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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

(Mark One)

Commission file number 0-20646

CARAUSTAR INDUSTRIES, INC.

(770) 948-3101
(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.10 par value
(Title of Class)

     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 such 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   o

     Indicated by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes   x    No   o

     The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2002, computed by reference to the closing sale price on such date, was $347,590,065. For purposes of calculating this amount only, all directors and executive officers are treated as affiliates. This determination of affiliate status shall not be deemed conclusive for other purposes. As of the same date, 27,851,768 shares of Common Stock, $.10 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s definitive Proxy Statement pertaining to the 2003 Annual Meeting of Shareholders (“the Proxy Statement”) and filed pursuant to Regulation 14A are incorporated herein by reference into Part III.

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INTRODUCTION

     Caraustar Industries, Inc. operates its business through 25 subsidiaries across the United States, Canada, Mexico and the United Kingdom. As used herein, “we,” “our,” “us,” (or similar terms), the “Company” or “Caraustar” includes Caraustar Industries, Inc. and its subsidiaries, except that when used with reference to common shares or other securities described herein and in describing the positions held by management of the Company, the term includes only Caraustar Industries, Inc. Our corporate website is www.caraustar.com. You can access our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and amendments to those filings, as well as our other SEC filings, free of charge on our website via hyperlink to a third party database of documents filed electronically with the SEC. These documents are available for access as soon as reasonably practicable after we electronically file these documents with the SEC.

FORWARD-LOOKING INFORMATION

     This Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains various “forward-looking statements,” within the meaning of Section 21E of the Securities Exchange Act of 1934, that are based on our beliefs and assumptions, as well as information currently available to us. When used in this document, the words “believe,” “anticipate,” “estimate,” “expect,” “intend,” “should,” “would,” “could,” or “may” and similar expressions may identify forward-looking statements. These statements involve risks and uncertainties that could cause our actual results to differ materially depending on a variety of important factors, including, but not limited to, those identified under the caption “— Risk Factors” in Part I, Item 1 of this Report and other factors discussed elsewhere in this Report and the Company’s other filings with the Securities and Exchange Commission. These documents are available from us, and also may be examined at public reference facilities maintained by the Securities and Exchange Commission or, to the extent filed via EDGAR, accessed through the Web Site of the Securities and Exchange Commission (http://www.sec.gov). We do not undertake any obligation to update any forward-looking statements we make.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Overview

     We are a major manufacturer of 100% recycled paperboard and converted paperboard products. We manufacture products primarily from recovered fiber, which is derived from recycled paper. We operate in three business segments:

•		Paperboard
•		Tube, core and composite container
•		Carton and custom packaging

     We report certain financial information by segment in the notes to the consolidated financial statements included in Part II, Item 8 of this Report.

Operations and Products

     Paperboard. Our principal manufacturing activity is the production of uncoated and clay-coated recycled paperboard. In this manufacturing process, we reduce recovered fiber to pulp, clean and refine it and then process it into various grades of paperboard for internal consumption by our converting facilities or sale in the following four end-use markets:

•		Tube, core and composite containers
•		Folding cartons
•		Gypsum wallboard facing paper

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•

Other specialty products

     We currently operate a total of 17 paperboard mills, including one owned in a joint venture. These mills are located in the following states: Connecticut, Georgia, Indiana, Iowa, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Washington and Virginia.

     In 2002, approximately 39% of the recycled paperboard sold by our paperboard mills was consumed internally by our converting facilities; the remaining 61% was sold to external customers. Sales of unconverted paperboard to external customers as a percentage of total sales by end-use market were as follows (excludes sales from the 50%-owned Premier Boxboard joint venture):

     Three of our paperboard mills operate specialty converting facilities that supply other specialty converted and laminated products to the bookbinding, game, puzzleboard, printing and furniture industries. We also operate two specialty converting facilities that supply die cut and foam laminated products and manufacture jigsaw puzzles and other specialty products.

     Each of our paperboard mills and most of our converting plants have onsite recovered fiber facilities that collect and bale recovered fiber. In addition, we operate 8 stand-alone recovered fiber recycling and brokerage facilities that collect, sell and broker recovered fiber to external customers and to our own mills. Sales of recovered fiber to external customers accounted for 5.0%, 4.0% and 5.6% of our total sales in 2002, 2001 and 2000, respectively.

     Tube, Core and Composite Container. Our largest converting operation is the production of tubes and cores. The principal applications of these products are cloth cores, paper mill cores, yarn carriers, carpet cores and film, foil and metal cores. On September 30, 2002 we acquired certain operating assets of the Smurfit Industrial Packaging Group, a business unit of Jefferson Smurfit Corporation (U.S.). The acquisition included 17 tube and core converting plants. This acquisition significantly increased our number of converting facilities and tube and core volume. Our 42 tube and core converting plants obtain approximately 86% of their paperboard needs from our paperboard mills and the remaining 14% from other manufacturers. Paper tubes are designed to provide specific physical strength properties, resistance to moisture and abrasion, and resistance to delamination at extremely high rotational speeds. Because of the relatively high cost of shipping tubes and cores, these facilities generally serve customers within a relatively small geographic area. Accordingly, most of our tube and core converting plants are located close to concentrations of customers.

     We continually seek to expand our presence in the markets for more sophisticated tubes and cores, which require stronger paper grades, higher skill and new converting technology. These markets include the yarn carrier and plastic film markets, as well as the market for cores used in certain segments of the paper industry. We believe these markets offer significant growth potential, as well as potentially higher operating margins.

     In addition to tube and core converting facilities, our tube, core and composite container division operates four facilities that produce specialty converted products used in industrial packaging protection applications (edge protectors). Our tube, core and related sales to external customers accounted for 23.9%, 22.1% and 21.3% of our total sales to external customers in 2002, 2001 and 2000, respectively.

     Our tube, core and composite container division also produces composite containers used in the adhesive, sealant, food and food service markets, as well as grease cans, tubes, cartridges and other components. The group has three composite container plants located in Stevens Point, Wisconsin, Saint Paris, Ohio and Orrville, Ohio and a transportation operation in Ohio. Composite container sales accounted for 4.5%, 4.4% and 3.9% of our total sales to external customers in 2002, 2001 and 2000, respectively.

     We manufacture injection-molded and extruded plastic products, including plastic cores for the textile industry, plastic cores for the film, paper and other industries and other specialized products. These plastic products are, to a large extent, complementary to our tube and core products. We own 80% of a company in Union, South Carolina that produces such plastic products.

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     Some of this plant’s customers also purchase our tubes and cores. This plant currently has six plastic extrusion lines and 24 injection-molding machines, using the latest available process control technology. We also produce injection-molded plastic parts at our facility in Georgetown, Kentucky. These parts are primarily used as components in the manufacture of our composite containers. We produce plastic cartridges at a facility located in New Smyrna Beach, Florida. Plastic product and related sales to external customers accounted for 1.9%, 2.1% and 2.3% of our total sales to external customers in 2002, 2001 and 2000, respectively.

     Carton and Custom Packaging. Our other converting operations produce folding cartons and rigid set-up boxes at 15 plants. These plants obtain approximately 49% of their paperboard needs from our paperboard mills and the remaining 51% from other manufacturers. Our boxes and cartons are used principally as containers for paper goods, hardware, candy, sports-related items, frozen foods, dry food, film and various other industrial applications, including textile and apparel applications.

     We operate seven specialty packaging facilities: three in Ohio, two in New Jersey and one each in Massachusetts and North Carolina. These facilities perform contract manufacturing and custom contract packaging for a variety of consumer product companies. Additionally, we operate a digital imaging facility in Ohio and a prepress reproduction facility in Connecticut.

     Carton and custom packaging sales accounted for 33.7% of our total sales to external customers in 2002, 35.6% in 2001 and 31.4% in 2000.

     Our consolidated sales for the twelve months ended December 31, 2002 were $949.9 million. We estimate that our three business segments accounted for the following percentages of sales for the twelve months ended December 31, 2002:

•		Paperboard — 36%
•		Tube, core and composite container — 30%
•		Carton and custom packaging — 34%

     Joint Ventures. We also operate two joint ventures with Temple-Inland, Inc., in which we own 50% interests. One of the joint ventures, Premier Boxboard Limited LLC, formed in 1999, produces a new, lightweight gypsum facing paper along with other containerboard grades. The other joint venture, Standard Gypsum, L.P. (“Standard Gypsum”), formed in 1996, manufactures gypsum wallboard. We manage the day-to-day operations of our Premier Boxboard joint venture, and Temple-Inland manages the day-to-day operations at our Standard Gypsum joint venture.

     We also have an equity interest as the nonoperating partner in a tube plant located in Tacoma, Washington that manufactures spiral-wound tubes and edge protectors. We acquired our joint venture partner’s ownership interest in January 2003 and we now own 100% of this facility.

     Raw Materials. Recovered fiber derived from recycled paperstock is the only significant raw material we use in our mill operations. We purchase approximately 62% of our recovered fiber requirements from independent sources, such as major retail stores, distribution centers and manufacturing plants. We obtain the balance from a combination of other sources. We collect some recovered fiber from small collectors and waste collection businesses. Our recovered fiber recycling and processing facilities sort and bale this recovered fiber and then either transfer it to our mills for processing or sell it to third parties. We also obtain recovered fiber from customers of our converting operations and from waste handlers and collectors who deliver loose recovered fiber to our mill sites for direct use without baling. We obtain another portion of our requirements from our small baler program, in which we lease, sell or furnish small baling machines to businesses that bale their own recovered fiber for our periodic collection.

     We closely monitor our recovered fiber costs, which can fluctuate significantly. Our paperboard mills continually pursue operational methods and alternative fiber sources to minimize our recovered fiber costs. One of these initiatives is to further increase our unbaled recovered fiber purchases, as a percentage of our total recovered fiber needs and to increase our reliance on purchases from our small baler program.

     Energy Costs. Excluding labor, energy is our most significant manufacturing cost. We use energy, including electricity, natural gas, fuel oil and coal, to generate steam used in the paper making process and to operate our paperboard machines and our other converting machinery. We purchase energy from local suppliers at market rates.

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     Product Distribution. Each of our manufacturing and converting facilities has its own sales staff and maintains direct sales relationships with its customers. We also employ divisional and corporate level sales personnel who support and coordinate the sales activities of individual facilities. Divisional and corporate sales personnel also provide sales management, marketing and product development assistance in markets where customers are served by more than one of our facilities. Approximately 186 of our employees are devoted exclusively to sales and customer service activities, although many other employees participate generally in sales efforts. We generally do not sell our products through independent sales representatives. Our advertising is limited to trade publications.

     Customers. We manufacture most of our converted products pursuant to customers’ orders. We do, however, maintain minimal inventory levels of certain products. Our business generally is not dependent on any single customer or upon a small number of major customers. However, in 2000, Georgia-Pacific, formerly our largest gypsum facing paper customer, refused to continue purchasing its requirements of gypsum facing paper for certain plants pursuant to the terms of a long-term supply contract. In 2002, we negotiated a new supply agreement at significantly lower volume than the original contract. Our operating results and financial condition have been materially and adversely affected by the reduced contract volume from Georgia-Pacific. Other than Georgia-Pacific, we do not believe that the loss of any one customer would have a material adverse effect on our financial condition or results of operations.

     Competition. Although we compete with numerous other manufacturers and converters, our competitive position varies greatly by geographic area and within the various product markets of the recycled paperboard industry. In most of our markets, our competitors are capable of supplying products that would meet customer needs. Some of our competitors have greater financial resources than we do. We compete in our markets on the basis of price, quality and service. We believe that it is important in all of our markets to work closely with our customers to develop or adapt products to meet customers’ specialized needs. We also believe that we compete favorably on the basis of all of the above factors.

     Tube, core and composite containers. In the southeastern United States, where we historically have marketed our tubes and cores, we believe that we and Sonoco Products Company are the major competitors. On a national level, Sonoco is our dominant competitor in the tube and core market. According to industry data, Sonoco had more than 50% of the total tube and core market in the United States in 2002. We also compete with several regional companies and numerous small local companies in the tube and core market.

     Carton and custom packaging. The folding carton and custom packaging market in the United States is served by several large national and regional companies and numerous small local companies. Nationally, none of the major competitors is dominant, although certain competitors may be dominant in particular geographic areas or market niches. In the markets served by our carton plants, the dominant competitors are Rock-Tenn Company, Smurfit-Stone Container Corporation and Graphic Packaging, Inc.

