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Caraustar Industries, Inc.

Caraustar Industries, Inc.

3100 Joe Jenkins Boulevard
Austell, Georgia 30106-3227
U.S.A.
Telephone: (770) 732-3401
Fax: (770) 732-3401
Web site: http://www.caraustar.com

Public Company
Incorporated:
1938 as Carolina Paper Board Corp.
Employees: 6,255
Sales: $963.4 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: CSAR
NAIC: 32212 Folding Paperboard Box Manufacturing; 322213 Setup Paperboard Box Manufacturing; 32214 Fiber Can, Tube, Drum, and Similar Products Manufacturing; 551112 Offices of Other Holding Companies

Caraustar Industries, Inc. is a leading manufacturer of recycled paperboard and converted paperboard products with more than 100 facilities in 29 states, Mexico, England, and Canada. Caraustars position as a diversified, low-cost producer and supplier of paperboard and paperboard products has allowed the company to capture a strong share of each of four key paper-board markets: tubes, cores, and drums; folding cartons; gypsum wallboard facing paper; and other specialty and converted paperboard products. In the mid-1990s, the company became the premier supplier of recycled boxboard in the United States as well as the largest independent supplier of gypsum facing paper in North America. Additionally, the company is the nations second largest supplier of tubes, cores, and composite containers and is among its top ten carton manufacturers. Caraustar is the only major paperboard producer to serve each of its four principal markets, providing the company both stability and flexibility in a traditionally cyclical, commodity-based industry. The company, which prides itself on its diversification, also produces extruded and injection-molded plastic products to complement its paperboard product lines. Since the early 1980s, Caraustar has pursued an aggressive growth plan through acquisition and internal expansion, raising net sales (after freight costs) from $94 million in 1980 to more than $963.4 million in 2000. Through its long history, Caraustar has had a nearly unbroken record of sales and income growth.

1938-49: Caraustar Starts Out as a Recycling Pioneer in the 1930s

Caraustar was formed as the Carolina Paper Board Corporation in Charlotte, North Carolina in 1938 by Ross Puette and other investors. Puette already had more than a decade of experience in the paperboard industry, beginning his career in the 1920s at Richmond, Virginia-based Manchester Board and Paper Co. (which became a subsidiary of Caraustar in 1994). With $25,000 in startup funds, Puette and his partners built North Carolinas first paper recycling plant, with 45 employees producing 25 tons of folding carton per day. The companys operations grew quickly: by 1940, more than 60 employees produced some 8,000 tons of paperboard, generating sales of $374,000. The choice of locationa major urban market with a ready supply of waste paperwould become a key element of the companys growth strategy.

During the 1940s, Carolina Paper Board branched out, forming affiliated companies in Charlotte and in Greenville, South Carolina and building two recycled paper processing plants to supply the companys Charlotte paperboard mill. This move toward vertical integration, which assured the company a ready supply of low-cost fiber, would also become a company hallmark. In 1947, the company added forward integration capacity, when it built a second paperboard mill in Austell, Georgia. In addition to the paperboard mill, the Austell site featured a converting facility, serving the folding carton market, and a recycled fiber processing plant, tapping the low-cost supply of waste paper in nearby Atlanta. By the end of the decade, Carolina Paper Boards two mills were producing 125 tons per day. The companys sales grew to $2.3 million on a total volume of 30,000 tons, and its payroll had swelled to 140 employees.

1950-80: Expansion and Steady Growth

The first of the companys strategic acquisitions occurred in the early 1950s, when Carolina Paper Board purchased a minority interest in Star Paper Tube, which operated a tube and core converting plant in Rock Hill, South Carolina. By 1958, Carolina Paper Board had gained a majority share of Star Paper Tube and had expanded the subsidiary by building two additional tube and core converting plants, in Danville, Virginia and in Austell, Georgia, serving the textile industry. At the end of the 1950s, Carolina Paper Boards operations had grown to eight facilities, and sales had tripled to $6.4 million on more than 50,000 tons. The company was now represented in three key markets: folding carton, other specialty products, and tube and core.

