Welcome to the 2000 Caraustar annual report with an emphasis on the theme, “fitting the pieces together.” It is our hope that through this report you will be able to understand how our four business groups function together as an integrated whole and to better appreciate how Caraustar fits into the everyday life of product manufacturers and consumers. Even though the Caraustar name may not appear on products you use every day, Caraustar plays an important role in their production. Our goal is to give you a cohesive overview of the entire company through focusing on the raw materials we consume, the products we manufacture and the markets we serve.

Building a company that is as far reaching in as many businesses as Caraustar is a process that combines a variety of skills; not the least of these is the ability to find the right pieces to match the existing surroundings. Unlike the simple jigsaw puzzle, however, it is not enough, in business, to simply find the right size, shape and color combination for a piece to fit. Beyond that is the greater requirement to enhance the overall business environment in which the company operates. A third element in the building process is timing. We face many challenges in making our acquisitions fit with our existing capabilities and in making the whole company fit with our evolving markets. Achieving timely success in integrating an acquired business is dependent on the business climate at the time of the acquisition.

The business climate we find ourselves in today is a seriously depressed market – the worst in many decades. This current business downturn has hit Caraustar particularly hard because we have been pursuing an aggressive acquisition strategy. It is well within our capabilities, both financially and from a management standpoint, to thrive in the recovery that surely lies ahead of us. For now, however, we are committed to managing our current affairs. To improve cash flow and reduce debt, we have cut capital spending authorizations across all business lines. For the first time in our history as a public company, we have cut our first quarter dividend in half. We recently announced the consolidation of our Salt Lake City carton operation into our Denver Carton Plant. We continue to drive out costs through leveraging our purchasing of goods and services while working to improve operating efficiencies and develop more cost-effective ways to serve the customer.

In the year 2000, revenues were a record $963 million, an 8.2 percent increase over 1999. Net income, however, fell to $19 million, excluding restructuring charges, from $41 million in the prior year. During the year, industry demand for recycled boxboard fell 245,000 tons, the fourth decline in the last six years. Just as important, the decline spanned all of our core businesses.

As a result of soft markets and the contract dispute with Georgia-Pacific, we have closed three of our least efficient paper mills. The fourth quarter was the most difficult period, with a decline of more than 50,000 tons of demand, or 18 percent, compared with the same period in the prior year. Even with such devastating shortfalls in volume, Caraustar’s market share of the overall recycled boxboard business, 15 percent at the end of 1999, remained the same through 2000.

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