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, 2005
| ¨ | 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 29, 2005.
| Common Stock, $.10 par value |
28,763,856 | |
| (Class) | (Outstanding) |
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2005
CARAUSTAR INDUSTRIES, INC.
TABLE OF CONTENTS
| Page | ||||
| PART I — |
FINANCIAL INFORMATION |
|||
| Item 1. |
||||
| Condensed Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004 |
3 | |||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||
| Item 3. |
30 | |||
| Item 4. |
30 | |||
| PART II — |
OTHER INFORMATION |
|||
| Item 1. |
30 | |||
| Item 2. |
30 | |||
| Item 6. |
30 | |||
| 31 | ||||
| 32 | ||||
2
| ITEM 1. | Condensed Consolidated Financial Statements |
CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share data)
| March 31, 2005 |
December 31, 2004 |
|||||||
| ASSETS | ||||||||
| CURRENT ASSETS: |
||||||||
| Cash and cash equivalents |
$ | 86,496 | $ | 89,756 | ||||
| Receivables, net of allowances for doubtful accounts, returns, and discounts of $4,343 and $4,418 as of March 31, 2005 and December 31, 2004, respectively |
113,018 | 102,644 | ||||||
| Inventories |
90,004 | 89,044 | ||||||
| Refundable income taxes |
361 | 409 | ||||||
| Current deferred tax asset |
10,662 | 11,035 | ||||||
| Other current assets |
12,773 | 11,059 | ||||||
| Total current assets |
313,314 | 303,947 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: |
||||||||
| Land |
11,814 | 11,856 | ||||||
| Buildings and improvements |
138,801 | 138,872 | ||||||
| Machinery and equipment |
623,234 | 616,791 | ||||||
| Furniture and fixtures |
16,039 | 15,725 | ||||||
| 789,888 | 783,244 | |||||||
| Less accumulated depreciation |
(402,588 | ) | (395,110 | ) | ||||
| Property, plant and equipment, net |
387,300 | 388,134 | ||||||
| GOODWILL |
183,130 | 183,130 | ||||||
| INVESTMENT IN UNCONSOLIDATED AFFILIATES |
64,072 | 59,676 | ||||||
| OTHER ASSETS |
24,627 | 24,818 | ||||||
| $ | 972,443 | $ | 959,705 | |||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: |
||||||||
| Current maturities of debt |
$ | 80 | $ | 80 | ||||
| Accounts payable |
86,728 | 84,890 | ||||||
| Accrued interest |
20,127 | 8,810 | ||||||
| Accrued compensation |
8,368 | 11,742 | ||||||
| Capital lease obligations |
524 | 79 | ||||||
| Other accrued liabilities |
34,823 | 34,880 | ||||||
| Total current liabilities |
150,650 | 140,481 | ||||||
| SENIOR CREDIT FACILITY |
— | — | ||||||
| LONG-TERM DEBT, less current maturities |
505,567 | 506,141 | ||||||
| LONG-TERM CAPITAL LEASE OBLIGATIONS |
883 | — | ||||||
| DEFERRED INCOME TAXES |
57,466 | 57,320 | ||||||
| PENSION LIABILITY |
34,772 | 32,897 | ||||||
| OTHER LIABILITIES |
5,331 | 5,614 | ||||||
| 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, 28,763,481 and 28,753,390 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively |
2,876 | 2,875 | ||||||
| Additional paid-in capital |
191,829 | 191,903 | ||||||
| Unearned compensation |
(4,075 | ) | (4,334 | ) | ||||
| Retained earnings |
49,006 | 48,552 | ||||||
| Accumulated other comprehensive (loss) income: |
||||||||
| Minimum pension liability adjustment |
(22,621 | ) | (22,621 | ) | ||||
| Foreign currency translation |
759 | 877 | ||||||
| Total accumulated other comprehensive loss |
(21,862 | ) | (21,744 | ) | ||||
| Total Shareholders’ Equity |
217,774 | 217,252 | ||||||
| $ | 972,443 | $ | 959,705 | |||||
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, |
||||||||
| 2005 |
2004 |
|||||||
| SALES |
$ | 269,524 | $ | 257,095 | ||||
| COST OF SALES |
229,897 | 220,569 | ||||||
| Gross profit |
39,627 | 36,526 | ||||||
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
36,411 | 35,449 | ||||||
| RESTRUCTURING AND IMPAIRMENT COSTS |
(603 | ) | (3,172 | ) | ||||
| Income (loss) from operations |
2,613 | (2,095 | ) | |||||
| OTHER (EXPENSE) INCOME: |
||||||||
| Interest expense |
(10,677 | ) | (10,704 | ) | ||||
| Interest income |
509 | 187 | ||||||
| Equity in income of unconsolidated affiliates |
8,356 | 2,682 | ||||||
| Other, net |
91 | (31 | ) | |||||
| (1,721 | ) | (7,866 | ) | |||||
| INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST |
892 | (9,961 | ) | |||||
| (PROVISION) BENEFIT FOR INCOME TAXES |
(413 | ) | 3,352 | |||||
| MINORITY INTEREST IN INCOME |
(25 | ) | (164 | ) | ||||
| NET INCOME (LOSS) |
$ | 454 | $ | (6,773 | ) | |||
| OTHER COMPREHENSIVE LOSS: |
||||||||
| Foreign currency translation adjustment |
(118 | ) | (19 | ) | ||||
| COMPREHENSIVE INCOME (LOSS) |
$ | 336 | $ | (6,792 | ) | |||
| BASIC |
||||||||
| NET INCOME (LOSS) PER COMMON SHARE |
$ | 0.02 | $ | (0.24 | ) | |||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
28,761 | 28,391 | ||||||
| DILUTED |
||||||||
| NET INCOME (LOSS ) PER COMMON SHARE |
$ | 0.02 | $ | (0.24 | ) | |||
| DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |
28,927 | 28,391 | ||||||
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, |
||||||||
| 2005 |
2004 |
|||||||
| OPERATING ACTIVITIES: |
||||||||
| Net income (loss) |
$ | 454 | $ | (6,773 | ) | |||
| Depreciation and amortization |
6,675 | 7,251 | ||||||
| Stock-based compensation expense |
255 | — | ||||||
| Restructuring and impairment costs |
183 | 1,305 | ||||||
| Deferred income taxes |
369 | (3,515 | ) | |||||
| Equity in income of unconsolidated affiliates, net of distributions |
(4,356 | ) | (182 | ) | ||||
| Changes in operating assets and liabilities |
(2,973 | ) | 2,416 | |||||
| Net cash provided by operating activities |
607 | 502 | ||||||
| INVESTING ACTIVITIES: |
||||||||
| Purchases of property, plant and equipment |
(4,482 | ) | (4,379 | ) | ||||
| Proceeds from disposal of property, plant and equipment |
695 | 1,351 | ||||||
| Investment in unconsolidated affiliates |
(40 | ) | (150 | ) | ||||
| Net cash used in investing activities |
(3,827 | ) | (3,178 | ) | ||||
| FINANCING ACTIVITIES: |
||||||||
| Repayments of short and long-term debt |
— | (3,509 | ) | |||||
| Proceeds from swap agreement unwind |
— | 380 | ||||||
| Issuances of stock, net of forfeitures |
96 | 1,658 | ||||||
| Payments for capital lease obligations |
(136 | ) | (27 | ) | ||||
| Net cash used in financing activities |
(40 | ) | (1,498 | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(3,260 | ) | (4,174 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
89,756 | 85,551 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD |
$ | 86,496 | $ | 81,377 | ||||
| SUPPLEMENTAL DISCLOSURES: |
||||||||
| Cash payments for interest |
$ | 301 | $ | — | ||||
| Income tax payments, net |
$ | 94 | $ | 116 | ||||
| Property acquired under capital leases |
$ | 1,464 | $ | — | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CARAUSTAR INDUSTRIES, INC. AND SUBSIDARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2005
(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 to present fairly, in all material respects, the financial position of the Company as of March 31, 2005, and the results of operations and cash flows for the three months ended March 31, 2005 and 2004. The results of operations and cash flows for the three months ended March 31, 2005 and 2004 are not, and should not be, construed as necessarily indicative of the results of the operations or cash flows which may be reported for the remainder of 2005. Certain reclassifications have been made to prior year balances to conform to current year classification.
The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of