Buckeye Technologies Inc. (NYSE:BKI) today announced second quarter net income of $46.3 million or $1.18 per share compared to a loss of $125.0 million or ($3.23) per share in the same period last year. Second quarter earnings included net income of $37.5 million, or $0.96 per share, from alternative fuel mixture credits (AFMC) earned during the quarter. During the same quarter of the prior year, the Company’s results included a $127.6 million ($3.30 per share) after-tax loss related to a non-cash goodwill impairment charge. Net sales were $183 million for the second quarter of fiscal 2010 compared to $185 million in the second quarter of fiscal 2009.
Excluding income from AFMC, adjusted net income was $8.8 million, or $0.22 per share versus second quarter fiscal 2009 adjusted net income (excluding non-cash goodwill impairment) of $2.6 million, or $0.07 per share. This $0.15 per share increase in earnings compared to the same quarter a year ago was largely due to increased shipment volume, which was up about 9%, and the resulting improvement in capacity utilization. Also contributing to improved earnings were significantly lower raw material costs and other cost reductions at our cotton specialty plants, and reduced interest expense.
Adjusted earnings of $0.22 per share in the just completed quarter were up $0.11 (+100%) compared to the $0.11 earned in the first quarter excluding the impact of AFMC. This improvement in earnings was driven by a significant rebound in our specialty fibers business. Product mix improved as we shifted volume out of the viscose staple fiber market back into our traditional niche markets like casings, tire cord and ethers due to improving demand in those markets. We also benefited from higher viscose staple fiber and fluff pulp pricing, improving volumes at our cotton specialty plants and lower cotton linter costs compared to the first quarter.
Chairman and Chief Executive Officer John B. Crowe said, “We are encouraged by the improving trends in our business, as evidenced by the strong rebound in earnings versus the first quarter and our first year over year gains since the July-September quarter of 2008. We are benefitting from improved demand, a better mix, rising fluff pulp prices and lower interest expense. We continued to reduce our debt during the second quarter to $290 million, with a target of $275 million by the end of our fiscal year in June. We also completed the redemption of $35 million of our 8.5% 2013 senior notes on January 4th using available cash and borrowings on our bank revolver, which we expect to generate annual interest savings of about $2.4 million per year going forward at current interest rates. The Buckeye organization continues to focus on growing sales, reducing costs and maintaining tight control on working capital.”
Buckeye has scheduled a conference call for January 27, 2009 at 11:00 a.m. ET to discuss second quarter fiscal year 2010 results. Those interested in listening by telephone may dial in at (877) 719-9786 within the United States. International callers should dial (719) 325-4761. Supplemental material for the call will be available on the Company’s website at www.bkitech.com or at www.streetevents.com.
Buckeye, a leading manufacturer and marketer of specialty fibers and nonwoven materials, is headquartered in Memphis, Tennessee, USA. The Company currently operates facilities in the United States, Germany, Canada, and Brazil. Its products are sold worldwide to makers of consumer and industrial goods.
Certain matters discussed in this press release may constitute forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors affecting the Company’s operations, financing, markets, products, services and prices, and other factors. For further information on factors which could impact the Company and the statements contained herein, please refer to public filings with the Securities and Exchange Commission.
*This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures used are “adjusted operating income,” “adjusted net income,” and “adjusted earnings per share” and are equal to net income, operating income and earnings per share excluding income from alternative fuel mixture credits and goodwill impairment. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it allows for a more meaningful comparison of these financial measures to prior periods, but this information should not be considered a substitute for any measures derived in accordance with GAAP. The Company manages its business units by financial measures which exclude these two items. Operating income and earnings per share targets for our all-employee bonus and at-risk compensation also exclude the benefit of alternative fuel mixture credits and the goodwill impairment charge.
