Buckeye Technologies Inc. (NYSE:BKI) today announced second quarter adjusted net income* of $27.9 million or $0.69 per share, which excludes after-tax non-cash asset impairment charges of $29.7 million, or $0.74 per share, related to the announced closure of the cotton linter pulp production line in Brazil and sale of our converting business in North Carolina, and income tax expense of $3.6 million or $0.09 per share related to cellulosic biofuel credits. Adjusted net income* rose 37% as compared to the prior year period’s $20.3 million, or $0.50 per share, which excluded after tax costs of $3.2 million, or $0.08 per share, from early extinguishment of debt, restructuring and accrued interest related to cellulosic biofuel credits.
Net sales of $227 million were up 8% versus last year’s second quarter sales of $210 million. Sales benefited from higher selling prices and increased specialty wood fibers shipment volume. The $0.19 increase in adjusted EPS*, compared to the prior year period, was driven by these same factors. The prior year quarter also benefited by $0.05 per share from the final insurance settlement related to June 2010 power outage at our Florida specialty wood pulp facility. Aside from higher cotton linter costs, which were up about 30% in North America over the year ago quarter, cost inflation for chemicals, transportation and other raw materials was modest with energy prices stable.
Comparing the second quarter to the first quarter of fiscal 2012, sales were down $13 million or 5%. Nonwovens shipment volume was down 10% due to seasonal weakness in Europe and lower North American volume. Specialty cotton shipment volume was also down 11% due to the winding down of operations at Americana and supply chain inventory adjustments in the LED TV end-markets. For specialty wood, shipment volume was up 2% but this was offset by the impact of lower fluff pulp prices. Adjusted Operating Income* was off $1.4 million due to lower shipment volume and reduced fluff pulp prices, although gross margin improved from 23.7% to 24.0% and selling, research and administrative expenses were down $1.0 million compared to the first quarter. Adjusted EPS* of $0.69 was down $0.05 compared to $0.74 in the first quarter due to lower operating income ($0.02), a higher tax rate ($0.02) and foreign exchange gain/loss ($0.01).
Chairman and Chief Executive Officer John B. Crowe said, “We were pleased with our second quarter fiscal 2012 financial results, which exceeded the expectations we shared during our last earnings call in October. The key drivers of year over year improvements continue to be strong markets and selling prices, better capacity utilization at our Memphis specialty cotton fibers plant, and benefits from our cost improvement initiatives.
“We continue to focus on generating free cash flow and returns on investment above our cost of capital which we did again in the quarter. One aspect of this focus is our restructuring efforts. In January, we announced the closure of our cotton linter pulp production line in Brazil and continued discussions with multiple parties for the potential sale of this facility. Also in January, we announced the sale of our non-core Merfin Systems converting business in North Carolina. These moves will allow us to redirect cash and management focus from under-performing or non-core businesses into strategic investment and growth opportunities. Key examples of that are our Foley energy project, which we expect to complete in the third quarter of fiscal year 2012, and the Foley specialty wood pulp expansion project, which is on track for completion at the end of calendar year 2012. Overall our business has good momentum.”
Buckeye has scheduled a conference call for Wednesday morning, January 25, at 11:00 a.m. ET to discuss second quarter performance. Persons interested in listening by telephone may dial in at (888) 287-5563 within the United States. International callers should dial (719) 325-2436. 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 and Canada. Its products are sold worldwide to makers of consumer and industrial goods.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” generally can be identified by the use of forward-looking terminology such as “assumptions,” “target,” “guidance,” “outlook,” “plans,” “projection,” “may,” “will,” “would,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” or “continue” (or the negative or other derivatives of each of these terms or similar terminology). The “forward-looking statements” include, without limitation, statements regarding the economic outlook for Buckeye and the demand for its products, the results and timing of Buckeye’s strategic investments and growth opportunities and expected levels of cash flow and debt reduction. These statements are based on management’s estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those projected as a result of certain factors. A discussion of factors that could cause results to vary is included in Buckeye’s Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.
Note Regarding Non-GAAP Financial Measures
*This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures presented are “adjusted operating income,” “adjusted net income,” “adjusted earnings per share,” “free cash flow” and are equal to net income, pre-tax income, operating income and earnings per share excluding the after-tax effects of alternative fuel mixture credits (AFMC) and cellulosic biofuel credits (CBC), goodwill and long-term asset impairment cost, restructuring cost and early debt extinguishment cost.