     Gypsum wallboard facing paper. The gypsum wallboard industry is divided into independent gypsum wallboard manufacturers, which either do not produce their own gypsum wallboard facing paper or cannot fill all of their needs internally, and integrated wallboard manufacturers, which supply all of their own gypsum wallboard facing paper requirements internally. We believe that the two largest integrated gypsum wallboard manufacturers, USG Corporation and National Gypsum Company, do not have significant sales of gypsum wallboard facing paper to the independent gypsum wallboard manufacturers. We believe that we have the largest market share of the supply of gypsum wallboard facing paper to independent wallboard manufacturers in North America.

     We also compete in the gypsum wallboard industry through a joint venture with Temple-Inland. Our joint venture, Standard Gypsum, competes with larger integrated wallboard manufacturers such as USG Corporation and National Gypsum, who have greater financial resources and superior marketing strength due to their greater number of locations and national presence. Standard Gypsum competes primarily on the basis of product quality, dependability, timeliness of delivery and price.

     Other specialty products. In our sales of specialty products and in sales of recycled paperboard to other manufacturers for the production of tubes, cores and composite containers, folding cartons and boxes and miscellaneous converted products (other than gypsum wallboard facing paper), we compete with a number of recycled paperboard manufacturers, including Rock-Tenn, Smurfit-Stone Container Corporation and The Newark Group, Inc. We believe that none of our competitors is dominant in any of these markets.

     Competitive position. Recovered fiber costs were higher on average in 2002 compared to 2001. Our average same-mill cost for recovered fiber per ton of recycled paperboard produced was approximately $85 during 2002, a 31% increase from $65 per ton in 2001. Although no specific information is available about competitors’ actual recovered fiber costs, we believe that our delivered recovered fiber costs are among the lowest in the recycled paperboard industry. Relative to other competitors, we believe that our

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lower recovered fiber costs are attributable in part to lower shipping costs resulting from the location of our paperboard mills and recovered fiber facilities near major metropolitan areas that generate substantial supplies of recovered fiber. Many of the paperboard mills operated by our principal competitors are located away from major metropolitan areas, and we believe, based on our knowledge of freight rates, that these competitors incur higher freight costs associated with their fiber recovery efforts, adding to their total cost of delivered recovered fiber.

     Our relatively low recovered fiber costs are also attributable to our emphasis on certain recovery methods that enable us to avoid baling operations. We believe that our competitors rely primarily on off-site, company-owned and operated recovered fiber baling operations that collect and bale recovered fiber for shipment and processing at the mill site. We also operate such facilities, and our experience is that the baling operation results in $25-$30 per ton higher recovered fiber costs. We equip most of our paperboard mills to accept unbaled recovered fiber for processing directly into its pulpers. In 2002 and 2001, unbaled recovered fiber represented approximately 5% and 6%, respectively, of our total recovered fiber purchases. We also use other fiber recovery methods — our small baler program and our recovery of fiber from customers — that result in lower recovered fiber costs.

     Environmental Matters. Our operations are subject to various international, federal, state and local environmental laws and regulations. These laws and regulations are administered by international, federal, state and local agencies. Among other things, these laws and regulations regulate the discharge of materials into the water, air and land, and govern the use and disposal of hazardous substances. We believe that our operations are in substantial compliance with all applicable environmental laws and regulations, except for violations that we believe would not have a material adverse effect on our business or financial position.

     Our recycled paperboard mills use substantial amounts of water in the papermaking process. Our mills discharge process wastewater into local sewer systems or directly into nearby waters pursuant to wastewater discharge permits. We use only small amounts of hazardous substances, and we believe the concentration of these substances in our wastewater discharge generally is below permitted maximums. From time to time, the imposition of stricter limits on the solids, sulfides, BOD (biological oxygen demand) or metals content of a mill’s wastewater requires us to alter the content of our wastewater. We can effect reductions by additional screening of the wastewater, by otherwise changing the flow of process wastewater from the mill or from pretreatment ponds into the sewer system, and by adding chemicals to the wastewater. We also are subject to regulatory requirements related to the disposal of solid wastes and air emissions from our facilities. We are not currently aware of any required expenditures relating to wastewater discharge, solid waste disposal or air emissions that we expect to have a material adverse effect on our business or financial condition, but we are unable to give assurance that we will not incur material expenditures in these areas in the future.

