Sales Reflect General Economic Downturn, Though Ongoing Rightsizing
and Rationalization Efforts Result in Operational Improvements
ATLANTA, Feb. 27 /PRNewswire-FirstCall/ -- Caraustar Industries,
Inc. (NASDAQ:CSAR) today announced that sales from continuing
operations for the fourth quarter ended December 31, 2008 were
$171.7 million, compared to sales of $203.9 million for the same
quarter in 2007. Loss from operations before restructuring and
impairment costs for the fourth quarter ended December 31, 2008 was
$2.5 million compared to a loss of $4.4 million for the same
quarter in 2007. Net loss from continuing operations for the fourth
quarter of 2008 was $22.7 million, or a loss of $0.79 per share,
compared to 2007 fourth quarter loss of $7.0 million, or $0.25 per
share. The fourth quarter 2008 and 2007 results from continuing
operations included a pre-tax restructuring and impairment charge
of approximately $8.7 million, or $0.19 per share, and $3.5
million, or $0.08 per share, respectively. The fourth quarter 2008
included increased tax expense of $9.1 million, or $0.32 cents per
share from valuation reserves applied to the company's deferred tax
assets. The $3.4 million decrease in pre-tax operating results was
primarily attributable to higher restructuring and impairment costs
of $5.1 million, which were partially offset by lower interest
expense of $0.5 million and lower selling, general and
administrative costs of $0.5 million. Total paperboard volume for
the fourth quarter of 2008 decreased approximately 57.4 thousand
tons, or 26.6 percent, compared to the same quarter last year. The
decrease was attributable to 28.0 thousand tons of fewer gypsum
facing paper and other specialty paperboard tons from PBL (Premier
Boxboard Limited LLC), which membership interest was sold on July
24, 2008, a 9.3 thousand ton decrease in other (non-PBL) gypsum
facing paper and a 17.9 thousand ton decrease in tube and core
board. The decline in gypsum facing paper is associated with
declines in the construction industry, and the shortfall in tube
and core was driven by the July 2008 closure of our Chattanooga URB
mill and general economic conditions. In the fourth quarter of
2008, Caraustar's mill capacity utilization was 73.6 percent,
compared with industry capacity utilization of 77.2 percent. Versus
the same quarter last year, mill margins improved $74 per ton as
increased selling prices of $28 per ton and decreased fiber costs
of $53 per ton were partially offset by higher fuel and energy
costs of $7 per ton. This per ton increase in energy costs is
attributable to decreased volume - which provides fewer tons over
which to spread fixed costs - and increased energy consumption to
heat our facilities. Tube and core margins increased $34 per ton,
primarily due to an increase in selling price. Compared to the
fourth quarter of 2007, gross margins improved in all business
segments except our recovered fiber group segment, which
experienced decreased margin due to the sharp decline in recovered
fiber prices in the fourth quarter 2008. Michael J. Keough,
president and chief executive officer of Caraustar, commented,
"Caraustar felt the impact of the global recession in the fourth
quarter as demand decreased in most of the end use markets we
serve. This decrease was particularly hard felt by our business
segments that are driven by industrial production. While the fourth
quarter is typically slow seasonally, we experienced softness
greater than historic seasonality, which led to manufacturing
inefficiencies and extended downtime at many of our production
facilities. Partially offsetting reduced volume were dramatically
lower fiber costs, higher selling prices, and lower selling,
general and administrative costs. "Year-to-date in 2009, volume
seems more solid than in the fourth quarter 2008 and we believe our
current liquidity position is adequate to support our day-to-day
business operations. We continue to work diligently on a resolution
of the near-term maturity of our 2009 Senior Notes, and the 2009
and 2010 noteholders have formed an ad hoc committee, which has
facilitated discussions. The company has retained legal and
financial advisors and expects that our discussions with the ad hoc
committee will be productive. We will continue to consider all
options. As developments unfold, we will communicate to all of our
constituents, as appropriate. "Our skilled employees and the
proactive steps we have taken in the past three years have provided
us with the appropriate cost structure to meet current challenges,
even given this recessionary economy. It has taken a lot of hard
work from the entire Caraustar team to better position the business
to demonstrate operational improvement against a tough economic
backdrop. We look forward to positioning our company for a bright
future. "We have been undergoing a Strategic Transformation Plan,
through which we have rationalized our portfolio by exiting
under-performing businesses; right-sized operations through
consolidation of facilities; significantly reduced SG&A costs;
and increased financial flexibility by redeeming the 2010 Senior
Subordinated Notes, paying off the term loan and paying down all
outstanding balances on the revolving credit facility." On December
9, 2008, Caraustar announced that it is finalizing and will
complete a cost take-out plan, including additional corporate staff
reductions. To date, the company has eliminated 49 positions, with
projected annual pre-tax savings of approximately $7.0 million.