2nd Quarter | 1st Quarter | ||||||||||||
($ in Millions) | 2012 | 2011 | 2012 | ||||||||||
Operating income | |||||||||||||
Operating income in accordance with GAAP | (10.5 | ) | 31.6 | 44.0 | |||||||||
Special items: | |||||||||||||
Restructuring costs | --- | 0.6 | --- | ||||||||||
Asset and Goodwill impairment | 53.1 | --- | --- | ||||||||||
Adjusted operating income | 42.6 | 32.2 | 44.0 | ||||||||||
Net income | |||||||||||||
Net income in accordance with GAAP | (5.4 | ) | 17.1 | 41.1 | |||||||||
Special items, after-tax: | |||||||||||||
Restructuring costs | --- | 0.5 | --- | ||||||||||
AFMC / CBC | 3.6 | 0.4 | (11.2 | ) | |||||||||
Early Extinguishment of Debt | 2.3 | ||||||||||||
Asset and Goodwill Impairment | 29.7 | --- | --- | ||||||||||
Adjusted net income | 27.9 | 20.3 | 29.9 | ||||||||||
Earnings per share (EPS) | |||||||||||||
EPS in accordance with GAAP | ($0.14 | ) | $ | 0.42 | $ | 1.02 | |||||||
Special items, after-tax, per share: | |||||||||||||
Restructuring costs | --- | 0.01 | --- | ||||||||||
AFMC / CBC | 0.09 | 0.01 | (0.28 | ) | |||||||||
Early Extinguishment of Debt | 0.06 | ||||||||||||
Asset and Goodwill Impairment | 0.74 | --- | --- | ||||||||||
Adjusted EPS | $ | 0.69 | $ | 0.50 | $ | 0.74 | |||||||
Free Cash Flow | |||||||||||||
Net cash provided by operating activities | 24.9 | 23.9 | 28.5 | ||||||||||
Net cash used in investing activities | (13.7 | ) | (19.5 | ) | (10.8 | ) | |||||||
Free Cash Flow | 11.2 | 4.4 | 17.7 |
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
December 31, 2011 | September 30, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||||||||||
Net sales | $ | 227,097 | $ | 240,067 | $ | 209,516 | $ | 467,164 | $ | 411,591 | |||||||||||
Cost of goods sold | 172,662 | 183,215 | 165,090 | 355,877 | 330,852 | ||||||||||||||||
Gross margin | 54,435 | 56,852 | 44,426 | 111,287 | 80,739 | ||||||||||||||||
Gross margin as a percentage of sales | 24.0 | % | 23.7 | % | 21.2 | % | 23.8 | % | 19.6 | % | |||||||||||
Selling, research and administrative expenses | 11,348 | 12,339 | 11,836 | 23,687 | 23,507 | ||||||||||||||||
Amortization of intangibles and other | 500 | 496 | 486 | 996 | 965 | ||||||||||||||||
Asset impairment loss | 50,711 | - | - | 50,711 | - | ||||||||||||||||
Goodwill impairment loss | 2,425 | - | - | 2,425 | - | ||||||||||||||||
Restructuring costs | - | - | 570 | - | 1,122 | ||||||||||||||||
Other operating income | - | - | (39 | ) | - | (46 | ) | ||||||||||||||
Operating income (loss) | (10,549 | ) | 44,017 | 31,573 | 33,468 | 55,191 | |||||||||||||||
Net interest expense and amortization of debt costs | (898 | ) | (3,311 | ) | (1,717 | ) | (4,209 | ) | (5,314 | ) | |||||||||||
Early extinguishment of debt | - | - | (3,649 | ) | - | (3,649 | ) | ||||||||||||||
Foreign exchange and other | (19 | ) | 502 | (199 | ) | 483 | (813 | ) | |||||||||||||
Income (loss) before income taxes | (11,466 | ) | 41,208 | 26,008 | 29,742 | 45,415 | |||||||||||||||
Income tax expense (benefit) | (6,027 | ) | 101 | 8,955 | (5,926 | ) | (36,063 | ) | |||||||||||||
Net income (loss) | $ | (5,439 | ) | $ | 41,107 | $ | 17,053 | $ | 35,668 | $ | 81,478 | ||||||||||
Computation of diluted earnings per share under the two-class method: | |||||||||||||||||||||
