<PAGE>   1
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                             ---------------------
 
                                   FORM 10-Q
 
<TABLE>
<C>               <S>
   (MARK ONE)
      [X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES AND EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
                                               OR
      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES AND EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
 
                        COMMISSION FILE NUMBER: 0-20646
 
                             ---------------------
 
                           CARAUSTAR INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                NORTH CAROLINA                                   58-1388387
       (State or other jurisdiction of                        (I.R.S. Employer
        incorporation or organization)                     Identification Number)
 
   3100 WASHINGTON STREET, AUSTELL, GEORGIA                        30106
   (Address of principal executive offices)                      (Zip Code)
</TABLE>
 
                                 (770) 948-3101
              (Registrant's telephone number, including area code)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 
                       Yes [X]                    No [ ]
 
     Indicate the number of shares outstanding of each of issuer's classes of
common stock, as of the latest practicable date, May 10, 1999.
 
<TABLE>
<CAPTION>
        COMMON STOCK, $.10 PAR VALUE                                24,948,884
        ----------------------------                                ----------
<S>                                                <C>
                  (Class)                                         (Outstanding)
</TABLE>
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
 
                           CARAUSTAR INDUSTRIES, INC.
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                          PAGE
                                                                          ----
<S>         <C>                                                           <C>
PART I --   FINANCIAL INFORMATION
Item 1.     Condensed Consolidated Financial Statements:
            Condensed Consolidated Balance Sheets as of March 31, 1999
              and December 31, 1998.....................................    3
            Condensed Consolidated Statements of Income for the
              three-month periods ended March 31, 1999 and March 31,
              1998......................................................    4
            Condensed Consolidated Statements of Cash Flows for the
              three-month periods ended March 31, 1999 and March 31,
              1998......................................................    5
            Notes to Condensed Consolidated Financial Statements........    6
Item 2.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations for the three-month periods
              ended March 31, 1999 and March 31, 1998...................    8
Item 3.     Quantitative and Qualitative Disclosures About Market
              Risk......................................................   13
PART II --  OTHER INFORMATION
Item 4.     Submission of Matters to a vote of Security Holders.........   14
Item 6.     Exhibits and Reports on Form 8-K............................   14
Signatures..............................................................   15
Exhibit Index...........................................................   16
</TABLE>
 
                                        2
<PAGE>   3
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 1.
 
                  CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
 
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                               MARCH 31,    DECEMBER 31,
                                                                 1999          1998*
                                                              -----------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                                         ASSETS
CURRENT ASSETS:
  Cash and cash equivalents.................................   $  12,311     $   2,610
  Receivables, net..........................................      87,419        76,394
  Inventories...............................................      65,039        67,544
  Refundable income taxes...................................           0         1,365
  Other current assets......................................       6,714         6,790
                                                               ---------     ---------
         Total current assets...............................     171,483       154,703
                                                               ---------     ---------
PROPERTY, PLANT AND EQUIPMENT:
  Land......................................................       6,530         6,530
  Buildings and improvements................................      98,487        97,942
  Machinery and equipment...................................     423,890       415,653
  Furniture and fixtures....................................       8,582         7,837
                                                               ---------     ---------
                                                                 537,489       527,962
  Less accumulated depreciation.............................    (212,457)     (203,492)
                                                               ---------     ---------
  Property, plant and equipment, net........................     325,032       324,470
                                                               ---------     ---------
GOODWILL, net...............................................     124,904       120,127
                                                               ---------     ---------
OTHER ASSETS................................................      19,533        19,497
                                                               ---------     ---------
                                                               $ 640,952     $ 618,797
                                                               =========     =========
 
                          LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current maturities of long-term debt......................   $  26,103     $  26,103
  Accounts payable..........................................      47,963        47,040
  Accrued liabilities.......................................      28,050        25,631
  Income taxes payable......................................       2,368             0
  Dividends payable.........................................       4,441         4,476
                                                               ---------     ---------
         Total current liabilities..........................     108,925       103,250
                                                               ---------     ---------
REVOLVING CREDIT LOANS......................................     149,000       147,000
                                                               ---------     ---------
LONG-TERM DEBT, less current maturities.....................      82,853        82,881
                                                               ---------     ---------
DEFERRED INCOME TAXES.......................................      44,746        43,437
                                                               ---------     ---------
DEFERRED COMPENSATION.......................................       3,760         3,889
                                                               ---------     ---------
OTHER LIABILITIES...........................................       4,282         4,375
                                                               ---------     ---------
MINORITY INTEREST...........................................         706           591
                                                               ---------     ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
  Preferred stock, $.10 par value; 5,000,000 shares
    authorized; none issued.................................           0             0
  Common stock, $.10 par value; 60,000,000 shares
    authorized, 24,927,632 and 24,681,358 shares issued and
    outstanding at March 31, 1999 and December 31, 1998,
    respectively............................................       2,493         2,468
  Additional paid-in capital................................     136,648       130,240
  Retained earnings.........................................     110,965       103,991
  Accumulated other comprehensive income....................      (3,426)       (3,325)
                                                               ---------     ---------
                                                                 246,680       233,374
                                                               ---------     ---------
                                                               $ 640,952     $ 618,797
                                                               =========     =========
</TABLE>
 
---------------
 
* Condensed from audited financial statements.
 
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
 
                                        3
<PAGE>   4
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 1.
 