Oct-Dec | Jul-Sep | Oct-Dec | |||||||
($ in Millions) | 2009 | 2009 | 2008 | ||||||
Operating income | |||||||||
Operating income in accordance with GAAP | 55.7 | 48.0 | (126.6 | ) | |||||
Goodwill impairment | 138.0 | ||||||||
Alternative fuel mixture credits | (37.1 | ) | (35.8 | ) | |||||
Adjusted operating income | 18.6 | 12.2 | 11.4 | ||||||
Net income | |||||||||
Net income in accordance with GAAP | 46.3 | 39.2 | (125.0 | ) | |||||
Goodwill impairment | 127.6 | ||||||||
Alternative fuel mixture credits | (37.5 | ) | (35.1 | ) | |||||
Adjusted net income | 8.8 | 4.1 | 2.6 | ||||||
Diluted earnings per share (EPS) | |||||||||
EPS in accordance with GAAP | $1.18 | $1.00 | ($3.23 | ) | |||||
Goodwill impairment | $3.30 | ||||||||
Alternative fuel mixture credits | ($0.96 | ) | ($0.89 | ) | |||||
Adjusted EPS | $0.22 | $0.11 | $0.07 |
BUCKEYE TECHNOLOGIES INC. | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
December 31, 2009 | September 30, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | ||||||||||||||||
Net sales | $ | 183,308 | $ | 177,274 | $ | 184,665 | $ | 360,582 | $ | 405,958 | ||||||||||
Cost of goods sold | 153,094 | 153,131 | 161,533 | 306,225 | 347,488 | |||||||||||||||
Gross margin | 30,214 | 24,143 | 23,132 | 54,357 | 58,470 | |||||||||||||||
Gross margin as a percentage of sales | 16.5 | % | 13.6 | % | 12.5 | % | 15.1 | % | 14.4 | % | ||||||||||
Selling, research and administrative expenses | 11,181 | 11,549 | 11,266 | 22,730 | 23,476 | |||||||||||||||
Amortization of intangibles and other | 477 | 473 | 471 | 950 | 940 | |||||||||||||||
Goodwill impairment loss | - | - | 138,008 | - | 138,008 | |||||||||||||||
Alternative fuel mixture credits | (37,073 | ) | (35,842 | ) | - | (72,915 | ) | - | ||||||||||||
Other operating income | (91 | ) | - | - | (91 | ) | - | |||||||||||||
Operating income | 55,720 | 47,963 | (126,613 | ) | 103,683 | (103,954 | ) | |||||||||||||
Net interest expense and amortization of debt costs | (4,621 | ) | (5,289 | ) | (7,469 | ) | (9,910 | ) | (14,907 | ) | ||||||||||
Early extinguishment of debt | - | 165 | 401 | 165 | 401 | |||||||||||||||
Foreign exchange and other | (199 | ) | (100 | ) | 213 | (299 | ) | (618 | ) | |||||||||||
Income (loss) before income taxes | 50,900 | 42,739 | (133,468 | ) | 93,639 | (119,078 | ) | |||||||||||||
Income tax expense (benefit) | 4,616 | 3,507 | (8,484 | ) | 8,123 | (2,944 | ) | |||||||||||||
Net income (loss) | $ | 46,284 | $ | 39,232 | $ | (124,984 | ) | $ | 85,516 | $ | (116,134 | ) | ||||||||
Earnings (loss) per share | $ | 1.19 | $ | 1.01 | $ | (3.23 | ) | $ | 2.21 | $ | (3.00 | ) | ||||||||
Diluted earnings per share | $ | 1.18 | $ | 1.00 | $ | (3.23 | ) | $ | 2.18 | $ | (3.00 | ) | ||||||||
Weighted average shares for basic earnings per share | 38,752 | 38,726 | 38,670 | 38,739 | 38,688 | |||||||||||||||
Weighted average shares for diluted earnings per share | 39,282 | 39,136 | 38,670 | 39,209 | 38,688 |
BUCKEYE TECHNOLOGIES INC. | |||||||||
CONSOLIDATED BALANCE SHEETS | |||||||||
(In thousands) | |||||||||
December 31 | September 30 | June 30 | |||||||
2009 | 2009 | 2009 | |||||||
Current assets: | |||||||||
Cash and cash equivalents | $ | 20,797 | $ | 23,255 | $ | 22,061 | |||
Accounts receivable, net | 120,420 | 113,395 | 111,292 | ||||||
Income tax and AFMC Receivable | 64,814 | 32,114 | 9,374 | ||||||
Inventories | 83,894 | 82,861 | 87,637 | ||||||
Deferred income taxes and other | 6,290 | 7,382 | 6,507 | ||||||
Total current assets | 296,215 | 259,007 | 236,871 | ||||||
Property, plant and equipment, net | 530,360 | 532,851 | 526,589 | ||||||
Goodwill | 2,425 | 2,425 | 2,425 | ||||||
Intellectual property and other, net | 20,118 | 26,141 | 26,499 | ||||||
Total assets | $ | 849,118 | $ | 820,424 | $ | 792,384 | |||
Liabilities and stockholders' equity | |||||||||
Current liabilities: | |||||||||
Trade accounts payable | $ | 26,780 | $ | 28,943 | $ | 30,882 | |||