The booming economy of the 1960s helped Carolina Paper Board increase its production more than 150 percent over the decade to an annual capacity of 128,000 tons. The company opened a third paper mill in 1964 in Greenville, South Carolina. Three years later, spurred by growth in the tube and core market, the company opened a fourth tube and core plant, which in turn prompted the opening of the companys fourth paper mill. In the mid-1960s, Carolina Paper Board also increased its folding carton capacity with the acquisition of Charlotte-based Atlantic Coast Carton Company. With 870 employees, Carolina Paper Boards sales quadrupled to $24.5 million, producing operating profits of more than $3 million. The companys push toward integration was already nearing a 30 percent integration level among its paper mills and converting plants.

The Atlantic Coast Carton acquisition marked a new era of growth strategy for the company. During the 1970s, acquisitions played a major role in Carolina Paper Boards expansion. Between 1970 and 1980, the company acquired one folding carton plant, two recycled fiber processing plants, and eight tube and core converting plants. At the same time, the company continued its internal growth, building five new tube and core converting plants, a recycled fiber processing plant, and a fifth paperboard mill. The new mill also enabled the company to move into a new paper market, the gypsum facing paper market, completing the companys target market areas. Meanwhile, the company was also expanding within the tube and core market, moving beyond its reliance on the textile industry to supply the paper, construction, metal, and film industries. The company already exhibited another ingredient to its later growth, that of achieving a reasonable balance among its target markets. Many of the companys plants were already capable of converting quickly from one market to another, helping to buffer the company during cyclical downturns in any of its core markets. As the 1970s ended, Carolina Paper Board had continued its strong growth, reaching revenues of $93.8 million and operating profits of $12.8 million. The companys 1,650 employees produced more than 264,000 tons.

1980-89: Company Converts to Caraustar But Slows Growth Near End of Decade

Until 1980, the company had operated as six affiliated corporations, with common management and ownership. In that year, the company consolidated its operations under the holding company, Caraustar Industries, and relocated its headquarters to its 150-acre Austell site. The newly incorporated company continued the internal and external expansion set during the previous decade. Between 1981 and 1986, the company built three tube and core converting plants and acquired two folding carton plants, a plastic extrusion and injection molding plant, three tube and core converting plants, and four recycled paperboard mills. In 1986, however, the company expansion slowed after a leveraged recapitalization added some $300 million to the companys debt. In the late 1980s, Caraustar acquired only one recycled paperboard mill, in Camden, New Jersey. The company also backed into another acquisition, that of Standard Gypsum Corp., a maker of gypsum wallboard, after that company was unable to pay its paperboard bill. In 1996, however, Caraustar sold 50 percent of its interest in Standard Gypsum and relinquished the directorship of that business.

Despite the slowdown in the companys growth, Caraustar managed to post a 187 percent increase in revenues during the 1980s, raising net sales to $141 million by 1990. Operating profits grew still more strongly, gaining 272 percent to reach $47.6 million. The companys 2,567 employees, meanwhile, had increased mill production to 565,000 tons.

1990-96: Company Goes Public and Grows into an Industry Pace Setter

At the start of the 1990s, Caraustars holdings had swelled to 44 facilities, including 11 paperboard mills located in Texas, North and South Carolina, Illinois, Ohio, New Jersey, and Tennessee. The company had grown to become one of the top ten recycling companies in the United States. The companys Star Paper Tube subsidiary had grown to become the second largest tube and core producer in the country. As the recession of the early 1990s took hold, Caraustar formulated a newly aggressive strategic plan, which called for the company to step up its vertical integration and diversification in its key market areas. Part of that plan included taking the company public, to alleviate the debt load incurred during the 1980s. The company made an initial public offering (IPO) of 11.1 million common shares in December 1992, raising some $90 million.

Company Perspectives:

At Caraustar we are committed to excellence and continuous improvement in every facet of our operation. Employee and Customer relationships will be built on mutual respect and concern for each others well-being. We will conduct our business guided by high ethical standards in accordance with all laws and regulations and will constantly strive to be responsible corporate citizens in the communities in which we are located. Caraustar Industries will produce and sell products and services that will earn a level of profits that enhances shareholder value, fairly rewards our employees for their contributions, and provides the capital necessary to maintain a leadership position in the recycled paperboard and packaging industry. To achieve these results we recognize we must provide quality goods and services that are superior to competition and that consistently meet customer requirements.