Caraustar will incur approximately $2.8 million in costs associated
with this restructuring activity, which costs are comprised
primarily of severance and other employee related items. The
company expects to complete its corporate reductions on or before
the end of the first quarter of 2009. On December 11, 2008 the
company announced the permanent closure of its Richmond Paperboard
mill. Non-cash impairment of fixed assets of $5.3 million and cash
costs, related to severance, of approximately $435 thousand were
incurred in the year ended December 31, 2008. Year ended December
31, 2008 Sales from continuing operations for the year ended
December 31, 2008 were $819.7 million compared to sales of $854.2
million for the same period in 2007. Income from operations before
restructuring and impairment costs for the year ended December 31,
2008 was $10.1 million compared to $3.2 million for the same period
in 2007. Net loss from continuing operations for the year ended
December 31, 2008 was $98.7 million, or a loss of $3.44 per share,
compared to a loss of $17.6 million, or a loss of $0.62 per share,
in the same period last year. Results from continuing operations
for the years ended December 31, 2008 and 2007 included
restructuring and impairment costs of approximately $14.4 million,
or $0.31 per share, and $13.2 million, or $0.29 per share,
respectively. The $91.3 million decrease in pre-tax operating
results was primarily attributable to 2008 impairment of goodwill
of $125.3 million, which was partly offset by lower selling,
general and administrative costs of $4.2 million, lower interest
expense of $2.3 million, increased income from unconsolidated
affiliates of $1.9 million, and a $23.8 million gain on the sale of
the company's fifty-percent ownership interest in PBL. On July 24
2008, Caraustar sold its fifty-percent interest in 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. The company also
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. Non-cash impairment of fixed
assets of $5.0 million was recorded as of September 30, 2008 and
cash costs (related to severance) of approximately $834 thousand
were incurred in the year ended December 31, 2008. At June 30,
2008, the company had $125.3 million of recorded goodwill, which
represented the excess purchase price over the fair value of the
net tangible and intangible assets acquired in prior periods.
Goodwill is reviewed at least annually or more frequently on the
occurrence of events or circumstances which may indicate that
carrying values exceed the fair values. During the third quarter of
2008, the company determined that recorded amounts of goodwill were
not supported by the fair values as calculated by several methods,
including the impact of the decline in the company's share price
during the quarter. Accordingly, a non-cash goodwill impairment
loss of $125.3 million was recorded as of September 30, 2008.
Liquidity The company ended 2008 with a cash balance of $35.5
million compared to $6.5 million at December 31, 2007. For the
years ended December 31, 2008 and 2007, the company generated $10.4
million and $0.4 million, respectively, of cash from operating
activities. The $10.0 million increase in cash generated was
primarily due to improved operating results, excluding both the
goodwill impairment and the gain on the sale of PBL. Year-to-date
capital expenditures decreased to $12.2 million from $26.6 million
in 2007. The company reduced its total debt by $31.8 million from
December 31, 2007 to December 31, 2008 and as of December 31, 2008;
the company had $22.0 million of availability under its Senior
Credit Facility, after giving effect to $15.7 million in letters of
credit and the $20.0 million minimum availability reserve, both of
which reduce availability. The company has approval from its bank
group to amend its Senior Credit Facility to defer the March 1,
2009 notification date, at which time the company would have been
required to advise the participating lenders in the bank group of
the company's plan to refinance or defease the 7.375 percent Senior
Notes, to April 30, 2008. The 7.375 percent Senior Notes due on
June 1, 2009 are recorded as a current liability, which results in
a working capital deficit as of December 31, 2008. Given the
turmoil in the credit markets, it is likely that the company will
not be able to refinance its Senior Notes. Continuing as a going
concern is dependent on a satisfactory refinancing or restructuring
of the Senior Notes, which will involve negotiations with the
noteholders. We expect to be able to continue to service our
customers' needs and expect no disruptions to our operations. The
outcome of the negotiations, however, is uncertain. Accordingly, as
of December 31, 2008, there is substantial doubt regarding the
company's ability to continue as a going concern. The financial
statements do not include any of the adjustments that would be
required to reflect possible effects on the recoverability and
classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.