Net income attributable to shareholders | $ | (5,439 | ) | $ | 41,107 | $ | 17,053 | $ | 35,668 | $ | 81,478 | ||||||||||
Less: Distributed and undistributed income allocated to participating securities (nonvested stock) | 77 | (606 | ) | (312 | ) | (520 | ) | (1,495 | ) | ||||||||||||
Distributed and undistributed income available to shareholders | $ | (5,362 | ) | $ | 40,501 | $ | 16,741 | $ | 35,148 | $ | 79,983 | ||||||||||
Diluted weighted average shares outstanding | 39,719 | 39,839 | 39,984 | 39,779 | 39,850 | ||||||||||||||||
Diluted earnings per share | $ | (0.14 | ) | $ | 1.02 | $ | 0.42 | $ | 0.88 | $ | 2.01 |
BUCKEYE TECHNOLOGIES INC. | ||||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||||
(In thousands) | ||||||||||
December 31 | September 30 | June 30 | ||||||||
2011 | 2011 | 2011 | ||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 35,998 | $ | 32,794 | $ | 30,494 | ||||
Accounts receivable, net | 136,571 | 135,322 | 140,582 | |||||||
Inventories | 106,756 | 101,588 | 91,024 | |||||||
Deferred income taxes and other | 14,328 | 11,396 | 12,216 | |||||||
Total current assets | 293,653 | 281,100 | 274,316 | |||||||
Property, plant and equipment, net | 476,020 | 514,743 | 530,468 | |||||||
Goodwill | - | 2,425 | 2,425 | |||||||
Deferred income taxes | 48,670 | 44,970 | 32,741 | |||||||
Intellectual property and other, net | 14,138 | 29,026 | 29,901 | |||||||
Total assets | $ | 832,481 | $ | 872,264 | $ | 869,851 | ||||
Liabilities and stockholders' equity | ||||||||||
Current liabilities: | ||||||||||
Trade accounts payable | $ | 32,846 | $ | 37,728 | $ | 41,437 | ||||
Accrued expenses | 40,323 | 60,418 | 71,722 | |||||||
Other current liabilities | 863 | - | - | |||||||
Total current liabilities | 74,032 | 98,146 | 113,159 | |||||||
Long-term debt | 86,840 | 90,351 | 96,921 | |||||||
Deferred income taxes | 5,531 | 5,438 | 7,968 | |||||||
Other liabilities | 85,486 | 87,374 | 72,506 | |||||||
Stockholders' equity | 580,592 | 590,955 | 579,297 | |||||||
Total liabilities and stockholders' equity | $ | 832,481 | $ | 872,264 | $ | 869,851 |
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
December 31, 2011 | September 30, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||||||||||||
OPERATING ACTIVITIES | |||||||||||||||||||||||
Net income (loss) | $ | (5,439 | ) | $ | 41,107 | $ | 17,053 | $ | 35,668 | $ | 81,478 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||
Asset impairment loss | 50,711 | - | - | 50,711 | - | ||||||||||||||||||
Depreciation | 12,791 | 13,026 | 12,132 | 25,817 | 24,106 | ||||||||||||||||||
Amortization | 655 | 651 | 641 | 1,306 | 1,318 | ||||||||||||||||||
Loss on early extinguishment of debt | - | - | 3,649 | - | 3,649 | ||||||||||||||||||
Loss on goodwill impairment | 2,425 | - | - | 2,425 | - | ||||||||||||||||||
Deferred income taxes | (2,509 | ) | (13,632 | ) | (420 | ) | (16,141 | ) | (65,855 | ) | |||||||||||||
Noncurrent AFMC refund payable | (1,567 | ) | 15,462 | - | 13,895 | 41,144 | |||||||||||||||||
Loss on disposal of equipment | 483 | 283 | 712 | 766 | 811 | ||||||||||||||||||
Insurance proceeds applied to capital investments | - | - | (161 | ) | - | (161 | ) | ||||||||||||||||
Provision for bad debts | 49 | 555 | (24 | ) | 604 | 88 | |||||||||||||||||