                  CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
 
                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                              -------------------
                                                                1999       1998
                                                              --------   --------
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
SALES.......................................................  $197,412   $185,588
FREIGHT.....................................................     9,847      8,717
                                                              --------   --------
          Net sales.........................................   187,565    176,871
COST OF SALES...............................................   138,789    127,116
                                                              --------   --------
          Gross profit......................................    48,776     49,755
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................    28,470     24,826
                                                              --------   --------
          Operating income..................................    20,306     24,929
OTHER (EXPENSE) INCOME:
  Interest expense..........................................    (4,071)    (3,699)
  Interest income...........................................       119         73
  Equity in income of unconsolidated affiliates.............     1,830        578
  Other, net................................................      (132)      (118)
                                                              --------   --------
                                                                (2,254)    (3,166)
                                                              --------   --------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST............    18,052     21,763
MINORITY INTEREST...........................................      (118)      (455)
PROVISION FOR INCOME TAXES..................................     6,519      8,131
                                                              --------   --------
NET INCOME..................................................  $ 11,415   $ 13,177
                                                              ========   ========
BASIC
NET INCOME PER COMMON SHARE.................................  $   0.46   $   0.52
                                                              ========   ========
Weighted average number of shares outstanding...............    24,759     25,280
                                                              ========   ========
DILUTED
NET INCOME PER COMMON SHARE.................................  $   0.46   $   0.52
                                                              ========   ========
Diluted weighted average number of shares outstanding.......    24,910     25,512
                                                              ========   ========
</TABLE>
 
The accompanying notes are an integral part of these condensed consolidated
statements of income.
 
                                        4
<PAGE>   5
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 1.
 
                  CARAUSTAR INDUSTRIES, INC. AND SUBSIDIARIES
 
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              FOR THE THREE MONTHS
                                                                     ENDED
                                                                   MARCH 31,
                                                              --------------------
                                                                1999        1998
                                                              --------    --------
                                                                  (UNAUDITED)
<S>                                                           <C>         <C>
Cash provided by (used in)
  Operating activities:
     Net income.............................................  $ 11,415    $ 13,177
     Adjustments for noncash charges........................     9,590       9,066
     Changes in current assets and liabilities..............    (1,381)      2,244
                                                              --------    --------
          Net cash provided by operating activities.........    19,624      24,487
                                                              --------    --------
  Investing activities:
     Purchases of property, plant and equipment.............    (8,810)     (8,512)
     Acquisitions of businesses.............................         0     (13,358)
     Other..................................................     1,163        (117)
                                                              --------    --------
          Net cash used in investing activities.............    (7,647)    (21,987)
                                                              --------    --------
  Financing activities:
     Proceeds from revolving credit loans...................    14,000      31,000
     Repayments of revolving credit loans...................   (12,000)    (11,000)
     Repayments of long-term debt...........................       (28)     (8,189)
     Dividends paid.........................................    (4,476)     (4,052)
     Proceeds from issuances of stock.......................       443         487
     Purchases of stock.....................................         0      (2,192)
     Distributions to minority interest holder..............         0        (600)
     Other..................................................      (215)       (130)
                                                              --------    --------
          Net cash (used in) provided by financing
            activities......................................    (2,276)      5,324
                                                              --------    --------
Net increase in cash and cash equivalents...................     9,701       7,824
Cash and cash equivalents at beginning of period............     2,610       1,391
                                                              --------    --------
Cash and cash equivalents at end of period..................  $ 12,311    $  9,215
                                                              ========    ========
Supplemental Disclosures:
  Cash payments for interest................................  $  2,089    $  2,136
                                                              ========    ========
  Cash payments for income taxes............................  $  1,732    $    682
                                                              ========    ========
  Stock issued for acquisition..............................  $  5,991    $      0
                                                              ========    ========
</TABLE>
 
The accompanying notes are an integral part of these condensed consolidated
statements of cash flows.
 
                                        5
<PAGE>   6
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 1.
 
                           CARAUSTAR INDUSTRIES, INC.
 
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 1999
                                  (UNAUDITED)
 
NOTE 1.  BASIS OF PRESENTATION
 
         The financial information included herein is unaudited; however, such
         information reflects all adjustments (consisting of normal recurring
         adjustments) which are, in the opinion of management, necessary for a
         fair statement of results for the interim periods. The results of
         operations for the three months ended March 31, 1999 are not
         necessarily indicative of the results to be expected for the full year.
 
NOTE 2.  ACQUISITIONS
 
         Each of the following acquisitions is being accounted for under the
         purchase method of accounting, applying the provisions of Accounting
         Principles Board Opinion No. 16. As a result, the Company records the
         assets and liabilities of the acquired companies at their estimated
         fair values with the excess of the purchase price over these amounts
         being recorded as goodwill. Actual allocations of goodwill and other
         identifiable assets will be based on further studies and may change
         during the allocation period, generally one year following the date of
         acquisition. These acquisitions are not expected to have a material
         impact on the operations of the Company.
 
         In March 1999, the Company acquired 67 percent of the outstanding stock
         of Carolina Component Concepts ("CCC") in exchange for 225,000 shares
         of the Company's common stock, valued at approximately $6.0 million. As
         a result of this transaction, the Company now owns 100 percent of CCC's
         common stock. CCC operates a specialty converting facility, located in
         Mooresville, North Carolina. Goodwill of approximately $5.1 million was
         recorded in connection with the acquisition and is being amortized over
         40 years.
 
