Caraustar Reports Second Quarter 2005 Results

Caraustar Industries announced that sales for the second quarter were $269.3 million compared to sales of $268.5 million for the same quarter in 2004. Net income for the quarter was $0.1 million, compared to the second quarter 2004 net income of $1.7 million. Quarterly results included restructuring and impairment costs of about $0.3 million and $2.4 million pre-tax related to various closures.

Volume in the quarter was up 1,600 tons, or 0.5 percent as gains in gypsum facing paper sold by its 50-percent owned unconsolidated Premier Boxboard Limited LLC joint venture more than offset reductions at the 100-percent owned Sweetwater Paperboard mill resulting from downtime and inefficiencies associated with an equipment upgrade.

Income from operations before restructuring and impairment costs in the quarter versus the second quarter 2004 was favorably impacted by $3.9 million from higher pricing and $1 million in lower fiber costs. This was more than offset by the $2.5 million impact from the decline in consolidated mill volume (primarily Sweetwater), $1.5 million in increased freight, $2.5 million in higher fuel and energy costs, $1.6 million of increased selling, general and administrative costs and $1.3 million in higher pension and other employee costs. Continued strong performances by PBL and Standard Gypsum, enabled the company to report a pretax increase in income of approximately $700,000.

For the first six months, sales were $538.8 million, an increase of 2.5 percent from 2004. Strong pricing and volume growth in the two joint ventures more than offset volume declines in the company's mill system and increased freight, energy and selling, general and administrative costs in the first half of 2005.

Michael Keough, president and CEO of Caraustar, commented, "Our quarterly performance was solid in spite of increased freight and energy costs. Industry volume was down approximately 1 percent compared to the second quarter of 2004 as the general economy and the paper/paperboard sector remained sluggish. Year to date, Caraustar volume is up 3.1 percent in 2005 through June and the industry was down 1.3 percent. Caraustar mill operating rates were 93 percent in the second quarter 2005 versus 96 percent for the same period last year.

"Pricing improved in the second quarter 2005 versus the same period last year, although it was business-specific with varying degrees of realization. We announced a paperboard price increase on April 26, 2005 and a price increase for converted tube and core products was announced on June 10, 2005. Results from the paperboard price increase are mixed, with greater success in uncoated recycled boxboard than coated recycled boxboard. It is too early to gauge the impact of the converted tube and core products price increase.