Caraustar secures commitments for $10 million in additional liquidity following challenging quarter

By Jennifer Lanning Drey

Portland, Ore., May 4 - Caraustar Industries, Inc. has obtained commitments from its banks for approximately $10 million of additional liquidity under its revolving credit line, Caraustar treasurer and comptroller Bill Nix said Friday during the company's first-quarter earnings conference call.

Nix said the company sought the additional liquidity, in part, because of higher fiber costs and a seasonally weak fourth quarter, which were both exacerbated by a slowdown in the housing market.

Nix also reiterated Caraustar's past announcement that it is exploring financing alternatives for its 7 3/8% senior notes due June 2009.

Caraustar had $51.7 million in borrowings outstanding under its $135.0 million senior secured credit facility at quarter end. Availability under the revolver portion of the facility was $26.2 million, according to a company news release.

The company had a cash balance of $1.2 million at March 31, compared with $1.0 million at Dec. 31, according to the release.

During the first three months of the year, Caraustar used $7.8 million cash in operating activities, compared with $5.3 million in the same period of 2006.

Caraustar's sales dropped 11.8% in the quarter to $232.7 million, compared with $263.9 million for the same period in 2006. The company reported an EBITDA loss of $673,000, according to the release.

"Overall soft market demand, largely impacted by the housing downturn coupled with dramatically higher fiber costs led to a challenging quarter," Caraustar chief executive officer Michael J. Keough said.

Company executives said Caraustar continued in its restructuring efforts during the quarter and reported spending $4.9 million on cash restructuring costs related to facility closures.

However, cash restructuring costs are expected to be significantly less in subsequent quarters of 2007 as restructuring activity slows down, Nix said.

"Although our transformation plan is being implemented against a backdrop of the most challenging market we've seen in many quarters, we've seen good progress in many areas," Keough said.

The company's current restructuring initiatives aim to reduce SG&A expenses by $10 million per year and to significantly impact $100 million in working capital expenses.

Caraustar is an Atlanta recycled packaging company.

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