Caraustar Industries, Inc. (NASDAQ:CSAR) will host a conference
call to present fourth quarter and year-end results on Friday,
February 27, 2009 beginning at 9:00 a.m. (ET) that will be webcast.
In order to listen to the webcast of its conference call, listeners
can log on to the Caraustar website at http://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
http://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 website of the
Securities and Exchange Commission (http://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 Q4 2008 Q3 2008
Q2 2008 Q1 2008 Q4 2007 CSAR Mill Tons Sold (Market) * 61.9 92.0
112.0 114.6 101.5 CSAR Mill Tons Converted 64.2 82.9 84.9 82.0 82.1
Total CSAR Mill Tons * 126.1 174.9 196.9 196.6 183.6 Outside
Paperboard Purchased 32.3 45.0 38.5 37.4 32.2 Total Paperboard
Controlled * 158.4 219.9 235.4 234.0 215.8 Tube & Core Tons
56.5 77.4 74.8 72.3 74.4 Folding Carton Tons 51.1 63.5 59.5 62.5
52.0 Gypsum Paper Tons * 9.6 26.7 50.7 50.6 44.6 Other Specialty
Tons * 41.2 52.3 50.4 48.6 44.8 Total Paperboard Controlled * 158.4
219.9 235.4 234.0 215.8 PBL gypsum facing and other specialty paper
sold * 0.0 11.8 36.2 33.4 28.0 Changes in Selling Price and Costs
($/ton): Q4 2008 vs. Q4 2007 Q4 2008 vs. Q3 2008 Mill Average
Selling Price $28.3 $15.5 Mill Average Fiber Cost (52.6) (47.0)
Mill Average Fuel & Energy Cost 7.3 (1.2) Net Increase $73.6
$63.7 Tubes and Cores Average Selling Price $36.2 $22.8 Tubes &
Cores Average Paperboard Cost 2.2 22.2 Net Increase $34.0 $0.6
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 Q4
2008 Q3 2008 Q2 2008 Q1 2008 Q4 2007 Net cash provided by (used in)
operating activities $696 $11,362 $2,043 $(3,718) $5,909 Changes in
working capital items and other (8,140) (6,228) 198 9,786 (11,523)
Provision (benefit) provision for income taxes 8,014 (21,258)
(3,327) 437 (3,923) Change in deferred taxes (5,286) 24,752 3,339
(361) 4,029 Interest expense 3,908 3,999 4,214 4,328 4,401 Return
of investment in unconsolidated affiliates - 182 713 1,085 1,797
EBITDA ** $(808) $12,809 $7,180 $11,557 $690 * 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 Years Ended Ended December 31, December 31, 2008
2007 2008 2007 Sales $171,676 $203,915 $819,658 $854,219 Cost of
goods sold 148,815 182,481 710,565 747,780 Selling, general and
administrative expenses 25,327 25,855 98,969 103,193 (Loss) income
from operations before restructuring and impairment costs and
goodwill impairment (2,466) (4,421) 10,124 3,246 Goodwill
impairment - - 125,252 - Restructuring and impairment costs 8,664
3,516 14,421 13,183 Loss from operations (11,130) (7,937) (129,549)
(9,937) Other (expense) income: Interest expense (3,908) (4,401)
(16,449) (18,760) Interest income 214 50 424 208 Equity in income
of unconsolidated affiliates - 826 3,665 1,770 Gain on sale of
interest in unconsolidated affiliates - - 23,807 19 Other, net 141
196 424 370 (3,553) (3,329) 11,871 (16,393) Loss from continuing
operations before income taxes (14,683) (11,266) (117,678) (26,330)
(Provision) benefit for income taxes (8,014) 4,276 18,966 8,712
Loss from continuing operations (22,697) (6,990) (98,712) (17,618)
Discontinued operations: Income (loss) from discontinued operations
before income taxes - 569 - (8,221) (Provision) benefit for income
taxes of discontinued operations - (353) - 1,323 Income (loss) from
discontinued operations - 216 - (6,898) Net loss $(22,697) $(6,774)
$(98,712) $(24,516) Basic (loss) income per common share Continuing
operations $(0.79) $(0.25) $(3.44) $(0.62) Discontinued operations
$0.00 $0.01 $0.00 $(0.24) Net loss $(0.79) $(0.24) $(3.44) $(0.86)
Weighted average number of shares Outstanding 28,748 28,640 28,700
28,621 Diluted (loss) income per common share Continuing operations
$(0.79) $(0.25) $(3.44) $(0.62) Discontinued operations $0.00 $0.01
$0.00 $(0.24) Net loss $(0.79) $(0.24) $(3.44) $(0.86) Diluted