Accrued expenses | 33,403 | 42,922 | 40,804 | ||||||
Current portion of long-term debt | 19,000 | - | - | ||||||
Total current liabilities | 79,183 | 71,865 | 71,686 | ||||||
Long-term debt | 271,000 | 295,000 | 327,465 | ||||||
Deferred income taxes | 46,988 | 48,961 | 48,399 | ||||||
Other liabilities | 33,898 | 34,722 | 26,803 | ||||||
Stockholders' equity | 418,049 | 369,876 | 318,031 | ||||||
Total liabilities and stockholders' equity | $ | 849,118 | $ | 820,424 | $ | 792,384 |
BUCKEYE TECHNOLOGIES INC. | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
December 31, 2009 | September 30, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | ||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||
Net income | $ | 46,284 | $ | 39,232 | $ | (124,984 | ) | $ | 85,516 | $ | (116,134 | ) | ||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||
Depreciation | 11,530 | 11,294 | 12,026 | 22,824 | 24,769 | |||||||||||||||||
Amortization | 735 | 748 | 613 | 1,483 | 1,252 | |||||||||||||||||
Gain on early extinguishment of debt | - | (165 | ) | (401 | ) | (165 | ) | (401 | ) | |||||||||||||
Goodwill impairment loss | - | - | 138,008 | - | 138,008 | |||||||||||||||||
Deferred income taxes and other | (2,068 | ) | (341 | ) | (7,737 | ) | (2,409 | ) | (5,861 | ) | ||||||||||||
Excess tax benefit from stock based compensation | (16 | ) | - | - | (16 | ) | - | |||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||||
Accounts receivable | (6,285 | ) | 5,380 | 16,705 | (905 | ) | 11,580 | |||||||||||||||
Income tax and AFMC receivable | (27,119 | ) | (28,321 | ) | - | (55,440 | ) | - | ||||||||||||||
Inventories | (988 | ) | 5,769 | (8,540 | ) | 4,781 | (9,381 | ) | ||||||||||||||
Other assets | 2,089 | (1,400 | ) | 181 | 689 | 323 | ||||||||||||||||
Accounts payable and other liabilities | (13,284 | ) | 1,905 | (19,387 | ) | (11,379 | ) | (15,615 | ) | |||||||||||||
Net cash provided by operating activities | 10,878 | 34,101 | 6,484 | 44,979 | 28,540 | |||||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||
Purchases of property, plant & equipment | (9,910 | ) | (8,762 | ) | (13,929 | ) | (18,672 | ) | (25,011 | ) | ||||||||||||
Proceeds from State of Florida grant | - | 7,381 | - | 7,381 | - | |||||||||||||||||
Other | (137 | ) | (16 | ) | (50 | ) | (153 | ) | (73 | ) | ||||||||||||
Net cash used in investing activities | (10,047 | ) | (1,397 | ) | (13,979 | ) | (11,444 | ) | (25,084 | ) | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||
Net borrowings (payments) under line of credit | (5,000 | ) | 77,529 | 3,773 | 72,529 | 2,541 | ||||||||||||||||
Payments on long term debt and other | - | (110,000 | ) | (5,253 | ) | (110,000 | ) | (5,358 | ) | |||||||||||||
Excess tax benefit from stock based compensation | 16 | - | - | 16 | - | |||||||||||||||||
Purchase of treasury shares | - | - | - | - | (494 | ) | ||||||||||||||||
Net proceeds from sale of equity interests | 33 | 122 | - | 155 | - | |||||||||||||||||
Net cash used in financing activities | (4,951 | ) | (32,349 | ) | (1,480 | ) | (37,300 | ) | (3,311 | ) | ||||||||||||
Effect of foreign currency rate fluctuations on cash | 1,662 | 839 | (985 | ) | 2,501 | (2,047 | ) | |||||||||||||||
Increase (decrease) in cash and cash equivalents | (2,458 | ) | 1,194 | (9,960 | ) | (1,264 | ) | (1,902 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 23,255 | 22,061 | 18,451 | 22,061 | 10,393 | |||||||||||||||||
Cash and cash equivalents at end of period | $ | 20,797 | $ | 23,255 | $ | 8,491 | $ | 20,797 | $ | 8,491 |
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
SEGMENT RESULTS | December 31, 2009 | September 30, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | ||||||||||||||||
Specialty Fibers | |||||||||||||||||||||
Net sales | $ | 129,585 | $ | 122,159 | $ | 137,739 | $ | 251,744 | $ | 302,718 | |||||||||||
Operating income (a) | 16,246 | 8,537 | 11,339 | 24,783 | 31,457 | ||||||||||||||||
