ) | (150 | ) | ||||
| Net cash used in investing activities |
(15,211 | ) | (13,753 | ) | ||||
| Financing activities: |
||||||||
| Repayments of long-term debt |
(2,413 | ) | (14,176 | ) | ||||
| Payments for capital leases |
(380 | ) | (139 | ) | ||||
| Proceeds from swap agreement unwinds |
826 | 380 | ||||||
| Issuances of stock, net of forfeitures |
231 | 2,450 | ||||||
| Net cash used in financing activities |
(1,736 | ) | (11,485 | ) | ||||
| Net increase in cash and cash equivalents |
914 | 3,644 | ||||||
| Cash and cash equivalents at beginning of period |
89,756 | 85,551 | ||||||
| Cash and cash equivalents at end of period |
$ | 90,670 | $ | 89,195 | ||||
| Cash payments for interest |
$ | 23,268 | $ | 22,441 | ||||
| Income tax payments |
$ | 370 | $ | 1,264 | ||||
| Capital lease obligations incurred |
$ | 1,532 | $ | 0 | ||||