     In addition, under certain environmental laws, we can be held strictly liable if hazardous substances are found on real property we have owned, operated or used as a disposal site. In recent years, we have adopted a policy of assessing real property for environmental risks prior to purchase. We are aware of issues regarding hazardous substances at certain facilities, but in each case we believe that any possible liabilities will not have a material adverse effect on our business or financial position.

     Employees. As of December 31, 2002, the 118 facilities we operate had approximately 6,437 employees, of whom 5,080 are hourly and 1,357 are salaried. Approximately 2,747 of our hourly employees are represented by labor unions. All principal union contracts expire during the period 2003-2009. We consider our relations with our employees to be excellent.

     Executive Officers. The names and ages, positions and period of service of each of our Company’s executive officers are set forth below. The term of office for each executive officer expires upon the earlier of the appointment and qualification of a successor or such officer’s death, resignation, retirement, removal or disqualification.

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Website. Our corporate website is www.caraustar.com. There you can access general information about our company, as well as our SEC filings. See “Introduction” above for more information regarding our website.

Risk Factors

     Investors should consider the following risk factors, in addition to the other information presented in this Report and the other Reports and registration statements we file from time to time with the Securities and Exchange Commission, in evaluating us, our business and an investment in our securities. Any of the following risks, as well as other risks and uncertainties, could harm our business and financial results and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment in our Company. The risks below are not the only ones facing our Company. Additional risks not currently known to us or that we currently deem immaterial also may impair our business.

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Our business and financial performance may be harmed by future increases in raw material costs.

     Our primary raw material is recycled paper, which is known in our industry as “recovered fiber.” The cost of recovered fiber has, at times, fluctuated greatly because of factors such as shortages or surpluses created by market or industry conditions. Although we have historically raised the selling prices of our products in response to raw material price increases, sometimes raw material prices have increased so quickly or to such levels that we have been unable to pass the price increases through to our customers on a timely basis, which has adversely affected our operating margins. We cannot give assurance that we will be able to pass such price changes through to our customers on a timely basis and maintain our margins in the face of raw material cost fluctuations in the future.

Our operating margins, cash flow and debt covenant compliance may be adversely affected by rising energy costs.

     Excluding labor, energy is our most significant manufacturing cost. We use energy to generate steam used in the paper making process and to operate our paperboard machines and all of our other converting machinery. Our energy costs decreased steadily throughout 2001 and in the first three quarters of 2002 before increasing sharply in the fourth quarter of 2002. In 2001, the average energy cost in our mill system was approximately $57 per ton. In 2002, energy costs decreased by 12.3% to $50 per ton. This was due primarily to decreases in natural gas and fuel oil costs, until the fourth quarter of 2002, when prices rose sharply. We expect that prices may continue to rise in response to the threat or commencement of armed conflict in the Middle East and the uncertainties regarding the outcome and implications of such a conflict. Until the last few years, our business had not been significantly affected by energy costs, and we historically have not passed energy costs through to our customers. We have not been able to pass through to our customers all of the energy cost increases we incurred during the last few years. Although we continue to evaluate our energy costs and consider ways to factor energy costs into our pricing we cannot give assurance that our operating margins and results of operations will not continue to be adversely affected by rising energy costs.

Our business and financial performance may be adversely affected by downturns in industrial production, housing and construction and the consumption of nondurable and durable goods.

     Demand for our products in our four principal end use markets is primarily driven by the following factors:

	•		Tube, core and composite container — industrial production, construction spending and consumer nondurable consumption
	•		Folding cartons — consumer nondurable consumption and industrial production
	•		Gypsum wallboard facing paper — single and multifamily construction, repair and remodeling construction and commercial construction
	•		Other specialty products — consumer nondurable consumption and consumer durable consumption.

     Downturns in any of these sectors will result in decreased demand for our products. In particular, our business has been adversely affected in recent periods by the general slow down in industrial demand. These conditions are beyond our ability to control, but have had, and will continue to have, a significant impact on our sales and results of operations.