Part of the funds raised in the companys IPO was earmarked for stepping up the companys acquisition program. Between 1991 and early 1997, Caraustar added some 30 facilities to its recycling empire. During 1992 and 1993, the company acquired two recycled paperboard mills, Buffalo Paperboard and Manchester Board and Paper, which was renamed Richmond Paperboard Corp. Caraustar bought two tube and core converting plants in Salt Lake City and Phoenix and acquired Federal Packaging Corp., a maker of composite containers using paperboard and injection-molded plastics. The following year, the company added to its folding cartons capacity with the acquisition of Mid-Packaging Group Inc. and that companys two Tennessee-based folding carton plants. While investing in upgrades and maintenance of its existing facilities, Caraustar also built two new tube and core converting plants, in Lancaster, Pennsylvania and in Mexico City, as well as a new production facility for the companys Star-Guard product in Lancaster, South Carolina.

In 1995, the company added GAR Holdings, with two specialty products plants and a folding carton plant, and Summer Paper Tube of Kernersville, North Carolina, with two core manufacturing plants. Summer also manufactured specialty adhesives used in the tube and core and paperboard lamination production processes, helping the company further solidify its diverse operations and integration within the paperboard industry. Toward that end, Caraustar also entered a joint venture with Tenneco Packaging Co., which involved a $114.5 million purchase of an 80 percent interest in Tennecos clay-coated paper-board mills in Rittman, Ohio and Tama, Iowa, expanding Caraustars capacity in that high-growth area of the paperboard industry.

By 1996, the companys revenues had almost doubled since 1992 and, at 9.6 percent, had almost reached a double digit profit margin with a net income of nearly $58 million. Its companys flexibility, vertical integration, and diversity had clearly enabled the company to outpace its competitors, many of whom struggled through industry downturns and booming paperstock costs.

By that year, the company was operating 14 paperboard mills in North Carolina, South Carolina, Georgia, New Jersey, Virginia, Illinois, Ohio, Iowa, Tennessee, New York, and Pennsylvania. Its paperboard mills recycled paperstock, reducing it to pulp, then cleaned, refinished, and processed the pulp into various grades of uncoated and clay-coated paperboard. Each of Caraustars mills had the flexibility of producing paperboard for two or more of the companys four key markets, allowing the company to react quickly to market conditions and maintain high plant productivity rates. Approximately 33 percent of the resulting paperboard was used internally by Caraustar; the remaining 67 percent was sold to other manufacturers of paper-board and related products. External sales of paperboard typically accounted for 36 percent of Caraustars annual sales.

The company and its subsidiaries operated some 40 converting facilities directly serving Caraustars primary markets. The companys largest and oldest subsidiary, Star Paper Tube, Inc., operated 28 tube, core, and can converting plants, providing cores for the carpeting, textile, paper, plastic film, and other industries. In 1996 alone, Caraustar produced some 268 thousand tons of tube and core products, which, together with sales of unconverted paperboard to other tube and core manufacturers, represented 36 percent of the companys net sales. In that same years, folding carton operations at ten plants in North Carolina, Ohio, and Tennessee provided 27 percent of Caraustars net sales. Also, its 13 gypsum wallboard facing paper plants shipped 263 thousand tons, capturing roughly 17 percent of the North American market, for 17 percent of the companys net sales. The companys sales of specialty paper-board productsfor the bookbinding, printing, games, puzzleboard, furniture, and other industriesaccounted for 14 percent of Caraustars net sales. Caraustar was then operating five specialty converting plants in Georgia, North and South Carolina, and Texas. Sales of injection-molded and extruded plastics and external sales of paperstock each accounted for approximately three percent of the companys net sales.

Late 1990s and Beyond: Caraustars Growth and Diversification Continue

Caraustar continued its expansion drive through the rest of the decade and into the next century, resulting in revenues that climbed from $602.7 million in 1996 to $963.4 million in 2000. In the same period, it increased its workforce from 4,048 employees to 6,255. The companys commitment to growth was reflected in the fact that between 1994 and 1999 it was expending an annual average of $33.3 million in capital outlays.

Key Dates:

1938:
Ross Puette and other investors found Carolina Paper Board Corporation.
1944:
Manchester Board and Paper Co. becomes company subsidiary.
1947:
Company builds second paperboard mill in Austell, Georgia.
1964:
Carolina Paper Board opens third paper mill in Greenville, South Carolina.
1967:
Company builds fourth tube and core plant and opens fourth paper mill.
1980:
Company consolidates six affiliated corporations under Caraustar Industries, a holding company with headquarters in Austell.
1992:
Caraustar goes public.
1998:
Company acquires Chesapeake Paperboard Company.
2000:
Caraustar reorganizes, forming four core areas: the Mill Group; the Industrial and Consumer Products Group; the Custom Packaging Group; and the Recovered Fiber Group.