         In April 1999, subsequent to the first quarter ended March 31, 1999,
         the Company acquired all of the assets and business of International
         Paper Company's Sprague boxboard mill ("Sprague") for approximately
         $103.2 million in cash plus $4.7 million of assumed debt. Sprague,
         located in Versailles, Connecticut, produces clay-coated recycled
         boxboard used primarily in the manufacture of folding cartons.
 
NOTE 3.  COMPREHENSIVE INCOME
 
         Total comprehensive income, consisting of net income plus other
         nonowner changes in equity, for the quarters ended March 31, 1999 and
         1998 was $11,314,000 and $13,227,000, respectively.
 
NOTE 4.  NEW ACCOUNTING PRONOUNCEMENT
 
         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133, "Accounting for Derivative Instruments and Hedging Activities."
         SFAS No. 133 established accounting and reporting standards for
         derivative instruments, including certain derivative instruments
         embedded in other contracts (collectively referred to as derivatives),
         and for hedging activities. It also requires that an entity recognize
         all derivatives as either assets or liabilities in the statement of
         financial position and measure those instruments at fair value. SFAS
         No. 133 is effective for the Company's fiscal year ending December 31,
         2000. Management does not expect SFAS No. 133 to have a significant
         impact on the Company's financial statements.
 
                                        6
<PAGE>   7
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 1.
 
NOTE 5.  SEGMENT INFORMATION
 
         The Company operates principally in three business segments organized
         by products. The paperboard segment consists of facilities that
         manufacture recycled uncoated and clay-coated paperboard and facilities
         that collect recycled paper and broker recycled paper and other paper
         rolls. The tube, core and composite container segment is principally
         made up of facilities that produce spiral and convolute-wound tubes,
         cores and cans. The carton and custom packaging segment consists of
         facilities that produce printed and unprinted folding and set-up
         cartons and facilities that provide contract manufacturing and contract
         packaging services. Intersegment sales are recorded at prices which
         approximate market prices. Operating income includes all costs and
         expenses directly related to the segment involved. Corporate expenses
         include corporate general, administrative and unallocated information
         systems expenses.
 
         The following table presents certain business segment information for
         the periods indicated (in thousands):
 
<TABLE>
<CAPTION>
                                                         FOR THE THREE MONTHS
                                                           ENDED MARCH 31,
                                                         --------------------
                                                           1999        1998
                                                         --------    --------
<S>                                                      <C>         <C>
Net sales (external customers):
  Paperboard...........................................  $ 75,102    $ 74,303
  Tube, core and composite container...................    63,894      62,929
  Carton and custom packaging..........................    48,569      39,639
                                                         --------    --------
          Total........................................  $187,565    $176,871
                                                         ========    ========
Net sales (intersegment):
  Paperboard...........................................  $ 27,683    $ 28,005
  Tube, core and composite container...................       664         443
  Carton and custom packaging..........................        70           3
                                                         --------    --------
          Total........................................  $ 28,417    $ 28,451
                                                         ========    ========
Operating income:
  Paperboard...........................................  $ 15,015    $ 20,731
  Tube, core and composite container...................     5,275       4,669
  Carton and custom packaging..........................     2,907       2,448
                                                         --------    --------
          Total........................................    23,197      27,848
Corporate expense......................................    (2,891)     (2,919)
                                                         --------    --------
Operating income.......................................    20,306      24,929
  Interest expense.....................................    (4,071)     (3,699)
  Interest income......................................       119          73
  Equity in income of unconsolidated affiliates........     1,830         578
  Other (net)..........................................      (132)       (118)
                                                         --------    --------
          Income before income taxes and minority
            interest...................................  $ 18,052    $ 21,763
                                                         ========    ========
</TABLE>
 
NOTE 6.  COMMITMENTS AND CONTINGENCIES
 
         The Company is involved in certain litigation arising in the ordinary
         course of business. In the opinion of management, the ultimate
         resolution of these matters will not have a material adverse effect on
         the Company's financial condition or results of operations.
 
                                        7
<PAGE>   8
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
                           CARAUSTAR INDUSTRIES, INC.
 
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and operating
results during the periods included in the accompanying condensed consolidated
financial statements.
 
GENERAL
 
The Company is a major manufacturer of recycled paperboard and converted
paperboard products, operating principally in three business segments. The
paperboard segment consists of facilities that manufacture recycled uncoated and
clay-coated paperboard and facilities that collect recycled paper and broker
recycled paper and other paper rolls. The tube, core and composite container
segment is principally made up of facilities that produce spiral and
convolute-wound tubes, cores and cans. The carton and custom packaging segment
consists of facilities that produce printed and unprinted folding and set-up
cartons and facilities that provide contract manufacturing and contract
packaging services.
 
The Company is vertically integrated to the extent that a large portion of its
paperboard production is consumed internally by its converting segments
(approximately 37 percent in the first quarter of 1999). As part of its strategy
to optimize capacity utilization, the Company regularly purchases paperboard
from other manufacturers in an effort to minimize the potential impact of demand
declines on the Company's own mill system. Additionally, each of the Company's
mills can produce recycled paperboard for more than one end-use product market,
which allows it to shift production between mills in response to customer or
market demands. The Company is also the only major manufacturer to serve all
four recycled boxboard end-use markets: tube and core, folding carton, gypsum
wallboard facing paper and other specialty.
 
Recovered fiber, which is derived from recycled paper stock, is the Company's
only significant raw material. Historically, the cost of recovered fiber has
fluctuated significantly due to market and industry conditions. For example, the
Company's average recovered fiber cost per ton of paperboard produced increased
from $43 per ton in 1993 to $144 per ton in 1995, an increase of 235 percent,
before dropping to $66 per ton in 1996. Recovered fiber cost per ton averaged
$71 during 1998 and $61 during the first quarter of 1999. Although the Company
raises its selling prices in response to increases in raw material costs, it
often is unable to maintain its operating margins in the face of dramatic cost
increases, and it experiences short-term margin shrinkage during all periods of
price increases due to customary time lags in the implementation of price
increases. There can be no assurance that the Company will be able to recoup any
future increases in the cost of recovered fiber by raising the prices of its
products. There also can be no assurance that, even if the Company is able to
recoup such cost increases, its operating margins and results of operations will
not be materially and adversely affected by time delays in the implementation of
price increases.
 
                                        8
<PAGE>   9
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
QUARTERS ENDED MARCH 31, 1999 AND 1998
 
The following tables set forth certain operating data regarding the Company's
volume and gross paper margins for the periods indicated. The volume information
shown below includes shipments of unconverted paperboard and converted
paperboard products. Tonnage volumes from the Company's business segments are
combined and presented along end-use market lines. Net sales and operating
income are reported by segment in Note 5 to the consolidated financial
statements as part of Part 1, Item 1 of this report.
 
<TABLE>
<CAPTION>
                                                            QUARTERS ENDED
                                                              MARCH 31,
                                                            --------------                %
                                                            1999     1998     CHANGE    CHANGE
                                                            -----    -----    ------    ------
<S>                                                         <C>      <C>      <C>       <C>
Production source of paperboard tons sold (in thousands):
  From paperboard mill production.........................  227.8    226.2      1.6       0.7%
  Outside purchases.......................................   16.8     23.6     (6.8)    -28.8%
                                                            -----    -----     ----
          Total paperboard tonnage........................  244.6    249.8     (5.2)     -2.1%
                                                            =====    =====     ====
Tons sold by market (in thousands):
  Tube, core and can volume
     Paperboard (internal)................................   50.6     48.7      1.9       3.9%
     Outside purchases....................................    4.4      6.9     (2.5)    -36.2%
                                                            -----    -----     ----
  Tube, core and can converted products...................   55.0     55.6     (0.6)     -1.1%
  Unconverted paperboard..................................   11.6     11.1      0.5       4.5%
                                                            -----    -----     ----
          Tube, core and can volume.......................   66.6     66.7     (0.1)     -0.1%
  Folding carton volume
     Paperboard (internal)................................   13.8     12.6      1.2       9.5%
     Outside purchases....................................   10.2      8.9      1.3      14.6%
                                                            -----    -----     ----
  Folding cartons.........................................   24.0     21.5      2.5      11.6%
  Unconverted paperboard..................................   48.9     52.3     (3.4)     -6.5%
                                                            -----    -----     ----
          Folding carton volume...........................   72.9     73.8     (0.9)     -1.2%
  Gypsum facing paper volume
     Unconverted paperboard...............................   59.0     56.9      2.1       3.7%
     Outside purchase (for resale)........................    0.5      6.2     (5.7)    -91.9%
                                                            -----    -----     ----
          Gypsum facing volume............................   59.5     63.1     (3.6)     -5.7%
  Other specialty volume
     Paperboard (internal)................................   19.8     18.6      1.2       6.5%
     Outside purchases....................................    1.7      1.6      0.1       6.3%
                                                            -----    -----     ----
  Other specialty converted products......................   21.5     20.2      1.3       6.4%
  Unconverted paperboard..................................   24.1     26.0     (1.9)     -7.3%
                                                            -----    -----     ----
          Other specialty volume..........................   45.6     46.2     (0.6)     -1.3%
                                                            -----    -----     ----
          Total paperboard tonnage........................  244.6    249.8     (5.2)     -2.1%
                                                            =====    =====     ====
</TABLE>
 
                                        9
<PAGE>   10
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
<TABLE>
<CAPTION>
                                                              QUARTERS ENDED
                                                                MARCH 31,
                                                              --------------              %
                                                              1999     1998    CHANGE   CHANGE
                                                              -----    -----   ------   ------
<S>                                                           <C>      <C>     <C>      <C>
Gross paper margins ($/ton):
  Paperboard mill:
     Average same-mill net selling price....................  $403     $417     $(14)    -3.4%
     Average same-mill recovered fiber cost.................    61       85      (24)   -28.2%
                                                              ----     ----     ----
       Paperboard mill gross paper margin...................  $342     $332     $ 10      3.0%
                                                              ====     ====     ====
  Tube and core:
     Average net selling price..............................  $711     $748     $(37)    -4.9%
     Average paperboard cost................................   382      415      (33)    -8.0%
                                                              ----     ----     ----
       Tube and core gross paper margin.....................  $329     $333     $ (4)    -1.2%
                                                              ====     ====     ====
</TABLE>
 
Consolidated net sales for the quarter ended March 31, 1999 increased 6.0
percent to $187.6 million from $176.9 million in 1998. Acquisitions accounted
for $14.6 million of sales during the first quarter of 1999. Excluding
acquisitions, net sales declined 2.2 percent. This decline was due primarily to
lower volume and selling prices in the paperboard segment, partially offset by
higher sales from the tube, core and composite containers and carton and custom
packaging segments.
 
Total paperboard tonnage for the quarter decreased 2.1 percent to 244.6 thousand
tons from 249.8 thousand tons. Excluding acquisitions, total paperboard tonnage
declined 5.6 percent to 235.8 thousand tons. This decline was the result of
lower shipments of unconverted paperboard to external customers, primarily to
customers in the folding carton and other specialty end-use markets, combined
with lower outside purchases for resale to gypsum facing paper customers.
Excluding acquisitions, outside purchases decreased 43.0 percent to 13.5
thousand tons. Tons sold from paperboard mill production increased 0.7 percent
for the quarter to 227.8 thousand tons compared with 226.2 thousand tons in the
first quarter last year, but declined 1.8 percent excluding the Chesapeake
Paperboard acquisition. Total tonnage converted increased 3.3 percent in the
first quarter of 1999 to 100.5 thousand tons versus 97.3 thousand tons in 1998,
but decreased 0.9 percent excluding acquisitions. Excluding acquisitions,
volumes in the folding carton and other specialty end-use markets decreased 8.6
percent and 8.7 percent, respectively.
 
Gross margin for the first quarter of 1999 decreased to 26.0 percent of net
sales from 28.1 percent in 1998. This margin decrease was due primarily to the
acquisition of operations with lower margins, as a percent of sales, than the
Company's other operations.
 
Operating income for the first quarter of 1999 was $20.3 million, a decrease of
$4.6 million, or 18.5 percent from the year-earlier period. Operating income at
comparable facilities declined $3.7 million, or 15.0 percent. This decline was
due primarily to weaker volume and lower operating rates in the paperboard
segment, partially offset by improved results in the tube, core and composite
containers and carton and custom packaging segments. Selling, general and
administrative expenses increased $3.6 million in the first quarter of 1999
versus 1998 due primarily to acquisitions and increased information systems
costs.
 
Interest expense increased 10.1 percent to $4.1 million for first quarter of
1999 from $3.7 million in 1998 due to higher average borrowings under the
revolving credit facility.
 
Equity income from unconsolidated affiliates for the first quarter was $1.8
million, up 216.6 percent from 1998 due to improved results for the Company's
gypsum wallboard joint venture with Temple-Inland.
 
Net income decreased 13.4 percent from $13.2 million in 1998 to $11.4 million.
Diluted net income per common share decreased 11.5 percent to $0.46 for the
first quarter of 1999 from $0.52 in the same period of 1998.
 
                                       10
<PAGE>   11
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
LIQUIDITY AND CAPITAL RESOURCES
 
On March 31, 1999, the Company had loans of $149.0 million outstanding under its
revolving credit facility versus $149.0 million on March 31, 1998 and $147.0
million on December 31, 1998. Loans under the revolving credit facility bear
interest, payable monthly, at the Eurodollar rate plus a margin based upon the
Company's consolidated leverage ratio, as defined in the revolving credit
agreement. For the three months ended March 31, 1999 and 1998 and for the year
ended December 31, 1998, the weighted average borrowings outstanding under the
revolving credit facility during such periods bore interest at 5.37 percent,
5.93 percent and 5.80 percent, respectively. Other long-term debt, less current
maturities, primarily the Company's 7.74 percent senior notes, was $82.9 million
at March 31, 1999 versus $83.2 million and $82.9 million at March 31, 1998 and
December 31, 1998, respectively.
 
The Company has a $400 million, five-year bank revolving credit facility which
may be increased up to $500 million and its maturity extended by up to three
additional years beyond the second quarter of 2002, subject to certain
conditions and approvals. The Company can use the facility to fund ongoing
working capital needs and for general corporate purposes, including
acquisitions. Interest under the facility is computed using the Company's choice
of: (a) the Eurodollar rate plus a margin; or (b) the higher of the Federal
Funds Rate plus a margin or the bank's prime lending rate. The Company can also
choose the basis for determining the margin above the Eurodollar rate as either:
(a) its consolidated leverage ratio; or (b) its investment grade rating. The
credit agreement contains certain restrictive covenants regarding, among other
matters, the incurrence of additional indebtedness and the maintenance of
certain leverage and interest coverage ratios, as defined in the agreement.
 
In 1998, the Company registered with the Securities and Exchange Commission a
total of $300 million in public debt securities for issuance in one or more
series and with such specific terms as to be determined from time to time. The
debt securities will be unsecured obligations of the Company. It is currently
anticipated that the proceeds from any sale of these debt securities will be
used for general corporate purposes, including, but not limited to, repayment of
debt, working capital, capital expenditures and acquisitions.
 
Cash generated from operations was $19.6 million for the three months ended
March 31, 1999 compared with $24.5 million for the same period last year. The
decrease in 1999 compared to the same period last year was due primarily to
unfavorable changes in working capital and lower net income.
 
Capital expenditures, excluding acquisitions, were $8.8 million in the first
quarter of 1999 versus $8.5 million for the same period last year. Aggregate
capital expenditures of approximately $38.0 million are anticipated for 1999.
 