     In addition, the September 11, 2001 terrorist attacks and the uncertainties surrounding those events have contributed to the general slowdown in U.S. economic activity. If those events, other terrorist activities, the U.S. military response and the resulting uncertainties continue to adversely affect the United States economy in general, the sectors above may be negatively impacted, which would cause our business to be adversely affected.

We are adversely affected by the cycles, conditions and problems inherent in our industry.

     Our operating results tend to reflect the general cyclical nature of the business in which we operate. In addition, our industry has suffered from excess capacity. Our industry also is capital intensive, which leads to high fixed costs and generally results in continued production as long as prices are sufficient to cover marginal costs. These conditions have contributed to substantial price competition and volatility within our industry. In the event of a recession, demand and prices are likely to drop substantially. Our profitability historically has been more sensitive to price changes than to changes in volume. Future decreases in prices for our products would adversely affect our operating results. These factors, coupled with our substantially leveraged financial position, may adversely affect our ability to respond to competition and to other market conditions or to otherwise take advantage of business opportunities.

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Our business may suffer from risks associated with growth and acquisitions.

     Historically, we have grown our business, revenues and production capacity to a significant degree through acquisitions. In the current difficult operating climate facing our industry and our financial position, the pace of our acquisition activity (with the exception of our recent purchase of certain assets of the Smurfit Industrial Packaging Group), and accordingly, our revenue growth, has slowed significantly as we have focused on conserving cash and maximizing the productivity of our existing facilities. However, we expect to continue evaluating and pursuing acquisition opportunities on a selective basis, subject to available funding and credit flexibility. Growth through acquisitions involves risks, many of which may continue to affect us based on acquisitions we have completed in the past. For example, we have suffered significant unexpected losses at our Sprague mill in Versailles, Connecticut, which we acquired from International Paper Company in 1999, resulting from unfavorable fixed price contracts, low capacity utilization, high energy costs and higher fiber costs that we were unable to pass through to our customers. Sprague incurred operating losses of $5.8 million and $7.2 million in 2002 and 2001, respectively, including the reversal of reserves related to unfavorable supply contracts. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We cannot give assurance that our acquired businesses will achieve the same levels of revenue, profit or productivity as our existing locations or otherwise perform as we expect.

     Acquisitions also involve specific risks. Some of these risks include:

	•		assumption of unanticipated liabilities and contingencies;
	•		diversion of management’s attention; and
	•		possible reduction of our reported earnings because of:

	• •		increased goodwill and intangible write-offs;
	• •		increased interest costs;
	• •		issuances of additional securities or debt; and
	• •		difficulties in integrating acquired businesses.

     As we grow, we can give no assurance that we will be able to:

	•		use the increased production capacity of any new or improved facilities;
	•		identify suitable acquisition candidates;
	•		complete additional acquisitions; or
	•		integrate acquired businesses into our operations.

If we cannot raise the necessary capital for, or use our stock to finance, acquisitions, expansion plans or other significant corporate opportunities, our growth may be impaired.

      As described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events,” we have entered into an amendment to our senior credit facility that, among other things, effectively prohibits us from making acquisitions or other strategic investments unless our financial performance significantly improves. Without additional capital, or replacement of our existing senior credit facility, we may have to curtail any acquisition and expansion plans or forego other significant corporate opportunities that may be vital to our long-term success. If our revenues and cash flow do not meet expectations, then we may lose our ability to borrow money or to do so on terms that we consider favorable. Conditions in the capital markets also will affect our ability to borrow, as well as the terms of those borrowings. In addition, our financial performance and the conditions of the capital markets will also affect the value of our common stock, which could make it a less attractive form of consideration in making acquisitions. All of these factors could also make it difficult or impossible for us to expand in the future.

Our substantial indebtedness could adversely affect our cash flow and our ability to fulfill our obligations under our indebtedness.

