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 |
For the quarterly period ended March 31, 2004
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] |
For the transition period from to
Commission File Number 0-20646
Caraustar Industries, Inc.
(Exact name of registrant as specified in its charter)
| North Carolina | 58-1388387 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 3100 Joe Jerkins Blvd., Austell, Georgia | 30106 | |
| (Address of principal executive offices) | (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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
Indicate the number of shares outstanding of each of issuer’s classes of common stock, as of the latest practicable date, April 30, 2004.
| Common Stock, $.10 par value |
28,441,579 | |
| (Class) | (Outstanding) |
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2004
CARAUSTAR INDUSTRIES, INC.
TABLE OF CONTENTS
2
ITEM 1. Condensed Consolidated Financial Statements
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
| March 31, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 81,377 | $ | 85,551 | ||||
| Receivables, net of allowances |
109,107 | 93,892 | ||||||
| Inventories |
86,106 | 87,608 | ||||||
| Refundable income taxes |
193 | 250 | ||||||
| Current deferred tax asset |
8,796 | 7,457 | ||||||
| Other current assets |
13,872 | 12,461 | ||||||
| Total current assets |
299,451 | 287,219 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: |
||||||||
| Land |
12,067 | 12,211 | ||||||
| Buildings and improvements |
140,247 | 141,022 | ||||||
| Machinery and equipment |
617,982 | 617,688 | ||||||
| Furniture and fixtures |
14,978 | 15,225 | ||||||
| 785,274 | 786,146 | |||||||
| Less accumulated depreciation |
(378,663 | ) | (375,374 | ) | ||||
| Property, plant and equipment, net |
406,611 | 410,772 | ||||||
| GOODWILL |
183,130 | 183,130 | ||||||
| INVESTMENT IN UNCONSOLIDATED AFFILIATES |
54,955 | 54,623 | ||||||
| OTHER ASSETS |
28,932 | 24,801 | ||||||
| $ | 973,079 | $ | 960,545 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current maturities of debt |
$ | 106 | $ | 106 | ||||
| Accounts payable |
80,953 | 75,013 | ||||||
| Accrued interest |
20,198 | 8,832 | ||||||
| Accrued compensation |
11,333 | 9,800 | ||||||
| Other accrued liabilities |
31,904 | 31,307 | ||||||
| Total current liabilities |
144,494 | 125,058 | ||||||
| SENIOR CREDIT FACILITY |
— | — | ||||||
| OTHER LONG-TERM DEBT, less current maturities |
529,438 | 531,001 | ||||||
| DEFERRED INCOME TAXES |
56,746 | 58,920 | ||||||
| PENSION LIABILITY |
21,141 | 18,632 | ||||||
| DEFERRED COMPENSATION |
1,561 | 1,522 | ||||||
| OTHER LIABILITIES |
4,180 | 5,031 | ||||||
| MINORITY INTEREST |
668 | 504 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 14) |
||||||||
| SHAREHOLDERS’ EQUITY: |
||||||||
| Preferred stock, $.10 par value; 5,000,000 shares authorized, no shares issued |
— | — | ||||||
| Common stock, $.10 par value; 60,000,000 shares authorized, 28,440,719 and 28,222,205 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively |
2,844 | 2,822 | ||||||
| Additional paid-in capital |
186,735 | 185,031 | ||||||
| Unearned compensation |
(1,825 | ) | (1,865 | ) | ||||
| Retained earnings |
45,758 | 52,531 | ||||||
| Accumulated other comprehensive (loss) income: |
||||||||
| Minimum pension liability adjustment |
(19,244 | ) | (19,244 | ) | ||||
| Foreign currency translation |
583 | 602 | ||||||
| Total accumulated other comprehensive loss |
(18,661 | ) | (18,642 | ) | ||||
| Total Shareholders’ Equity |
214,851 | 219,877 | ||||||
| $ | 973,079 | $ | 960,545 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| SALES |
$ | 257,095 | $ | 252,902 | ||||
| COST OF SALES |
216,651 | 206,346 | ||||||
| Gross profit |
40,444 | 46,556 | ||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
39,497 | 43,594 | ||||||
| RESTRUCTURING AND IMPAIRMENT COSTS |
3,042 | 4,332 | ||||||
| Loss from operations |
(2,095 | ) | (1,370 | ) | ||||
| OTHER (EXPENSE) INCOME: |
||||||||
| Interest expense |
(10,857 | ) | (10,337 | ) | ||||
| Interest income |
340 | 201 | ||||||
| Equity in income of unconsolidated affiliates |
2,682 | 20 | ||||||