In March 1999, the Company acquired 67 percent of the outstanding stock of
Carolina Component Concepts Inc. in exchange 225,000 shares of the Company's
common stock, valued at approximately $6.0 million. As a result of this
transaction, the Company now owns 100 percent of CCC's common stock. CCC
operates a specialty converting facility, located in Mooresville, North
Carolina.
 
In April 1999, subsequent to the first quarter ended March 31, 1999, the Company
acquired all of the assets and business of International Paper Company's Sprague
boxboard mill for approximately $103.2 million in cash plus $4.7 million of
assumed debt. Sprague, located in Versailles, Connecticut, produces clay-coated
recycled boxboard used primarily in the manufacture of folding cartons.
 
Cash dividends of $4.5 million were paid in the first quarter of 1999 versus
$4.1 million in the same period last year. The Company's Senior Notes agreement
and its revolving credit agreement contain no specific limitations on the
payment of dividends.
 
The Company did not purchase any shares of its common stock during the first
quarter of 1999 pursuant to its common stock purchase program. The Company has
cumulatively purchased 3,235,000 shares since January 1996. The Company's board
of directors has authorized purchases of up to 765,000 additional shares, and
the
 
                                       11
<PAGE>   12
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
Company intends to continue such purchases, subject to market conditions and
availability, but there can be no assurance as to the completion, timing or
prices of such future purchases.
 
The Company anticipates that it will be able to meet its funding needs for the
possible acquisition of additional facilities, working capital, capital
expenditures and additional stock purchases through internally generated cash
and borrowings under its revolving credit facility and the issuance of debt
securities in the public markets.
 
YEAR 2000
 
The Company uses software and related information technologies and other
equipment throughout its businesses that may be affected by the date change in
the year 2000. The use of systems and equipment that cannot correctly interpret
and process dates after 1999 could result in system or equipment failures. Such
failures could cause disruptions of operations including, among other things,
inaccurate processing of financial information and/or temporary inabilities to
process transactions, manufacture products or engage in similar normal business
activities.
 
The Company has attempted to identify and assess its areas of risk related to
the year 2000 issue. As called for in its overall plan to prepare for the year
2000, the Company has conducted a comprehensive inventory and evaluation of its
information technology ("IT") systems to determine their year 2000 compliance.
The primary financial computer systems were upgraded in December 1997. This
system and the Company's computerized financial software systems are year 2000
compliant. Certain systems at individual operating company sites, primarily
involving order entry, shipping and inventory control are undergoing remediation
or replacement and are expected to be year 2000 compliant by mid-year 1999.
Non-IT electronic equipment, including equipment engaged in manufacturing and
other processes, is being tested and modified or replaced as needed, and the
Company anticipates that this process will be complete by mid-year 1999. Ongoing
efforts are being made to identify third parties that may be unable to become
year 2000 compliant and to make contingency plans. However, the Company has no
means of ensuring that third parties with whom it deals will be year 2000
compliant or that the information obtained from such third parties regarding
year 2000 compliance will prove to be accurate.
 
The total cost associated with required modifications and replacement of the
Company's systems in response to the year 2000 issue is not expected to
materially affect the Company's financial condition or results of operations.
The estimated total cost of the year 2000 effort is approximately $4.2 million.
This estimate does not include costs to replace or upgrade systems that were
previously planned and not accelerated due to the year 2000 issue. The total
amount expended through the first quarter of 1999 was approximately $2.7
million. The future cost related to the year 2000 is estimated to be
approximately $1.5 million. The Company's year 2000 efforts are funded primarily
from the existing IT budget and have been ongoing since 1997. The total cost of
these efforts represents approximately 20 percent of the total IT budget for the
three-year period 1997-1999.
 
The Company believes the most reasonably likely worst case year 2000 scenario
would be the failure of key customers or suppliers (e.g., utility providers) to
achieve year 2000 compliance, resulting in lost sales to such key customers or
lost production due to forced shutdowns at one or more mill operations for an
indefinite period of time. Such failures could materially and adversely affect
the Company's financial condition or results of operations. Currently, based on
responses obtained from third parties to date, the Company is not aware of any
material third parties that do not expect to be year 2000 compliant. However,
due to uncertainty surrounding the readiness of third parties, the Company is
unable to presently determine whether the consequences of year 2000 failures
will materially impact the Company's financial condition or results of
operations. Ongoing efforts are expected to significantly reduce this
uncertainty.
 
The Company has developed contingency plans to address potential material year
2000 issues primarily arising from failures of third party suppliers or
customers to become year 2000 compliant. These contingency plans include plans
to minimize the impact of any lost mill production. The Company normally
schedules downtime for regular maintenance and capital improvements during the
year-end period. To the extent possible, the
                                       12
<PAGE>   13
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART I, ITEM 2.
 
Company plans to take a more flexible approach to such scheduling to allow
maintenance and capital-improvement downtime to coincide with any year 2000
related forced downtime. In addition, the Company can increase inventory levels
prior to year-end 1999 to mitigate any forced downtime based on assessments made
closer to the end of 1999. The Company also plans to minimize the impact of any
lost mill production by shifting production from any facilities affected by year
2000 failures to unaffected facilities. As mentioned above, the Company is
continuing its efforts to identify third parties who indicate that they may be
unable to become year 2000 compliant and will develop and modify its contingency
plans as needed.
 
