ATLANTA, Aug. 1 GA-Caraustar-ern
ATLANTA, Aug. 1 /PRNewswire-FirstCall/ -- Caraustar Industries, Inc.
(Nasdaq: CSAR) today announced that sales from continuing operations for the
second quarter ended June 30, 2008 were $217.0 million compared to sales of
$221.2 million for the same quarter in 2007. Net loss from continuing
operations for the second quarter of 2008 was $3.6 million, or $0.13 per
share, compared to a 2007 second quarter loss of $2.5 million, or $0.09 per
share. The second quarter 2008 and 2007 results from continuing operations
included pre-tax restructuring and impairment costs of approximately $5.8
million, or $0.13 per share, and $3.7 million, or $0.08 per share,
respectively. The $2.8 million decrease in pre-tax operating results was
primarily attributable to higher restructuring and impairment costs of $2.1
million.
The company announced on July 22, 2008 the closure of its Chattanooga
Paperboard mill, which is expected to save approximately $9.0 million
(pre-tax) in costs annually. The company expects to incur total pre-tax
charges of approximately $7.1 million associated with the mill closure.
Non-cash impairment of fixed assets in the amount of approximately $5.1
million was recorded in restructuring and impairment costs as of June 30,
2008. Cash costs of approximately $2.0 million related primarily to severance
will be expensed in the third quarter 2008. On July 24 2008, Caraustar sold
its fifty-percent interest in Premier Boxboard Limited, LLC (PBL) to its joint
venture partner, Temple Inland, Inc. for $62 million pre-tax. The company used
approximately $31 million of the proceeds to repay all outstanding debt under
its Senior Credit Facility and had excess sale proceeds of approximately $31
million as well as availability under the revolving portion of the facility of
approximately $42 million post-transaction.
Paperboard volume was essentially unchanged year-over-year. There was an
increase in same-mill coated recycled boxboard (CRB) volume of 0.6 thousand
tons. Caraustar's overall same-mill volume was down 1.2 percent, and
utilization was 90.5 percent, favorably contrasting with industry volume which
was down 7.9 percent with utilization at 88.6 percent. Quarter-over-quarter,
mill margins decreased $33 per ton, eroded primarily by increased fiber costs
of $15 per ton and higher fuel and energy costs of $14 per ton. Tube and core
pricing was up $27 per ton versus the same period last year.
Six-month period ended June 30, 2008
Sales from continuing operations for the six months ended June 30, 2008
were $433.5 million compared to sales of $440.7 million for the same period in
2007. Net loss from continuing operations for the six months ended June 30,
2008 was $3.4 million, or $0.12 per share, compared to a loss of $11.7
million, or $0.41 per share, in the same period last year. Results from
continuing operations for the six-month periods ended 2008 and 2007 included
restructuring and impairment costs of approximately $6.6 million, or $0.14 per
share, and $9.5 million, or $0.21 per share, respectively. The $10.5 million
improvement in pre-tax operating results was primarily attributable to lower
restructuring and impairment costs of $2.9 million, increased equity in income
of unconsolidated affiliates (PBL) of $2.5 million, and a decrease in SG&A as
a percent of sales of 1.2 percent ($5.8 million).
Michael J. Keough, president and chief executive officer of Caraustar,
commented, "Caraustar's operating results before restructuring costs were
positive for the quarter. We are less than satisfied with these results but
pleased that our considerable efforts are mitigating the impact of a sluggish
economy. We are also somewhat encouraged by recent industry announcements
that show market dynamics changing with the removal of over 300,000 tons of
URB mill capacity. In addition to the industry capacity reductions, Caraustar
removed approximately 60,000 tons of URB capacity with the closure of the
Chattanooga Paperboard mill. We believe these actions will positively impact
industry capacity utilization going forward.
"We announced price increases effective in July of $40 per ton on URB
grades and $50 per ton on CRB grades as well as the need to pass through, via
freight surcharges, increased transportation costs. These increases were
driven by higher input costs resulting from current marketplace and economic
conditions. Prices on converted paperboard products were also increased six
percent, effective mid-August. If energy, freight and other costs continue to
increase, additional price increases and cost recovery measures will be
required. Volumes were soft in the second quarter but are anticipated to
improve in the third quarter, which is supported by recent order increases,
particularly for specialty products and folding cartons.
"Management is working diligently on refinancing its 7.375 percent Senior
Notes. Completing the sale of our interest in PBL was a first step and raised
a portion of the funds necessary to refinance the company's Senior Notes. We
have engaged J.P. Morgan Securities Inc. to assist in evaluating financial
alternatives and expect to announce additional components of the refinancing
as we complete them."
Joint Ventures
Caraustar's fifty-percent owned interest in the PBL mill contributed $1.1
million in equity in income from unconsolidated affiliates in the second
quarter 2008 versus $0.4 million in the second quarter of 2007. Cash
distributions were $1.0 million in the second quarter 2008 compared to zero
for the same period last year. Subsequent to quarter-end, the company
received a distribution of $1.6 million prior to the aforementioned sale of
its interest in PBL to Temple-Inland. Both the increase in earnings and cash
distributions were attributable to increased margins, which compensated for
slightly decreased volume.
Liquidity
The company ended the quarter with a cash balance of $80 thousand compared
to $6.5 million at December 31, 2007. For the six-month periods ended June 30,
2008 and 2007, the company used $1.7 million and $12.2 million, respectively,
of cash in operating activities. The change in cash used in operating
activities in the first half of 2008 versus the first half of 2007 of $10.5
million was primarily due to improved operating results. Year-to-date capital
expenditures decreased to $5.8 million from $11.6 million in 2007.
As of June 30, 2008, the company had $25.1 million of availability under
its revolving credit facility after giving effect to $17.0 million in
borrowings outstanding and $16.0 million of letters of credit, which reduce
availability. On July 24, 2008, the company completed the sale of its
fifty-percent membership interest in PBL. Approximately $31 million of the
$62 million of proceeds from the sale were applied to the repayment of the
amounts then outstanding under the Senior Credit Facility, leaving $31 million
in cash and increasing availability under the revolving portion of the
facility to approximately $42 million immediately thereafter.
The company expects to use the balance of the proceeds to enhance
liquidity and to help the company refinance its obligations under its 7.375
percent Senior Notes due on June 1, 2009 and shown as a current liability on
the balance sheet. The addition of the Senior Notes as a current liability
results in a working capital deficit as of June 30, 2008. The company
continues to pursue various options to refinance the Senior Notes. While no
assurance can be given that such efforts will produce sufficient liquidity to
permit the company to refinance the Senior Notes on terms favorable to the
company, or at all, the company remains optimistic given work to date on
developing those options.
Caraustar Industries, Inc. (Nasdaq: CSAR) will host a conference call to
review second quarter results on Friday, August 1, 2008 beginning at 9:00 a.m.
(ET) 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.
Caraustar Industries, Inc. is one of North America's largest integrated
manufacturers of 100% recycled paperboard and converted paperboard products.
The company is a socially responsible corporation, is committed to
environmentally sound practices and is dedicated to providing customers with
outstanding value through innovative products and services. 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 and cores; folding
cartons; gypsum facing paper and specialty paperboard products. For additional
information on Caraustar, please visit the company's website at
www.caraustar.com.
This press release contains 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 plans and industry trends and their potential
impact on the company's business and financial results. Statements that are
not statements of historical fact, as well as statements including words such
as "expect," "intend," "will," "believe," "estimate," "project," "budget,"
"forecast," "anticipate," "plan," "may," "would," "could," "should,"
"predicts," "potential," "continue," and similar expressions are intended to
identify such forward-looking statements. Forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results, levels of activity, performance or achievements to differ materially
from results expressed or implied by such statements. Such risk factors
include, among others: 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, changes in demand for the company's
products, the degree of success achieved by the company's new product
initiatives, uncertainties related to the company's ability to successfully
complete certain asset sales to finance a portion of the redemption of its
debt, future financing plans and needs, the impact on the company of its
results of operation in recent years and the sufficiency of its financial
resources to absorb the impact, changes in government regulations, the
company's ability to service its substantial indebtedness, and unforeseen
difficulties with the consolidation, integration of the company's accounting
and control operations and IT systems. 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.
CONTACT: Ronald J. Domanico
Senior Vice President and
Chief Financial Officer
(770) 948-3101
Caraustar Industries, Inc.
Unaudited Supplemental Data
Volume Sold (tons): In thousands
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
CSAR Mill Tons Sold (Market) * 112.0 114.6 101.5 111.4 112.5
CSAR Mill Tons Converted 84.982.082.183.786.4
Total CSAR Mill Tons * 196.9 196.6 183.6 195.1 198.9
Outside Paperboard Purchased 38.537.432.238.640.3
Total Paperboard Controlled * 235.4 234.0 215.8 233.7 239.2
Tube & Core Tons 74.872.374.477.477.6
Folding Carton Tons 59.562.552.055.456.8
Gypsum Paper Tons * 50.750.644.650.152.0
Other Specialty Tons * 50.448.644.850.852.8
Total Paperboard Controlled * 235.4 234.0 215.8 233.7 239.2
PBL gypsum facing and other
specialty paper sold * 36.233.428.035.036.3
Changes in Selling Price and Costs ($/ton):
Q2 2008 vs. Q2 2007 Q2 2008 vs. Q1 2008
Mill Average Selling Price ($3.5) ($3.0)
Mill Average Fiber Cost 15.0 2.3
Mill Average Fuel & Energy Cost 14.1 1.9
Net Margin Decrease ($32.6) ($7.2)
Tubes and Cores Average Selling Price$26.7($0.3)
Tubes & Cores Average Paperboard Cost(16.9) (19.7)
Net Margin Increase $43.6$19.4
Reconciliation of Net Cash Provided by (Used in) Operations to Earnings
Before Interest, Taxes, Depreciation and Amortization (as defined by our
Senior Credit Facility Agreement):
In thousands
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
Net cash provided by (used
in) operating activities $2,043 $(3,718) $5,909 $6,755 $(4,381)
Changes in working capital
items and other 1989,786 (11,523) (2,188) 7,211
(Benefit) provision for
income taxes (3,327) 437 (3,923) (1,289) (1,533)
Change in deferred taxes3,339 (361) 4,0291,4381,616
Interest expense4,2144,3284,4014,8804,829
Return of investment in
unconsolidated affiliates7131,0851,797--
EBITDA ** $7,180 $11,557 $690 $9,596 $7,742
* Includes gypsum facing and other specialty paper sold by Caraustar's
50%-owned, unconsolidated Premier Boxboard ("PBL") joint venture.
** This item is not a financial measure under generally accepted
accounting principals (GAAP) in the United States. Because this item is
not a GAAP financial measure, other companies may present similarly
titled items determined with differing adjustments. Accordingly, this
measure as presented 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 this non-GAAP financial
measure because it uses this measure, and believes this measure is
useful in evaluating the Company's ongoing comparable operating
results, cash position and its ability to generate cash. The tables
above include a reconciliation of this non-GAAP financial measure 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.