In April 1997, the company reached an agreement to acquire General Packing Service, Inc. of Clifton, New Jersey, adding that companys pharmaceutical, medical, and health, beauty, and personal care packaging products to its product line. In the same year, it purchased all the common stock of Oak Tree Packaging Corporation, whose operations consisted of three folding carton plants located in Versailles, Connecticut; Thorndike, Massachusetts; and York, Pennsylvania. Additionally in 1997, Caraustar and its subsidiary, Star Paper Tube, Inc., acquired substantially all of the assets and business of Baxter Tube Company, a manufacturer of spiral-wound tubes and a subsidiary of Cleveland, Ohio-based The Tranzonic Cos. Baxter Tubes four facilities were located in Ware Shoals, South Carolina; Perrysburg, Ohio; Minerva, Ohio; and Leyland, Lancaster, United Kingdom, where the company operated as Unity Paper Tube, Ltd.

In March of the next year, 1998, the company acquired Chesapeake Paperboard Company and its wholly-owned subsidiary, Chesapeake Fiber Packaging Corporation. Chesapeake, operating in Maryland, processed uncoated recycled paperboard in Baltimore and manufactured folding cartons and specialty corrugated products at its converting facility in Hunt Valley. In the same year, Caraustar purchased all of the outstanding common stock of Etowah Recycling, Inc., which operated recovered fiber plants, one in Canton, Georgia, and the other in Hardeeville, South Carolina. Additionally, the company bought out Tenneco Packagings 20 percent share of CPI, making Caraustar the sole owner of CPIs operations. Late in 1998, it also acquired all of the outstanding stock of Boxall, Inc., a Birmingham, Alabama, manufacturer of folding cartons. Boxall, which had revenues of $4.5 million in 1997, was slated to operate as a wholly-owned subsidiary and become part of Caraustars newly-formed specialty packaging group.

Caraustar continued its aggressive growth in the next two years. In 1999, it acquired a handful of small companies, including Carolina Component Concepts, Inc. ( a specialty paperboard converting operation), International Paperboard Companys Sprague boxboard mill (a maker of clay-coated recycled paper-board), Halifax Paperboard Company (a producer of uncoated recycled paperboard and a specialty paperboard converter), the Folding Carton Division of Tenneco Packaging, Inc. (a folding carton manufacturer), and Carolina Converting, Inc. (a specialty paperboard converter). This last-named company, the nations leading manufacturer of jigsaw puzzles and coin folders, reflected Caraustars ongoing interest in diversification. In addition to outright acquisitions, in 1999 the company entered an equal share venture with Temple-Inland, Inc., with whom it formed Premier Boxboard Limited LLC, a producer of a new lightweight gypsum facing paper and other grades of containerboard.

Early in the next year, Caraustar took steps to build its brand identity by dissolving all of its subsidiaries and renaming them Caraustar groups. For example, one of its principal subsidiaries, Star Paper Tube, was redesignated as Caraustars Industrial and Consumer Products Group. The net result was that the company organized itself into four groups: (1) the Mill Group, concerned with the manufacturing of recycled paperboard, gypsum facing paper, and laminated paperboard products; (2) the Industrial and Consumer Products Group, concerned with tubing, core, and composite containers; (3) the Custom Packaging Group, concerned with carton and custom packaging; and (4) the Recovered Fiber Group, Plastics and Adhesives, comprised of recovered paper recycling centers, plastics manufacturing, and adhesives production.

The next year, starting in February with the purchase of MilPak, Inc., a contract packager, the company continued its acquisition spree. MilPak, located in Pine Brook, New Jersey, produced blister packaging, cartoning and labeling, as well as other contract packaging for various consumer products.

The company also retrenched, however. It closed down operations at two paperboard mills, first at Baltimore in February, then, in September, at Camden, New Jersey. The first was a permanent move. The second resulted from Caraustars contract dispute with Georgia-Pacific Corporation, its largest gypsum facing paper customer. Sales to Georgia-Pacific fell by 80 percent in the course of second half of 2000. Caraustar also curtailed the operations of its Buffalo Paperboard Corp. in Lockport, New York, by cutting back its full-time manufacturing to just ten days per month.

During 2000 it had become obvious that, despite sales that continued to grow at a very healthy clip, operating expenses and debt service had begun taking a heavy toll. The companys net income dropped from $41.1 million in 1999 to just $8.1 million in 2000, which called for greater efficiency and, perhaps, a slowing down in capital investments. The result was a kind of balancing act between continued expansion through acquisitions and further cutbacks in the companys operations. For example, in November, after the earlier closure of two plants and the cutbacks at another, Caraustar completed the purchase of Crane Carton Co., the Chicago manufacturer of large folding cartons. The company paid $24.8 million for Crane, which in 1999 had logged revenues of $41 million.

The balancing act continued into the next year. In January 2001, because of a lack of market demand, Caraustar shut down its Chicago, Illinois, uncoated recycled paperboard mill. Although profitable through 1998, by 1999 it had begun to lose money. In March, the company put in effect a plan to combine the operations of its Salt Lake City, Utah, carton plant with those of its Denver, Colorado, carton plant, trimming its work force in the process. Meanwhile, Caraustar was mending some fences and still looking for expansion opportunities. In May, it ended its contract dispute with Georgia-Pacific, with whom it negotiated a new ten-year contract agreement.

Principal Divisions

Custom Packing Group; Mill Group; Recovered Fiber Group; Industrial and Consumer Products Group.

Principal Competitors

Longview Fibre Company; Rock-Tenn Company; Smurfit-Stone Container Corporation; Sonoco Products Company; Weyerhaeuser Company.

Further Reading

Caraustar, Boxall to Merge Cartons, Pulp & Paper, January 1999, p. 25.

Caraustar Closes Chicago Mill, Paperboard Packaging, March 2001, p. 20.

Caraustar Industries, Inc. Announces Acquisition of MilPak, Inc., PR Newswire, April 7, 2000.

Caraustar Industries, Inc. Involved in Contract Dispute with Gypsum Facing Customer, PR Newswire, September 12, 2000.

Caraustar Purchases Crane Carton, Package Printing, January 2001, p. 78.

Caraustar to Buy Two Paperboard Mills, Pulp & Paper, May 1999, p. 21.

Harte, Susan, Upward Bound, Atlanta Journal and Constitution, May 19, 1996, p. 21G.

Johnson, Jim, Caraustar, GP Strike Deal, Waste News, May 28, 2001, p. 5.

Jones, John A.. Caraustar Diversifies to Outperform Slow Paper Industry, Investors Business Daily, October 7, 1996, p. B14.

Krantz, Matt, How Flexibility Lets Paper Firm Beat the Cycles, Investors Business Daily, November 5, 1996, p. A4.

Milstead, David, Rock Hill, S.C., Unit of Atlanta-based Paperboard Firm Getting New Name, Knight Ridder/Tribune Business News, January 18, 2000.

Prohaska, Thomas J., Lockport, N.Y. Mill to Operate Part Time, Lay Off Workers, Knight Ridder/Tribune Business News, September 14, 2000.

Shaw, Monica, Caraustar Industries: Growth Company Focuses on Diversity, Low-Cost Production, Pulp £ Paper, January 1997, p. 40.

M.L. Cohen

update: Jane W. Fiero

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Caraustar Industries, Inc.

Caraustar Industries, Inc.

3100 Washington Street
Austell, Georgia 30001
U.S.A.
(770) 948-3101
Fax: 770-732-3401

Public Company
Incorporated:
1938 as Carolina Paper Board Corp.
Employees: 4,114
Sales: $602.69 million (1996)
Stock Exchanges: NASDAQ
SICs: 2652 Setup Paperboard Boxes; 2655 Fiber Cans Tubes Drums; 2657 Folding Paperboard Boxes Including Sanitary; 6719 Holding Companies, Not Elsewhere Classified

Caraustar Industries, Inc. is a leading manufacturer of recycled paperboard and converted paperboard products with more than 70 facilities in the United States and Mexico. Caraustars position as a diversified, low-cost producer and supplier of paperboard and paperboard products has allowed the company to capture a strong share of each of four key paperboard markets: tubes, cores, and drums; folding cartons; gypsum wall-board facing paper; and other specialty and converted paper-board products. Caraustar is the only major paperboard producer to serve each of these four markets, providing the company both stability and flexibility in a traditionally cyclical, commodity-based industry. The company also produces extruded and injection-molded plastic products to complement its paperboard product lines. Since the early 1980s, Caraustar has pursued an aggressive growth plan through acquisition and internal expansion, raising net sales (after freight costs) from $94 million in 1980 to more than $600 million in 1996. Caraustar has a nearly unbroken record of sales and income growth.

Caraustar operates 14 paperboard mills in North Carolina, South Carolina, Georgia, New Jersey, Virginia, Illinois, Ohio, Iowa, Tennessee, New York, and Pennsylvania. Caraustars paperboard mills recycle paperstock, reducing this stock to pulp, then cleaning, refining, and processing the pulp into various grades of uncoated and clay-coated paperboard. Each of Caraustars mills has the flexibility of producing paperboard for two or more of the companys four key markets, allowing the company to react quickly to market conditions and maintain high plant productivity rates. Approximately 33 percent of the resulting paperboard is used internally by Caraustar; the remaining 67 percent is sold to other manufacturers of paperboard and related products. External sales of paperboard typically account for 36 percent of Caraustars annual sales.

The company and its subsidiaries operate some 40 converting facilities directly serving Caraustars primary markets. The companys largest and oldest subsidiary, Star Paper Tube, Inc., operates 28 tube, core, and can converting plants, providing cores for the carpeting, textile, paper, plastic film, and other industries. In 1996, Caraustar produced some 268 thousand tons of tube and core products, which, together with sales of unconverted paperboard to other tube and core manufacturers, represented 36 percent of the companys net sales.

Folding carton operations, produced at ten plants in North Carolina, Ohio, and Tennessee, provided 27 percent of Caraustars net sales in 1996. In that year, Caraustars 13 gypsum wallboard facing paper plants shipped 263 thousand tons, capturing roughly 17 percent of the North American market, for 17 percent of the companys net sales. The companys sales of specialty paperboard productsfor the bookbinding, printing, games, puzzleboard, furniture, and other industriesaccounted for 14 percent of Caraustars net sales. Caraustar operates five specialty converting plants in Georgia, North and South Carolina, and Texas. Sales of injection-molded and extruded plastics and external sales of paperstock each accounted for approximately three percent of the companys net sales in 1996.

A Recycling Pioneer in the 1930s

Caraustar was formed as the Carolina Paper Board Corporation in Charlotte, North Carolina in 1938 by Ross Puette and other investors. Puette already had more than a decade of experience in the paperboard industry, beginning his career in the 1920s at Richmond, Virginia-based Manchester Board and Paper Co. (which became a subsidiary of Caraustar in 1994). With $25,000 in startup funds, Puette and his partners built North Carolinas first paper recycling plant, with 45 employees producing 25 tons of folding carton per day. The companys operations grew quickly: by 1940, more than 60 employees produced some 8,000 tons of paperboard, generating sales of $374,000. The choice of locationa major urban market with a ready supply of waste paperwould become a key element of the companys growth strategy.

During the 1940s, Carolina Paper Board branched out, forming affiliated companies in Charlotte and in Greenville, South Carolina and building two recycled paper processing plants to supply the companys Charlotte paperboard mill. This move toward vertical integration, which assured the company a ready supply of low-cost fiber, would also become a company hall-mark. In 1947, the company added forward integration capacity, when it built a second paperboard mill in Austell, Georgia. In addition to the paperboard mill, the Austell site featured a converting facility, serving the folding carton market, and a recycled fiber processing plant, tapping the low-cost supply of waste paper in nearby Atlanta. By the end of the decade, Carolina Paper Boards two mills were producing 125 tons per day. The companys sales grew to $2.3 million on a total volume of 30,000 tons, and its payroll had swelled to 140 employees.

The first of the companys strategic acquisitions occurred in the early 1950s, when Carolina Paper Board purchased a minority interest in Star Paper Tube, which operated a tube and core converting plant in Rock Hill, South Carolina. By 1958, Carolina Paper Board had gained a majority share of Star Paper Tube and had expanded the subsidiary by building two additional tube and core converting plants, in Danville, Virginia and in Austell, Georgia, serving the textile industry. At the end of the 1950s, Carolina Paper Boards operations had grown to eight facilities, and sales had tripled to $6.4 million on more than 50,000 tons. The company was now represented in three key markets: folding carton, other specialty products, and tube and core.

