Business News
Caraustar Industries, Inc. Reports First Quarter 2009 Results
Monday 04. May 2009 - Reaches Agreement to Extend Revolving Credit Facility
Caraustar Industries, Inc. (Nasdaq: CSAR) today announced that sales from operations for the first quarter ended March 31, 2009 were $159.3 million compared to sales of $216.5 million for the same quarter in 2008. Net loss for the first quarter of 2009 was $4.4 million, or $0.15 per share, compared to 2008 first quarter income of $0.2 million, or $0.01 per share. The first quarter 2009 and 2008 results from operations included restructuring and impairment costs of approximately $9.5 million, or $0.21 per share, and $0.7 million, or $0.02 per share, respectively. The $9.1 million decrease in pre-tax results was primarily attributable to higher restructuring and impairment costs of $8.8 million, increased pension expense of $2.3 million, and higher professional fees of $1.9 million related to efforts to restructure the company’s 7.375 percent Senior Notes maturing on June 1, 2009. These costs were partially offset by lower salaries and a reduction in other employee benefit expenses of $1.9 million and lower interest expense of $0.4 million.
Total paperboard volume for the first quarter of 2009 decreased approximately 73.4 thousand tons, or 31.4 percent, compared to the same quarter last year. The decrease was attributable to 33.4 thousand tons of lower gypsum facing paper and other specialty paperboard tons from PBL (Premier Boxboard Limited LLC), which membership interest was sold on July 24, 2008, an 8.8 thousand ton decrease in other (non-PBL) gypsum facing paper, and a 16.3 thousand ton decrease in tube and core board. The decrease in gypsum facing paper production is associated with declines in the construction industry, and the shortfall in the tube and core segment is attributable to lower overall demand due to the recessionary economic conditions. The company operated 3 fewer paperboard mills in the first quarter of 2009 compared to the same period last year. In the first quarter of 2009, Caraustar’s mill capacity utilization was 93.3 percent, compared to industry capacity utilization of 82.6 percent.
Michael J. Keough, president and chief executive officer of Caraustar, commented, “Overall, we were pleased with the results of operations in the first quarter. Despite a challenging economic backdrop, the company was able to deliver solid results. Our employees continue to remain focused on meeting customers’ needs and operational excellence, and we see the benefits of their focus and hard work. Our operations are running safer than they have ever run. Our first quarter 2009 results, however, were impacted by weaker volume, particularly in our tube and core business, as industrial production remained slow. We recouped some losses due to lower fiber costs, quarter-over-quarter. We are beginning to see margin compression as fiber costs rise and capacity utilization decreases because of declining demand.”
Mr. Keough further commented, “We continue discussions with the ad hoc committee of our senior noteholders with respect to a restructuring of our debt obligations. We will disclose additional information as appropriate.”
Liquidity
The company ended the quarter with a cash balance of $25.6 million compared to $35.5 million at December 31, 2008. For the quarters ended March 31, 2009 and 2008, the company used $9.0 million and $3.7 million, respectively, of cash from operating activities. The $5.3 million increase in cash used was primarily due to increased working capital. Capital expenditures decreased quarter-over-quarter to $1.0 million from $3.9 million in 2008.
As of March 31, 2009, the company had $25.6 million of availability under its Senior Credit Facility, after giving effect to $16.0 million in letters of credit and the $20.0 million minimum availability reserve, both of which reduce availability. The company executed an amendment to its Senior Credit Facility to defer until May 8, 2009 notification to the participating lenders in the bank group of the company’s plan to refinance or defease the 7.375 percent Senior Notes. As of April 30, 2009, the company is obligated to apply cash receipts to any outstanding balance drawn on its revolving credit line. There is no balance drawn on the credit line and the company believes that it has sufficient cash on hand to fund current operations. However, as noted above, our 7.375 percent Senior Notes mature on June 1, 2009. Given the significant constraints in the credit markets, we believe we would be unable to refinance our notes prior to maturity. Accordingly, continuing as a going concern is dependent on us reaching satisfactory agreement with the holders of the 7.375 percent Senior Notes with respect to a restructuring. It is not possible to determine whether we will reach an agreement with our noteholders or to assess the feasibility and timing of the implementation of any proposed restructuring. We expect to be able to continue to service our customers’ needs and will work to minimize disruptions to our operations caused by this uncertainty.