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 September 30, 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, November 8, 2004.
| Common Stock, $.10 par value | 28,491,348 | |
| (Class) | (Outstanding) |
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2004
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)
| September 30, 2004 |
December 31, 2003 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 89,195 | $ | 85,551 | ||||
| Receivables, net of allowances for doubtful accounts, returns, and discounts of $4,058 and $5,302 at September 30, 2004 and December 31, 2003, respectively |
111,689 | 93,892 | ||||||
| Inventories |
88,644 | 87,608 | ||||||
| Refundable income taxes |
110 | 250 | ||||||
| Current deferred tax asset |
10,996 | 7,457 | ||||||
| Other current assets |
12,137 | 12,461 | ||||||
| Total current assets |
312,771 | 287,219 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: |
||||||||
| Land |
12,084 | 12,211 | ||||||
| Buildings and improvements |
141,806 | 141,022 | ||||||
| Machinery and equipment |
622,901 | 617,688 | ||||||
| Furniture and fixtures |
15,424 | 15,225 | ||||||
| 792,215 | 786,146 | |||||||
| Less accumulated depreciation |
(390,584 | ) | (375,374 | ) | ||||
| Property, plant and equipment, net |
401,631 | 410,772 | ||||||
| GOODWILL |
183,130 | 183,130 | ||||||
| INVESTMENT IN UNCONSOLIDATED AFFILIATES |
60,025 | 54,623 | ||||||
| OTHER ASSETS |
26,331 | 24,801 | ||||||
| $ | 983,888 | $ | 960,545 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current maturities of debt |
$ | 80 | $ | 106 | ||||
| Accounts payable |
86,039 | 75,013 | ||||||
| Accrued interest |
20,154 | 8,832 | ||||||
| Accrued compensation |
12,927 | 9,800 | ||||||
| Other accrued liabilities |
39,760 | 31,307 | ||||||
| Total current liabilities |
158,960 | 125,058 | ||||||
| SENIOR CREDIT FACILITY |
— | — | ||||||
| OTHER LONG-TERM DEBT, less current maturities |
516,937 | 531,001 | ||||||
| DEFERRED INCOME TAXES |
58,365 | 58,920 | ||||||
| PENSION LIABILITY |
25,506 | 18,632 | ||||||
| DEFERRED COMPENSATION |
1,390 | 1,522 | ||||||
| OTHER LIABILITIES |
4,084 | 5,031 | ||||||
| MINORITY INTEREST |
648 | 504 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 13) |
||||||||
| 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, 28,486,392 and 28,222,205 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively |
2,849 | 2,822 | ||||||
| Additional paid-in capital |
187,370 | 185,031 | ||||||
| Unearned compensation |
(358 | ) | (1,865 | ) | ||||
| Retained earnings |
46,905 | 52,531 | ||||||
| Accumulated other comprehensive (loss) income: |
||||||||
| Minimum pension liability adjustment |
(19,244 | ) | (19,244 | ) | ||||
| Foreign currency translation |
476 | 602 | ||||||
| Total accumulated other comprehensive loss |
(18,768 | ) | (18,642 | ) | ||||
| Total Shareholders’ Equity |
217,998 | 219,877 | ||||||
| $ | 983,888 | $ | 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 September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| SALES |
$ | 273,789 | $ | 253,013 | $ | 799,355 | $ | 752,758 | ||||||||
| COST OF SALES |
233,094 | 211,685 | 679,635 | 631,231 | ||||||||||||
| Gross profit |
40,695 | 41,328 | 119,720 | 121,527 | ||||||||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
33,931 | 31,845 | 103,098 | 111,548 | ||||||||||||
| RESTRUCTURING AND IMPAIRMENT COSTS |
4,827 | 3,085 | 9,500 | 9,252 | ||||||||||||
| Income from operations |
1,937 | 6,398 | 7,122 | 727 | ||||||||||||
| OTHER (EXPENSE) INCOME: |
||||||||||||||||
| Interest expense |
(10,684 | ) | (11,251 | ) | (32,287 | ) | (32,832 | ) | ||||||||
| Interest income |
597 | 286 | 1,286 | 722 | ||||||||||||
| Write-off of deferred debt costs |
— | — | — | (1,812 | ) | |||||||||||
| Equity in income of unconsolidated affiliates |
7,746 | 3,217 | 16,810 | 4,681 | ||||||||||||
| Other, net |
(81 | ) | (93 | ) | (400 | ) | 258 | |||||||||
| (2,422 | ) | (7,841 | ) | (14,591 | ) | (28,983 | ) | |||||||||
| LOSS BEFORE MINORITY INTEREST AND INCOME TAXES |
(485 | ) | (1,443 | ) | (7,469 | ) | (28,256 | ) | ||||||||
| MINORITY INTEREST IN (INCOME) LOSSES |
(32 | ) | 155 | (145 | ) | 92 | ||||||||||
| (PROVISION) BENEFIT FOR INCOME TAXES |
(79 | ) | 141 | 1,988 | 10,054 | |||||||||||
| NET LOSS |
$ | (596 | ) | $ | (1,147 | ) | $ | (5,626 | ) | $ | (18,110 | ) | ||||
| OTHER COMPREHENSIVE INCOME (LOSS): |
||||||||||||||||
| Foreign currency translation adjustment |
175 | (52 | ) | (126 | ) | 671 | ||||||||||
| COMPREHENSIVE LOSS |
$ | (421 | ) | $ | (1,199 | ) | $ | (5,752 | ) | $ | (17,439 | ) | ||||
| BASIC |
||||||||||||||||
| NET LOSS PER COMMON SHARE |
$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.20 | ) | $ | (0.65 | ) | ||||
| Weighted average number of shares outstanding |
28,506 | 27,990 | 28,449 | 27,937 | ||||||||||||
| DILUTED |
||||||||||||||||
| NET LOSS PER COMMON SHARE |
$ | (0.02 | ) | $ | (0.04 | ) | $ | (0.20 | ) | $ | (0.65 | ) | ||||
| Weighted average number of shares outstanding |
28,506 | 27,990 | 28,449 | 27,937 | ||||||||||||
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 Nine Months Ended September 30, |
||||||||
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | (5,626 | ) | $ | (18,110 | ) | ||
| Depreciation and amortization |
22,558 | 22,130 | ||||||
| Stock-based compensation expense |
1,610 | — | ||||||
| Loss on extinguishment of debt |
301 | — | ||||||
| Write-off of deferred debt costs |
— | 1,812 | ||||||
| Loss on disposal of property, plant and equipment, net |
1,154 | 1,116 | ||||||
| Restructuring costs |
1,813 | 8,547 | ||||||
| Other noncash adjustments |
(2,989 | ) | (8,751 | ) | ||||
| Equity in income of unconsolidated affiliates, net of distributions |
(5,310 | ) | (1,031 | ) | ||||
| Changes in operating assets and liabilities, net of acquisitions |
15,232 | 37,135 | ||||||
| Net cash provided by operating activities |
28,743 | 42,848 | ||||||