Steady Growth in the 1960s and 1970s

The booming economy of the 1960s helped Carolina Paper Board increase its production more than 150 percent over the decade to an annual capacity of 128,000 tons. The company opened a third paper mill in 1964 in Greenville, South Carolina. Three years later, spurred by growth in the tube and core market, the company opened a fourth tube and core plant, which in turn prompted the opening of the companys fourth paper mill. In the mid-1960s, Carolina Paper Board also increased its folding carton capacity with the acquisition of Charlotte-based Atlantic Coast Carton Company. With 870 employees, Carolina Paper Boards sales quadrupled to $24.5 million, producing operating profits of more than $3 million. The companys push toward integration was already nearing a 30 percent integration level among its paper mills and converting plants.

The Atlantic Coast Carton acquisition marked a new era of growth strategy for the company. During the 1970s, acquisitions played a major role in Carolina Paper Boards expansion. Between 1970 and 1980, the company acquired one folding carton plant, two recycled fiber processing plants, and eight tube and core converting plants. At the same time, the company continued its internal growth, building five new tube and core converting plants, a recycled fiber processing plant, and a fifth paperboard mill. The new mill also enabled the company to move into a new paper market, the gypsum facing paper market, completing the companys target market areas. Meanwhile, the company was also expanding within the tube and core market, moving beyond its reliance on the textile industry to supply the paper, construction, metal, and film industries. The company already exhibited another ingredient to its later growth, that of achieving a reasonable balance among its target markets. Many of the companys plants were already capable of converting quickly from one market to another, helping to buffer the company during cyclical downturns in any of its core markets. As the 1970s ended, Carolina Paper Board had continued its strong growth, reaching revenues of $93.8 million and operating pro-fits of $12.8 million. The companys 1,650 employees produced more than 264,000 tons.

Company Perspectives:

At Caraustar we are committed to excellence and continuous improvement in every facet of our operation. Employee and Customer relationships will be built on mutual respect and concern for each others well-being. We will conduct our business guided by high ethical standards in accordance with all laws and regulations and will constantly strive to be responsible corporate citizens in the communities in which we are located. Caraustar Industries will produce and sell products and services that will earn a level of profits that enhances shareholder value, fairly rewards our employees for their contributions, and provides the capital necessary to maintain a leadership position in the recycled paperboard and packaging industry. To achieve these results we recognize we must provide quality goods and services that are superior to competition and that consistently meet customer requirements.

Converting to Caraustar in the 1980s

Until 1980, the company had operated as six affiliated corporations, with common management and ownership. In that year, the company consolidated its operations under the holding company, Caraustar Industries, and relocated its headquarters to its 150-acre Austell site. The newly incorporated company continued the internal and external expansion set during the previous decade. Between 1981 and 1986, the company built three tube and core converting plants and acquired two folding carton plants, a plastic extrusion and injection molding plant, three tube and core converting plants, and four recycled paperboard mills. In 1986, however, the company expansion slowed after a leveraged recapitalization added some $300 million to the companys debt. In the late 1980s, Caraustar acquired only one recycled paperboard mill in Camden, New Jersey. The company also backed into another acquisition, that of Standard Gypsum Corp., a maker of gypsum wallboard, after that company was unable to pay its paperboard bill. In 1996, however, Caraustar sold 50 percent of its interest in Standard Gypsum and relinquished the directorship of that business.

Despite the slowdown in the companys growth, Caraustar managed to post a 187 percent increase in revenues during the 1980s, raising net sales to $141 million by 1990. Operating profits grew still more strongly, gaining 272 percent to reach $47.6 million. The companys 2,567 employees, meanwhile, had increased mill production to 565,000 tons.

Public in the 1990s

At the start of the 1990s, Caraustars holdings had swelled to 44 facilities, including 11 paperboard mills located in Texas, North and South Carolina, Illinois, Ohio, New Jersey, and Tennessee. The company had grown to become one of the top ten recycling companies in the United States. The companys Star Paper Tube subsidiary had grown to become the second largest tube and core producer in the country. As the recession of the early 1990s took hold, Caraustar formulated a newly aggressive strategic plan, which called for the company to step up its vertical integration and diversification in its key market areas. Part of that plan included taking the company public, to alleviate the debt load incurred during the 1980s. The company made an initial public offering (IPO) of 11.1 million common shares in December 1992, raising some $90 million.