Readers are cautioned that the year 2000 disclosures above contain certain
forward looking statements and should be read in conjunction with "Forward
Looking Information" which follows.
 
FORWARD-LOOKING INFORMATION
 
This Report on Form 10-Q, including "Management's Discussion and Analysis of
Financial Condition and Results of Operations," may contain various
"forward-looking statements," within the meaning of Section 21E of the
Securities Exchange Act of 1934, that are based on management's belief and
assumptions, as well as information currently available to management. When used
in this document, the words "anticipate," "estimate," "expect," and similar
expressions may identify forward-looking statements. Although the Company
believes that the expectations reflected in any such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to be
correct. Any such statements are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, the Company's actual financial
results, performance or condition may vary materially from those anticipated,
estimated or expected. Among the key factors that may have a direct bearing on
the Company's actual financial results, performance or condition are
fluctuations in raw material prices and the economy in general, the degree and
nature of competition, demand for the Company's products, changes in government
regulations, the Company's ability to complete acquisitions and integrate the
operations of acquired businesses, the ability of the Company and third parties
with whom the Company deals to achieve year 2000 compliance, as described above,
and other matters discussed in this report and the Company's other filings with
the Securities and Exchange Commission.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
For a discussion of certain market risks related to the Company, see Part II,
Item 7A, "Quantitative and Qualitative Disclosures about Market Risk", in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998. There have been no significant developments with respect to the Company's
exposure to interest rate market risk.
 
                                       13
<PAGE>   14
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
PART II, ITEM 4.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
The Company's annual shareholders' meeting was held on April 21, 1999. The
matters voted upon at the meeting were (1) a proposal to elect three Class I
directors (Thomas V. Brown, Ralph M. Holt, Jr. and Dennis M. Love) and (2) a
proposal to ratify the selection of Arthur Andersen LLP as the Company's
independent public accountants for fiscal 1999. Proposals (1) and (2) were
approved by the following margins:
 
<TABLE>
<CAPTION>
                                                                VOTES AGAINST OR                  BROKER
PROPOSAL                                           VOTES FOR        WITHHELD       ABSTENTIONS   NONVOTES
--------                                           ----------   ----------------   -----------   --------
<S>                                                <C>          <C>                <C>           <C>
Election of Directors
  Thomas V. Brown................................  20,631,765        35,495              --        --
  Ralph M. Holt, Jr..............................  20,633,636        33,624              --        --
  Dennis M. Love.................................  20,633,365        33,895              --        --
Ratification of Selection
  of Independent Public Accountants..............  20,603,905        30,145          33,210        --
</TABLE>
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
     The Exhibits to this Report on Form 10-Q are listed in the accompanying
Exhibit Index.
 
     (b) Reports on Form 8-K
 
     The Company filed one current report on Form 8-K during the quarter ending
March 31, 1999. The report, filed on March 5, 1999, incorporated the contents of
a press release in which the Company announced a definitive agreement with
International Paper Company to acquire its Sprague recycled boxboard mill
located in Versailles, Connecticut.
 
                                       14
<PAGE>   15
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
 
                                   SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          CARAUSTAR INDUSTRIES, INC.
 
                                          By:    /s/ H. LEE THRASH, III
                                            ------------------------------------
                                                     H. Lee Thrash, III
                                             Vice President and Chief Financial
                                                           Officer
                                            (Principal Financial and Accounting
                                                           Officer)
 
Dated: May 13, 1999
 
                                       15
<PAGE>   16
 
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.    DESCRIPTION                                                   FILED HEREWITH (*)
-------  -----------                                                   ------------------
<S>      <C>                                                           <C>
3.01     Amended and Restated Articles of Incorporation of the
         Company (Incorporated by reference -- Exhibit 3.01 to Annual
         Report for 1992 on Form 10-K [SEC File No. 0-20646])........
3.02     Second Amended and Restated Bylaws of the Company
         (Incorporated by reference -- Exhibit 3.02 to Registration
         Statement on Form S-4 [SEC File No. 333-29937]).............
4.01     Specimen Common Stock Certificate (Incorporated by
         reference -- Exhibit 4.01 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])
4.02     Articles 3 and 4 of the Company's Amended and Restated
         Articles of Incorporation (included in Exhibit 3.01)........
4.03     Article II of the Company's Second Amended and Restated
         Bylaws (included in Exhibit 3.02)
4.04     Rights Agreement, dated as of April 19, 1995, between
         Caraustar Industries, Inc. and The Bank of New York, as
         Successor Rights Agent (Incorporated by reference -- Exhibit
         1 to Current Report on Form 8-K dated April 19, 1995 [SEC
         File No. 0-20646])..........................................
10.01    Note Agreement, dated as of October 1, 1992, between the
         Company and the Prudential Insurance Company of America,
         regarding the Company's 7.89% Senior Subordinated Notes
         (Incorporated by reference -- Exhibit 10.02 to Annual Report
         for 1992 on Form 10-K [SEC File No. 0-20646])...............
10.02    Amendment Agreement, dated as of June 2, 1995, between the
         Company and the Prudential Insurance Company of America
         regarding the Company's 7.89% Senior Subordinated Notes
         (Incorporated by reference -- Exhibit 10.03 to Report on
         Form 10-Q for the quarter ended September 30, 1995 [SEC File
         No. 0-20646])...............................................
10.03    Amendment Agreement, dated as of July 23, 1997, between the
         Company and the Prudential Insurance Company of America
         regarding the Company's 7.89% Senior Subordinated Notes
         (Incorporated by reference -- Exhibit 10.03 to report on
         Form 10-Q for the quarter ended June 30, 1997 [SEC File No.
         0-20646])...................................................
10.04    Amendment Agreement, dated as of August 12, 1998, between
         the Company and the Prudential Insurance Company of America
         regarding the Company's 7.89% Senior Subordinated Notes
         (Incorporated by reference -- Exhibit 10.04 to report on
         Form 10-Q for the quarter ended September 30, 1998 [SEC File
         No. 0-20646])...............................................
10.05    Employment Agreement, dated December 31, 1990, between the
         Company and Thomas V. Brown (Incorporated by
         reference -- Exhibit 10.06 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])................................
10.06    Asset Purchase Agreement, dated August 7, 1992, between the
         Company and Domtar Gypsum Inc. (Incorporated by
         reference -- Exhibit 10.07 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])................................
</TABLE>
 