Depreciation and amortization (b) | 7,411 | 7,040 | 8,060 | 14,451 | 16,408 | ||||||||||||||||
Capital expenditures | 8,794 | 7,436 | 11,855 | 16,230 | 21,952 | ||||||||||||||||
Nonwoven Materials | |||||||||||||||||||||
Net sales | $ | 60,241 | $ | 62,728 | $ | 56,841 | $ | 122,969 | $ | 122,703 | |||||||||||
Operating income (a) | 4,560 | 5,144 | 1,506 | 9,704 | 5,099 | ||||||||||||||||
Depreciation and amortization (b) | 3,668 | 3,807 | 3,497 | 7,475 | 7,542 | ||||||||||||||||
Capital expenditures | 1,135 | 728 | 1,558 | 1,863 | 2,336 | ||||||||||||||||
Corporate | |||||||||||||||||||||
Net sales | $ | (6,518 | ) | $ | (7,613 | ) | $ | (9,915 | ) | $ | (14,131 | ) | $ | (19,463 | ) | ||||||
Operating income (loss) (a) | 34,914 | 34,282 | (139,458 | ) | 69,196 | (140,510 | ) | ||||||||||||||
Depreciation and amortization (b) | 929 | 921 | 940 | 1,850 | 1,759 | ||||||||||||||||
Capital expenditures | (19 | ) | 598 | 516 | 579 | 723 | |||||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 183,308 | $ | 177,274 | $ | 184,665 | $ | 360,582 | $ | 405,958 | |||||||||||
Operating income (loss) (a) | 55,720 | 47,963 | (126,613 | ) | 103,683 | (103,954 | ) | ||||||||||||||
Depreciation and amortization (b) | 12,008 | 11,768 | 12,497 | 23,776 | 25,709 | ||||||||||||||||
Capital expenditures | 9,910 | 8,762 | 13,929 | 18,672 | 25,011 | ||||||||||||||||
(a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, alternative fuel mixture credits, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. Corporate net sales represents the elimination of intersegment sales included in the specialty fibers reporting segment. | |||||||||||||||||||||
(b) Depreciation and amortization includes depreciation, depletion and amortization of intangibles. | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
ADJUSTED EBITDA | December 31, 2009 | September 30, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | ||||||||||||||||
Net income (loss) | $ | 46,283 | $ | 39,232 | $ | (124,984 | ) | $ | 85,515 | $ | (116,134 | ) | |||||||||
Income tax expense | 4,616 | 3,507 | (8,484 | ) | 8,123 | (2,944 | ) | ||||||||||||||
Interest expense | 4,412 | 5,067 | 7,271 | 9,479 | 14,504 | ||||||||||||||||
Amortization of debt costs | 258 | 269 | 261 | 527 | 523 | ||||||||||||||||
Early extinguishment of debt | - | (165 | ) | (401 | ) | (165 | ) | (401 | ) | ||||||||||||
Depreciation, depletion and amortization | 12,007 | 11,767 | 12,497 | 23,774 | 25,709 | ||||||||||||||||
EBITDA | 67,576 | 59,677 | (113,840 | ) | 127,253 | (78,743 | ) | ||||||||||||||
Asset impairments | - | - | 138,008 | - | 138,008 | ||||||||||||||||
Non cash charges | 159 | 90 | 522 | 249 | 730 | ||||||||||||||||
Adjusted EBITDA | $ | 67,735 | $ | 59,767 | $ | 24,690 | $ | 127,502 | $ | 59,995 | |||||||||||
We calculate EBITDA as earnings before cumulative effect of change in accounting plus interest expense, income taxes and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by adding back the following items: asset impairment charges, non-cash charges and other (gains) losses. You should not consider adjusted EBITDA to be an alternative measure of our net income, as an indicator of operating performance; or our cash flow, as an indicator of liquidity. Adjusted EBITDA corresponds with the definition contained in our US revolving credit facility, established on July 25, 2007, and it provides useful information concerning our ability to comply with debt covenants. Although we believe adjusted EBITDA enhances your understanding of our financial condition, this measure, when viewed individually, is not a better indicator of any trend as compared to other measures (e.g., net sales, net earnings, net cash flows, etc.). |
Contacts:
Steve Dean
Senior Vice President and
Chief Financial Officer
901-320-8352
or
Investor
Relations:
Daryn Abercrombie, 901-320-8908
www.bkitech.com