weighted average number of Shares outstanding 28,748 28,640 28,700
28,621 CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) December
December 31, 31, 2008 2007 ASSETS Current assets: Cash and cash
equivalents $35,514 $6,548 Receivables, net of allowances 56,389
74,207 Inventories 53,728 65,412 Refundable income taxes - 104
Current deferred tax assets - 5,841 Other current assets 7,084
7,061 Assets of discontinued operations held for sale 96 96 Total
current assets 152,811 159,269 Property, plant and equipment: Land
9,541 9,803 Buildings and improvements 78,153 83,685 Machinery and
equipment 403,965 402,968 Furniture and fixtures 32,511 32,345
524,170 528,801 Less accumulated depreciation (305,327) (288,892)
Property, plant and equipment, net 218,843 239,909 Goodwill -
122,542 Investment in unconsolidated affiliates - 39,117 Other
assets 10,096 11,183 $381,750 $572,020 LIABILITIES AND
SHAREHOLDERS' (DEFICIT) EQUITY Current liabilities: Current
maturities of debt $190,597 $5,830 Accounts payable 35,481 63,968
Accrued interest 1,616 1,773 Accrued compensation 11,233 9,828
Accrued pension 496 496 Capital lease obligations 11 72 Income
taxes payable 3,198 - Other accrued liabilities 20,586 20,913 Total
current liabilities 263,218 102,880 Long-term debt, less current
maturities 36,431 253,012 Long-term capital lease obligations - 14
Deferred income taxes - 34,082 Pension liability 73,774 27,980
Other liabilities 16,305 14,233 Shareholders' equity Common stock
2,995 2,947 Additional paid-in capital 193,846 192,978 Retained
deficit (133,839) (35,127) Accumulated other comprehensive loss
(70,980) (20,979) Total shareholders' (deficit) equity (7,978)
139,819 $381,750 $572,020 CARAUSTAR INDUSTRIES, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (In Thousands) For the Years Ended December 31, 2008 2007
Operating activities: Net loss $(98,712) $(24,516) Depreciation and
amortization 18,218 19,907 Equity-based compensation expense 700
1,335 Goodwill impairment 125,252 - Restructuring and impairment
costs 9,624 9,692 Deferred income taxes (22,444) (10,496) Gain on
sale of interest in unconsolidated affiliates (23,807) (19) Equity
in income of unconsolidated affiliates (3,665) (1,770)
Distributions from unconsolidated affiliates 3,665 2,203 Changes in
operating assets and liabilities, net of acquisitions 1,552 4,100
Net cash provided by operating activities 10,383 436 Investing
activities: Purchases of property, plant and equipment (12,182)
(26,601) Proceeds from disposal of property, plant and equipment
3,703 7,054 Proceeds from sale of assets held for sale - 21,680
Acquisition of businesses, net of cash acquired (5,359) - Changes
in restricted cash (41) (147) Net proceeds from the sale of
interest in unconsolidated affiliates 60,944 161 Return of
investment in unconsolidated affiliates 1,980 1,838 Investment in
unconsolidated affiliates - (78) Net cash provided by investing
activities 49,045 3,907 Financing activities: Proceeds from senior
credit facility - revolver 79,921 143,160 Repayments of senior
credit facility - revolver (90,260) (137,821) Repayments of senior
credit facility - term loan (20,048) (11,063) Proceeds from note
payable - 7,436 Payments for capital lease obligations (75) (549)
Issuances of stock, net of forfeitures - 20 Net cash (used in)
provided by financing activities (30,462) 1,183 Net change in cash
and cash equivalents 28,966 5,526 Cash and cash equivalents at
beginning of period 6,548 1,022 Cash and cash equivalents at end of
period $35,514 $6,548 Supplemental Disclosures Cash payments for
interest $18,783 $20,876 Income tax payments, net of refunds $1,218
$(958) DATASOURCE: Caraustar Industries, Inc. CONTACT: Ronald J.
Domanico, Senior Vice President and Chief Financial Officer of
Caraustar Industries, Inc., +1-770-948-3101 Web Site:
http://www.caraustar.com/
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