Excess tax benefit from stock based compensation | (788 | ) | (765 | ) | (435 | ) | (1,553 | ) | (445 | ) | |||||||||||||
Stock-based compensation expense | 1,245 | 966 | 1,200 | 2,211 | 2,135 | ||||||||||||||||||
Other | (244 | ) | (112 | ) | 88 | (356 | ) | (44 | ) | ||||||||||||||
Change in operating assets and liabilities | |||||||||||||||||||||||
Accounts receivable | 1,999 | (1,462 | ) | 7,838 | 537 | 6,462 | |||||||||||||||||
Income tax and AFMC receivable | - | - | 7,924 | - | 51,767 | ||||||||||||||||||
Inventories | (6,346 | ) | (12,447 | ) | (7,065 | ) | (18,793 | ) | (16,814 | ) | |||||||||||||
Other assets | (3,247 | ) | 359 | 932 | (2,888 | ) | 1,829 | ||||||||||||||||
Accounts payable and other liabilities | (25,288 | ) | (15,527 | ) | (20,201 | ) | (40,815 | ) | (25,565 | ) | |||||||||||||
Net cash provided by operating activities | 24,930 | 28,464 | 23,863 | 53,394 | 105,903 | ||||||||||||||||||
INVESTING ACTIVITIES | |||||||||||||||||||||||
Purchases of property, plant & equipment | (13,586 | ) | (10,713 | ) | (19,520 | ) | (24,299 | ) | (31,436 | ) | |||||||||||||
Proceeds from insurance settlement related to capital investments | - | - | 161 | - | 161 | ||||||||||||||||||
Other | (75 | ) | (51 | ) | (139 | ) | (126 | ) | (207 | ) | |||||||||||||
Net cash used in investing activities | (13,661 | ) | (10,764 | ) | (19,498 | ) | (24,425 | ) | (31,482 | ) | |||||||||||||
FINANCING ACTIVITIES | |||||||||||||||||||||||
Net borrowings (payments) under line of credit | (3,511 | ) | (6,570 | ) | 139,026 | (10,081 | ) | 66,496 | |||||||||||||||
Payments on long term debt | - | - | (140,000 | ) | - | (140,000 | ) | ||||||||||||||||
Payments for debt issuance costs | - | - | (2,586 | ) | - | (2,586 | ) | ||||||||||||||||
Payments related to early extinguishment of debt | - | - | (1,984 | ) | - | (1,984 | ) | ||||||||||||||||
Excess tax benefit from stock based compensation | 788 | 765 | 435 | 1,553 | 445 | ||||||||||||||||||
Purchase of treasury shares | (1,941 | ) | (8,648 | ) | - | (10,589 | ) | - | |||||||||||||||
Net proceeds from sale of equity interests | 1,002 | 638 | 2,338 | 1,640 | 2,379 | ||||||||||||||||||
Payment of dividend | (2,374 | ) | (2,410 | ) | (1,605 | ) | (4,784 | ) | (3,222 | ) | |||||||||||||
Other | - | (469 | ) | - | (469 | ) | - | ||||||||||||||||
Net cash used in financing activities | (6,036 | ) | (16,694 | ) | (4,376 | ) | (22,730 | ) | (78,472 | ) | |||||||||||||
Effect of foreign currency rate fluctuations on cash | (2,029 | ) | 1,294 | 2,763 | (735 | ) | 7,082 | ||||||||||||||||
Increase in cash and cash equivalents | 3,204 | 2,300 | 2,752 | 5,504 | 3,031 | ||||||||||||||||||
Cash and cash equivalents at beginning of period | 32,794 | 30,494 | 22,400 | 30,494 | 22,121 | ||||||||||||||||||
Cash and cash equivalents at end of period | $ | 35,998 | $ | 32,794 | $ | 25,152 | $ | 35,998 | $ | 25,152 |
BUCKEYE TECHNOLOGIES INC. | ||||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
SEGMENT RESULTS | December 31, 2011 | September 30, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||||||||||
Specialty Fibers | ||||||||||||||||||||||
Net sales | $ | 176,660 | $ | 183,422 | $ | 155,323 | $ | 360,082 | $ | 298,115 | ||||||||||||