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     We have a substantial amount of outstanding indebtedness. See “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Financial Statements and Supplemental Data” included in Part II of this Report. In addition, as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “—Subsequent Events,” we have guaranteed indebtedness of, or provided similar credit support to, our joint ventures for which we could also be liable. Our substantial level of indebtedness increases the possibility that we may be unable to generate cash sufficient to pay when due the principal of, interest on or other amounts due in respect of our indebtedness. We may also obtain additional long-term debt, increasing the risks discussed below. Our substantial leverage could have significant consequences to holders of our debt and equity securities. For example, it could:

	•		make it more difficult for us to satisfy our obligations with respect to our indebtedness, including compliance with financial covenants;
	•		increase our vulnerability to general adverse economic and industry conditions;
	•		limit our ability to obtain additional financing;
	•		require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the amount of our cash flow available for other purposes, including capital expenditures and other general corporate purposes;
	•		require us to sell debt or equity securities or to sell some of our core assets, possibly on unfavorable terms, to meet payment obligations;
	•		restrict us from making strategic acquisitions, introducing new technologies or exploiting business opportunities;
	•		limit our flexibility in planning for, or reacting to, changes in our business and our industry;
	•		place us at a possible competitive disadvantage compared to our competitors that have less debt;
	•		adversely affect the value of our common stock; and
	•		affect our viability as a going concern.

Our interest expense could be adversely affected by risks associated with our interest rate swap agreements.

     Interest rate swap agreements carry a certain inherent element of interest rate risk. During 2001, we entered into four interest rate swap agreements in order to take advantage of the current market conditions. These agreements converted a significant portion of our fixed rate 9 7/8% senior subordinated notes and our fixed rate 7 3/8% senior notes into variable rate obligations. The variable rates are based on the three-month LIBOR plus a fixed margin. These swap agreements lowered our interest expense in 2001 and 2002, and we expect these agreements to continue to positively impact our interest expense. If, however, LIBOR increases significantly, our interest expense could be adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information on our swap agreements.

We are subject to many environmental laws and regulations that require significant expenditures for compliance and remediation efforts, and changes in the law could increase those expenses and adversely affect our operations.

     Compliance with the environmental requirements of international, federal, state and local governments significantly affects our business. Among other things, these requirements regulate the discharge of materials into the water, air and land and govern the use and disposal of hazardous substances. Under environmental laws, we can be held strictly liable if hazardous substances are found on real property we have ever owned, operated or used as a disposal site. In recent years, we have adopted a policy of assessing real property for environmental risks prior to purchase. We are aware of issues regarding hazardous substances at some facilities, and we have put into place a remedial plan at each site where we believe such a plan is necessary. We regularly make capital and operating expenditures to stay in compliance with environmental laws. Despite these compliance efforts, risk of environmental liability is part of the nature of our business. We cannot give assurance that environmental liabilities, including compliance and remediation costs, will not have a material adverse effect on us in the future. In addition, future events may lead to additional compliance or other costs that could have a material adverse effect on our business. Such future events could include changes in, or new interpretations of, existing laws, regulations or enforcement policies or further investigation of the potential health hazards of certain products or business activities.

ITEM 2. PROPERTIES

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Facilities. The following table sets forth certain information concerning our facilities. Unless otherwise indicated, we own such facilities.

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ITEM 3. LEGAL PROCEEDINGS

     From time to time claims are asserted against the Company arising out of its operation in the normal course of business. Management does not believe that the Company is a party to any litigation that will have a material adverse effect on its financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to the Company’s security holders during the fourth fiscal quarter ended December 31, 2002.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Since October 1, 1992, our common shares, $.10 par value (the “Common Shares”) have traded on the National Association of Securities Dealers, Inc. NASDAQ National Market System (“NASDAQ”) under the symbol CSAR. As of March 14, 2003, there were approximately 508 shareholders of record and, as of that date, we estimate that there were approximately 2,100 beneficial owners holding stock in nominee or “street” name. The table below sets forth quarterly high and low stock prices and dividends declared during the years 2002 and 2001.

     We paid dividends of $0.18 per share during each quarter of 2000. In February 2001, we announced that the first quarter dividend was reduced by one-half to $0.09 per issued and outstanding common share. In June 2001, we reduced our second, third and fourth quarter dividend from $0.09 to $0.03 per issued and outstanding common share. We suspended future payments of quarterly dividends, beginning in the first quarter of 2002. The decision to reduce the quarterly dividend was made to preserve our financial flexibility in light of difficult industry conditions. As described under “Management's Discussion and Analysis of Financial Condition and Results of Operations — Subsequent Events,” our senior credit facility currently prohibits us from paying any dividends.

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ITEM 6. SELECTED FINANCIAL DATA