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
For The Three Months For The Six Months
Ended Ended
June 30,June 30,
2008 2007 2008 2007
Sales $217,026 $221,248 $433,528 $440,673
Cost of goods sold 190,810 191,365 379,185 384,661
Selling, general and
administrative expenses 24,30125,98348,73754,561
Income from operations before
restructuring and impairment costs 1,915 3,900 5,606 1,451
Restructuring and impairment costs5,844 3,724 6,566 9,510
(Loss) income from operations(3,929) 176 (960) (8,059)
Other (expense) income:
Interest expense (4,214) (4,829) (8,542) (9,479)
Interest income 134837 102
Equity in income of
unconsolidated affiliates 1,139 355 3,054 514
Other, net62768298
(3,000) (4,350) (5,369) (8,765)
Loss from continuing operations
before income taxes (6,929) (4,174) (6,329) (16,824)
Benefit for income taxes 3,327 1,652 2,890 5,088
Loss from continuing operations (3,602) (2,522) (3,439) (11,736)
Discontinued operations:
Income from discontinued
operations before income taxes- 333 - 749
Provision for income taxes of
discontinued operations - (119)- (265)
Income from discontinued
operations - 214 - 484
Net loss$(3,602) $(2,308) $(3,439) $(11,252)
Basic (loss) income per common
share
Continuing operations$(0.13) $(0.09) $(0.12) $(0.41)
Discontinued operations $0.00 $0.01 $0.00 $0.02
Net loss $(0.13) $(0.08) $(0.12) $(0.39)
Weighted average number of shares
outstanding 28,69128,61528,67128,609
Diluted (loss) income per common
share
Continuing operations$(0.13) $(0.09) $(0.12) $(0.41)
Discontinued operations $0.00 $0.01 $0.00 $0.02
Net loss $(0.13) $(0.08) $(0.12) $(0.39)
Diluted weighted average number of
shares outstanding 28,69128,61528,67128,609
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
2008 2007
ASSETS
Current assets:
Cash and cash equivalents $80 $6,548
Receivables, net of allowances 81,735 74,207
Inventories 61,238 65,412
Refundable income taxes 249 104
Current deferred tax assets 6,2155,841
Other current assets 8,8077,061
Assets of discontinued operations held
for sale96 96
Total current assets 158,420 159,269
Property, plant and equipment:
Land 9,7989,803
Buildings and improvements 93,265 83,685
Machinery and equipment 396,034 402,968
Furniture and fixtures 32,359 32,345
531,456 528,801
Less accumulated depreciation (301,168)(288,892)
Property, plant and equipment, net 230,288 239,909
Goodwill 125,326 122,542
Investment in unconsolidated affiliates 38,171 39,117
Other assets10,675 11,183
$562,880 $572,020
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of debt $197,414 $5,830
Accounts payable 60,898 63,968
Accrued interest 1,7021,773
Accrued compensation 10,4999,828
Accrued pension 496 496
Capital lease obligations28 72
Other accrued liabilities18,876 20,913
Total current liabilities289,913 102,880
Long-term debt, less current maturities 64,468 253,012
Long-term capital lease obligations 2 14
Deferred income taxes 32,053 34,082
Pension liability 24,381 27,980
Other liabilities 14,229 14,233
Shareholders' equity
Common stock 2,9512,947
Additional paid-in capital 193,900 192,978
Retained deficit(38,566) (35,127)
Accumulated other comprehensive loss(20,451) (20,979)
Total shareholders' equity 137,834 139,819
$562,880 $572,020
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
For the Six Months Ended
June 30,
2008 2007
Operating activities:
Net loss$(3,439) $(11,252)
Depreciation and amortization 8,96510,570
Equity-based compensation expense 817 554
Restructuring and impairment costs5,796 3,055
Deferred income taxes(2,978) (5,030)
Equity in income of unconsolidated
affiliates (3,054) (514)
Distributions from unconsolidated
affiliates 2,202 -
Changes in operating assets and
liabilities, net of acquisitions(9,984) (9,611)
Net cash used in operating activities(1,675) (12,228)
Investing activities:
Purchases of property, plant and equipment (5,770) (11,600)
Proceeds from disposal of property, plant
and equipment 881 1,369
Acquisition of businesses, net of cash
acquired(5,359)-
Changes in restricted cash (31) (75)
Return of investment in unconsolidated
affiliates 1,79841
Investment in unconsolidated affiliates - (78)
Net cash used in investing activities(8,481) (10,343)
Financing activities:
Proceeds from senior credit facility
- revolver 73,56683,954
Repayments of senior credit facility
- revolver (66,905) (56,954)
Repayments of senior credit facility
- term loan (2,917) (2,917)
Payments for capital lease obligations (56) (273)
Issuances of stock, net of forfeitures-20
Net cash provided by financing activities 3,68823,830
Net change in cash and cash equivalents (6,468)1,259
Cash and cash equivalents at beginning of
period 6,548 1,022
Cash and cash equivalents at end of period $80$2,281
Supplemental Disclosures:
Cash payments for interest $9,817$9,513
Income tax payments, net of refunds $4 $174
SOURCE Caraustar Industries, Inc.