| Other, net |
(31 | ) | 98 | |||||
| (7,866 | ) | (10,018 | ) | |||||
| LOSS BEFORE MINORITY INTEREST AND INCOME TAXES |
(9,961 | ) | (11,388 | ) | ||||
| MINORITY INTEREST IN INCOME |
(164 | ) | (5 | ) | ||||
| BENEFIT FOR INCOME TAXES |
(3,352 | ) | (4,265 | ) | ||||
| NET LOSS |
$ | (6,773 | ) | $ | (7,128 | ) | ||
| OTHER COMPREHENSIVE (GAIN) LOSS: |
||||||||
| Foreign currency translation adjustment |
(19 | ) | 196 | |||||
| COMPREHENSIVE LOSS |
$ | (6,792 | ) | $ | (6,932 | ) | ||
| BASIC |
||||||||
| NET LOSS PER COMMON SHARE |
$ | (0.24 | ) | $ | (0.26 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
28,391 | 27,911 | ||||||
| DILUTED |
||||||||
| NET LOSS PER COMMON SHARE |
$ | (0.24 | ) | $ | (0.26 | ) | ||
| DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
28,391 | 27,911 | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
| For the Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (6,773 | ) | $ | (7,128 | ) | ||
| Depreciation and amortization |
7,251 | 7,748 | ||||||
| Disposal of property, plant and equipment, net |
130 | 294 | ||||||
| Restructuring costs |
1,175 | 5,627 | ||||||
| Other noncash adjustments |
(3,258 | ) | (2,628 | ) | ||||
| Equity in income of unconsolidated affiliates, net of distributions |
(182 | ) | 480 | |||||
| Changes in operating assets and liabilities, net of acquisitions |
2,132 | 11,702 | ||||||
| Net cash provided by operating activities |
475 | 16,095 | ||||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of property, plant and equipment |
(4,379 | ) | (6,290 | ) | ||||
| Acquisition of businesses, net of cash acquired |
— | (707 | ) | |||||
| Proceeds from disposal of property, plant and equipment |
1,351 | 134 | ||||||
| Investment in unconsolidated affiliates |
(150 | ) | — | |||||
| Net cash used in investing activities |
(3,178 | ) | (6,863 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Repayments of short and long-term debt |
(3,509 | ) | — | |||||
| Proceeds from swap agreement unwind |
380 | 4,264 | ||||||
| Issuances of stock, net of forfeitures |
1,658 | — | ||||||
| Deferred debt costs |
— | (809 | ) | |||||
| Net cash (used in) provided by financing activities |
(1,471 | ) | 3,455 | |||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
(4,174 | ) | 12,687 | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
85,551 | 34,314 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 81,377 | $ | 47,001 | ||||
| SUPPLEMENTAL DISCLOSURES: |
||||||||
| Cash payments for interest |
$ | — | $ | 850 | ||||
| Income tax payments (refunds), net |
$ | 116 | $ | (16,992 | ) | |||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
(UNAUDITED)
Note 1. Basis of Presentation
The financial information included herein is unaudited; however, such information reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods. Certain notes and other information have been condensed or omitted from the interim financial statements; therefore, these financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to prior year balances to conform with the 2004 presentation.
Note 2. New Accounting Pronouncements
In December 2003, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits, an amendment of FASB Statements No. 87, 88 and 106”. SFAS No. 132 requires disclosures about defined benefit pension plans’ and other postretirement plans’ assets, obligations, cash flows and net cost. The Company adopted the annual disclosure provisions for the fiscal year ended December 31, 2003. The Company adopted the interim disclosure provisions effective with this filing as provided in Note 10.
Note 3. Accounting for Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its employee stock options. Interim pro forma information regarding net income (loss) and earnings (loss) per share is required by SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure” which requires that the information be determined as if the Company had accounted for its employee stock options under the fair value method of that statement. The fair values for these options were estimated as of the grant dates using the Black-Scholes option pricing model with the following weighted average assumptions: