UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended September 30, 2002 | ||||
| OR | ||||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
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| For the transition period from _________________ to _________________ |
Commission File Number 0-20646
Caraustar Industries, Inc.
| North Carolina (State or other jurisdiction of incorporation or organization) |
58-1388387 (I.R.S. Employer Identification Number) |
|
| 3100 Joe Jerkins Blvd., Austell, Georgia (Address of principal executive offices) |
30106 (Zip Code) |
(770) 948-3101
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date, October 28, 2002.
| Common Stock, $.10 par value | 27,908,210 | |
| (Class) | (Outstanding) |
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002
CARAUSTAR INDUSTRIES, INC.
TABLE OF CONTENTS
| Page | ||||
| PART I — | FINANCIAL INFORMATION | |||
| Item 1. | Condensed Consolidated Financial Statements: | |||
| Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001. | 3 | |||
| Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2002 and September 30, 2001. | 4 | |||
| Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2002 and September 30, 2001. | 5 | |||
| Notes to Condensed Consolidated Financial Statements. | 6 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 25 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 45 | ||
| Item 4. | Disclosure Controls and Procedures | 45 | ||
| PART II — | OTHER INFORMATION | |||
| Item 6. | Exhibits and Reports on Form 8-K | 48 | ||
| Signatures | 49 | |||
| Certifications | 50 | |||
| Exhibit Index | 52 |
2
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
| September 30, | December 31, | |||||||||||
| 2002 | 2001 | |||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS: |
||||||||||||
Cash and cash equivalents |
$ | 64,507 | $ | 64,244 | ||||||||
Receivables, net of allowances |
116,600 | 86,297 | ||||||||||
Inventories |
115,332 | 101,823 | ||||||||||
Refundable income taxes |
7,975 | 17,949 | ||||||||||
Other current assets |
22,876 | 16,456 | ||||||||||
Total current assets |
327,290 | 286,769 | ||||||||||
PROPERTY, PLANT AND EQUIPMENT: |
||||||||||||
Land |
14,872 | 12,620 | ||||||||||
Buildings and improvements |
151,008 | 135,727 | ||||||||||
Machinery and equipment |
652,761 | 625,691 | ||||||||||
Furniture and fixtures |
14,536 | 14,326 | ||||||||||
| 833,177 | 788,364 | |||||||||||
Less accumulated depreciation |
(382,002 | ) | (337,988 | ) | ||||||||
Property, plant and equipment, net |
451,175 | 450,376 | ||||||||||
GOODWILL AND INTANGIBLE ASSETS, net |
187,341 | 146,465 | ||||||||||
INVESTMENT IN UNCONSOLIDATED AFFILIATES |
56,203 | 62,285 | ||||||||||
OTHER ASSETS |
35,036 | 15,086 | ||||||||||
| $ | 1,057,045 | $ | 960,981 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||
CURRENT LIABILITIES: |
||||||||||||
Current maturities of debt |
$ | 65 | $ | 48 | ||||||||
Accounts payable |
72,125 | 52,133 | ||||||||||
Accrued liabilities |
56,685 | 37,749 | ||||||||||
Dividends payable |
— | 833 | ||||||||||
Total current liabilities |
128,875 | 90,763 | ||||||||||
SENIOR CREDIT FACILITY |
38,000 | — | ||||||||||
OTHER LONG-TERM DEBT, less current maturities |
532,435 | 508,691 | ||||||||||
DEFERRED INCOME TAXES |
73,544 | 66,760 | ||||||||||
DEFERRED COMPENSATION |
1,536 | 1,741 | ||||||||||
OTHER LIABILITIES |
4,699 | 12,512 | ||||||||||
MINORITY INTEREST |
822 | 935 | ||||||||||
COMMITMENTS AND CONTINGENCIES (NOTE 10) |
||||||||||||
SHAREHOLDERS’ EQUITY: |
||||||||||||
Preferred stock, $.10 par value; 5,000,000 shares authorized; none issued |
— | — | ||||||||||
Common stock, $.10 par value; 60,000,000 shares authorized,
27,894,142 and 27,853,897 shares issued and outstanding at September 30, 2002 and December 31, 2001, respectively |
2,789 | 2,785 | ||||||||||
Additional paid-in capital |
182,078 | 180,116 | ||||||||||
Retained earnings |
92,915 | 97,488 | ||||||||||
Accumulated other comprehensive loss |
(648 | ) | (810 | ) | ||||||||
| 277,134 | 279,579 | |||||||||||
| $ | 1,057,045 | $ | 960,981 | |||||||||
The accompanying notes are an integral part of these financial statements.
3
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
| For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||
| September 30, | September 30, | ||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||||
SALES |
$ | 240,016 | $ | 234,851 | $ | 695,399 | $ | 697,698 | |||||||||
COST OF SALES |
187,322 | 172,807 | 527,004 | 516,829 | |||||||||||||
Gross profit |
52,694 | 62,044 | 168,395 | 180,869 | |||||||||||||
FREIGHT COSTS |
14,482 | 13,869 | 42,212 | 40,299 | |||||||||||||
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES |
37,353 | 36,832 | 107,744 | 109,861 | |||||||||||||
RESTRUCTURING COSTS |
— | — | 985 | 7,083 | |||||||||||||
Operating income |
859 | 11,343 | 17,454 | 23,626 | |||||||||||||
OTHER (EXPENSE) INCOME: |
|||||||||||||||||
Interest expense |
(9,431 | ) | (10,393 | ) | (28,110 | ) | (31,159 | ) | |||||||||
Interest income |
493 | 319 | 1,361 | 624 | |||||||||||||
Equity in income (loss) of unconsolidated affiliates |
826 | 936 | 1,861 | (1,799 | ) | ||||||||||||
Other, net |
39 | (98 | ) | (72 | ) | (611 | ) | ||||||||||
Total other expense |
(8,073 | ) | (9,236 | ) | (24,960 | ) | (32,945 | ) | |||||||||
(LOSS) INCOME BEFORE MINORITY INTEREST,
INCOME TAXES AND EXTRAORDINARY LOSS |
(7,214 | ) | 2,107 | (7,506 | ) | (9,319 | ) | ||||||||||
MINORITY INTEREST IN LOSSES |
35 | 120 | 113 | 157 | |||||||||||||
(BENEFIT) PROVISION FOR INCOME TAXES |
(2,690 | ) | 1,272 | (2,822 | ) | (2,362 | ) | ||||||||||
(LOSS) INCOME BEFORE EXTRAORDINARY
LOSS |
(4,489 | ) | 955 | (4,571 | ) | (6,800 | ) | ||||||||||
EXTRAORDINARY LOSS FROM EARLY
EXTINGUISHMENT OF DEBT, NET OF TAX
BENEFIT |
— | — | — | (2,695 | ) | ||||||||||||
NET (LOSS) INCOME |
$ | (4,489 | ) | $ | 955 | $ | (4,571 | ) | $ | (9,495 | ) | ||||||
BASIC |
|||||||||||||||||
(LOSS) INCOME PER COMMON SHARE
BEFORE EXTRAORDINARY LOSS |
$ | (0.16 | ) | $ | 0.03 | $ | (0.16 | ) | $ | (0.24 | ) | ||||||
EXTRAORDINARY LOSS PER COMMON SHARE |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.10 | ) | ||||||||
NET (LOSS) INCOME PER COMMON SHARE |
$ | (0.16 | ) | $ | 0.03 | $ | (0.16 | ) | $ | (0.34 | ) | ||||||
Weighted average number of shares outstanding |
27,862 | 27,856 | 27,859 | 27,841 | |||||||||||||
DILUTED |
|||||||||||||||||
(LOSS) INCOME PER COMMON SHARE
BEFORE EXTRAORDINARY LOSS |
$ | (0.16 | ) | $ | 0.03 | $ | (0.16 | ) | $ | (0.24 | ) | ||||||
EXTRAORDINARY LOSS PER COMMON SHARE |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.10 | ) | ||||||||
NET (LOSS) INCOME PER COMMON SHARE |
$ | (0.16 | ) | $ | 0.03 | $ | (0.16 | ) | $ | (0.34 | ) | ||||||
Diluted weighted average number of shares
outstanding |
27,862 | 27,856 | 27,859 | 27,841 | |||||||||||||
The accompanying notes are an integral part of these financial statements.
4
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| For the Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2002 | 2001 | |||||||||
Cash provided by (used in) |
||||||||||
Operating activities: |
||||||||||
Net loss |
$ | (4,571 | ) | $ | (9,495 | ) | ||||
Extraordinary loss from early extinguishment of debt |
— | 4,305 | ||||||||
Depreciation and amortization |
46,148 | 46,986 | ||||||||
Restructuring costs |
985 | 3,987 | ||||||||
Change in deferred income taxes |
6,543 | 3,414 | ||||||||
Other noncash adjustments |
56 | 10 | ||||||||
Equity in income or loss of unconsolidated affiliates, net of distributions |
4,794 | 1,799 | ||||||||
Changes in current assets and liabilities, net of businesses acquired |
1,964 | (4,361 | ) | |||||||
Net cash provided by operating activities |
55,919 | 46,645 | ||||||||
Investing activities: |
||||||||||
Purchases of property, plant and equipment |
(16,126 | ) | (22,500 | ) | ||||||
Acquisitions of businesses, net of cash acquired |
(69,144 | ) | (34 | ) | ||||||
Investment in unconsolidated affiliates |
(200 | ) | — | |||||||
Other |
1,056 | 572 | ||||||||
Net cash used in investing activities |
(84,414 | ) | (21,962 | ) | ||||||
Financing activities: |
||||||||||
Proceeds from senior credit facility |
38,000 | 18,000 | ||||||||
Repayments of senior credit facility |
— | (212,000 | ) | |||||||
Proceeds from the issuance of the 7 1/4% and 9 7/8% notes |
— | 291,200 | ||||||||
Repayments of other long and short-term debt |
(6,628 | ) | (67,110 | ) | ||||||
7.74% senior notes prepayment penalty |
— | (3,565 | ) | |||||||
Dividends paid |
(833 | ) | (8,037 | ) | ||||||
Other |
(1,781 | ) | (1,826 | ) | ||||||
Net cash provided by financing activities |
28,758 | 16,662 | ||||||||
Net change in cash and cash equivalents |
263 | 41,345 | ||||||||
Cash and cash equivalents at beginning of period |
64,244 | 8,900 | ||||||||
Cash and cash equivalents at end of period |
$ | 64,507 | $ | |||||||