                                       16
<PAGE>   17
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.    DESCRIPTION                                                   FILED HEREWITH (*)
-------  -----------                                                   ------------------
<S>      <C>                                                           <C>
10.07    Deferred Compensation Plan, together with copies of existing
         individual deferred compensation agreements (Incorporated by
         reference -- Exhibit 10.08 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])................................
10.08    1987 Executive Stock Option Plan (Incorporated by
         reference -- Exhibit 10.09 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])................................
10.09    1993 Key Employees' Share Ownership Plan (Incorporated by
         reference -- Exhibit 10.10 to Registration Statement on Form
         S-1 [SEC File No. 33-50582])................................
10.10    Energy Purchase Agreement, dated December 18, 1989, between
         Camden Paperboard Corporation and Camden Cogen, L.P.
         (Incorporated by reference -- Exhibit 10.11 to Registration
         Statement on Form S-1 [SEC File No. 33-50582])..............
10.11    Incentive Bonus Plan of the Company (Incorporated by
         reference -- Exhibit 10.10 to Annual Report for 1993 on Form
         10-K [SEC File No. 0-20646])................................
10.12    1996 Director Equity Plan of the Company (Incorporated by
         reference -- Exhibit 10.12 to Report on Form 10-Q for the
         quarter ended March 31, 1996 [SEC File No. 0-20646])........
10.13    Credit Agreement, dated as of July 23, 1997, by and among
         the Company, as Borrower, the banks listed therein, Bankers
         Trust Company, as Administrative Agent, NationsBank, N.A.,
         as Syndication Agent, SunTrust Bank, Atlanta, as
         Documentation Agent, First Union National Bank, as Managing
         Agent and each of Credit Lyonnais, The Bank of New York, The
         Bank of Nova Scotia, The Bank of Tokyo -- Mitsubishi, Ltd.,
         and Wachovia Bank, as Co-Agents (Incorporated by
         Reference -- Exhibit 10.13 to Report on Form 10-Q for the
         Quarter Ended June 30, 1997 [SEC File No 0-20646])..........
10.14    1998 Key Employee Incentive Compensation Plan (Incorporated
         by reference -- Exhibit 10.14 to Annual Report for 1997 on
         Form 10-K [SEC File No. 0-20646])...........................
10.15    Amendment No. 1 to Credit Agreement, dated as of October 8,
         1997, by and among the Company, as Borrower, the banks
         listed therein, Bankers Trust Company, as Administrative
         Agent, NationsBank, N.A., as Syndication Agent, SunTrust
         Bank, Atlanta, as Documentation Agent, First Union National
         Bank, as Managing Agent and each of Credit Lyannais, The
         Bank of New York, The Bank of Nova Scotia, The Bank of
         Tokyo -- Mitsubishi, Ltd., and Wachovia Bank, as Co-Agents
         (Incorporated by reference -- Exhibit 10.15 to report on
         Form 10-Q for the quarter ended September 30, 1998 [SEC File
         No. 0-20646])...............................................
10.16    Amendment No. 2 to Credit Agreement, dated as of October 30,
         1998, by and among the Company, as Borrower, the banks
         listed therein, Bankers Trust Company, as Administrative
         Agent, NationsBank, N.A., as Syndication Agent, SunTrust
         Bank, Atlanta, as Documentation Agent, First Union National
         Bank, as Managing Agent and each of Credit Lyannais, The
         Bank of New York, The Bank of Nova Scotia, The Bank of
         Tokyo -- Mitsubishi, Ltd., and Wachovia Bank, as Co-Agents
         (Incorporated by reference -- Exhibit 10.16 to report on
         Form 10-Q for the quarter ended September 30, 1998 [SEC File
         No. 0-20646])...............................................
</TABLE>
 
                                       17
<PAGE>   18
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999
 
<TABLE>
<CAPTION>
EXHIBIT
  NO.    DESCRIPTION                                                   FILED HEREWITH (*)
-------  -----------                                                   ------------------
<S>      <C>                                                           <C>
10.17    Asset Purchase Agreement Between Caraustar Industries, Inc.,
         Sprague Paperboard, Inc., and International Paper Company,
         dated as of March 4, 1999...................................          *
11.01    Computation of Earnings Per Share...........................          *
27.01    Financial Data Schedule (For SEC purposes only).............          *
</TABLE>
 
                                       18