Part of the funds raised in the companys IPO was earmarked for stepping up the companys acquisition program. Between 1991 and early 1997, Caraustar added some 30 facilities to its recycling empire. During 1992 and 1993, the company acquired two recycled paperboard mills, Buffalo Paperboard and Manchester Board and Paper, which was renamed Richmond Paperboard Corp. Caraustar bought two tube and core converting plants in Salt Lake City and Phoenix and acquired Federal Packaging Corp., a maker of composite containers using paperboard and injection-molded plastics. The following year, the company added to its folding cartons capacity with the acquisition of Mid-Packaging Group Inc. and that companys two Tennessee-based folding carton plants. While investing in upgrades and maintenance of its existing facilities, Caraustar also built two new tube and core converting plants, in Lancaster, Pennsylvania and in Mexico City, as well as a new production facility for the companys Star-Guard product in Lancaster, South Carolina.

In 1995, the company added GAR Holdings, with two specialty products plants and a folding carton plant, and Summer Paper Tube of Kernersville, North Carolina, with two core manufacturing plants. Summer also manufactured specialty adhesives used in the tube and core and paperboard lamination production processes, helping the company further solidify its diverse operations and integration within the paperboard industry. Toward that end, also, Caraustar entered a joint venture with Tenneco Packaging Co., which involved a $114.5 million purchase of an 80 percent interest in Tennecos clay-coated paperboard mills in Rittman, Ohio and Tama, Iowa, expanding Caraustars capacity in that high-growth area of the paperboard industry.

By 1996, the companys revenues had more than doubled, reaching $629.67 million and generating nearly $58 million in net income. The companys flexibility and diversity enabled the company to outpace its competitors, many of which struggled through industry downturns and booming paperstock costs. Caraustar promised to continue its expansion drive. In April 1997, the company reached agreement to acquire General Packing Service, Inc. of Clifton, New Jersey, adding that companys lines of pharmaceutical, medical, and health, beauty, and personal care packaging products.

Principal Subsidiaries

ACC Services, Inc. (North Carolina); Mid Packaging GroupAlabama, Inc. (Alabama); Atlantic Coast Carton Company (North Carolina); Austell Box Board Corporation (Georgia); Buffalo Paperboard Corporation (New York); Camden Paper-board Corporation (New Jersey); Caraustar Paper Sales, Inc. (Georgia); Caraustar Paper Sales South; Caraustar Paperboard Corporation (Ohio); Carolina Paper Board Corporation (North Carolina); Carolina Paper Box Co., Inc. (North Carolina); Carolina Recycling, Inc. (North Carolina); Carotell Paper Board Corporation (South Carolina); Chattanooga Paperboard Corporation (Tennessee); Chicago Paperboard Corporation (Illinois); Cincinnati Paperboard Corporation( Ohio); Columbus Recycling, Inc. (Georgia); Federal Packaging Corporation (Delaware); Federal Transport, Inc. (Ohio); GAR Holding Company (Delaware); Macon Recycling, Inc. (Georgia); Mid-State Paper Box Company, Inc. (North Carolina); Packrite Packaging, Inc. (North Carolina); Paper Recycling, Inc. ( Georgia); Paragon Plastics, Inc. (South Carolina; 80%); Quality Design Products, Inc. (Georgia); Reading Paperboard Corporation (Pennsylvania); Richmond Paperboard Corporation (Virginia); Special Packaging, Inc. (Delaware); Standard Gypsum Corporation (Texas); Star Paper Tube de Mexico, S.A. de C.V. (Mexico; 65%); Star Paper Tube, Inc. (South Carolina); Star Recycling Incorporated (Georgia); Sweetwater Paper Board Company, Inc. (Georgia); The Garber Company (Delaware); The Mid/Packaging Group, Inc. (Tennessee).

Further Reading

Harte, Susan, Upward Bound, Atlanta Journal and Constitution, May 19, 1996, p. 21G.

Jones, John A., Caraustar Diversifies To Outperform Slow Paper Industry, Investors Business Daily, October 7, 1996, p. B14.

Krantz, Matt, How Flexibility Lets Paper Firm Beat the Cycles, Investors Business Daily, November 5, 1996, p. A4.

Shaw, Monica, Caraustar Industries: Growth Company Focuses on Diversity, Low-Cost Production, Pulp & Paper, January 1997, p. 40.

M. L. Cohen

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