Operating income (a) | 41,920 | 43,831 | 34,445 | 85,751 | 56,585 | |||||||||||||||||
Depreciation and amortization (b) | 8,325 | 8,359 | 8,160 | 16,684 | 15,947 | |||||||||||||||||
Total assets | 482,236 | 520,636 | 498,015 | 482,236 | 498,015 | |||||||||||||||||
Capital expenditures | 11,510 | 8,985 | 17,362 | 20,495 | 28,265 | |||||||||||||||||
Nonwoven Materials | ||||||||||||||||||||||
Net sales | $ | 58,307 | $ | 64,685 | $ | 62,427 | $ | 122,992 | $ | 130,547 | ||||||||||||
Operating income (a) | 2,765 | 2,328 | 817 | 5,093 | 5,420 | |||||||||||||||||
Depreciation and amortization (b) | 4,009 | 4,217 | 3,506 | 8,226 | 7,233 | |||||||||||||||||
Total assets | 193,950 | 198,576 | 211,874 | 193,950 | 211,874 | |||||||||||||||||
Capital expenditures | 1,674 | 1,689 | 1,789 | 3,363 | 2,571 | |||||||||||||||||
Corporate | ||||||||||||||||||||||
Net sales | $ | (7,870 | ) | $ | (8,040 | ) | $ | (8,234 | ) | $ | (15,910 | ) | $ | (17,071 | ) | |||||||
Operating income (loss) (a) | (55,234 | ) | (2,142 | ) | (3,689 | ) | (57,376 | ) | (6,814 | ) | ||||||||||||
Depreciation and amortization (b) | 957 | 946 | 953 | 1,903 | 1,892 | |||||||||||||||||
Total assets | 152,595 | 153,052 | 134,657 | 152,595 | 134,657 | |||||||||||||||||
Capital expenditures | 402 | 39 | 369 | 441 | 600 | |||||||||||||||||
Total | ||||||||||||||||||||||
Net sales | $ | 227,097 | $ | 240,067 | $ | 209,516 | $ | 467,164 | $ | 411,591 | ||||||||||||
Operating income (loss) (a) | (10,549 | ) | 44,017 | 31,573 | 33,468 | 55,191 | ||||||||||||||||
Depreciation and amortization (b) | 13,291 | 13,522 | 12,619 | 26,813 | 25,072 | |||||||||||||||||
Total assets | 828,781 | 872,264 | 844,546 | 828,781 | 844,546 | |||||||||||||||||
Capital expenditures | 13,586 | 10,713 | 19,520 | 24,299 | 31,436 | |||||||||||||||||
(a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, goodwill impairment, 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, 2011 | September 30, 2011 | December 31, 2010 | December 31, 2011 | December 31, 2010 | |||||||||||||||||
Net income (loss) | $ | (5,439 | ) | $ | 41,107 | $ | 17,053 | $ | 35,668 | $ | 81,478 | |||||||||||
Income tax expense | (6,027 | ) | 101 | 8,955 | (5,926 | ) | (36,063 | ) | ||||||||||||||
Interest expense | 868 | 3,348 | 1,589 | 4,216 | 5,022 | |||||||||||||||||
Amortization of debt costs | 155 | 155 | 155 | 310 | 353 | |||||||||||||||||
Early extinguishment of debt | - | - | 3,649 | - | 3,649 | |||||||||||||||||
Depreciation, depletion and amortization | 13,291 | 13,522 | 12,618 | 26,813 | 25,071 | |||||||||||||||||
EBITDA | 2,848 | 58,233 | 44,019 | 61,081 | 79,510 | |||||||||||||||||
Goodwill and asset impairments | 53,136 | - | - | 53,136 | - | |||||||||||||||||
Non cash charges | 481 | 300 | 712 | 781 | 812 | |||||||||||||||||
Adjusted EBITDA | $ | 56,465 | $ | 58,533 | $ | 44,731 | $ | 114,998 | $ | 80,322 | ||||||||||||
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, goodwill impairment, restructuring charges incurred since the inception of the current credit facility, non-cash charges and other (gains) losses and deducting any non-cash expense associated with alternative fuel mixture credits. 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 October 22, 2010, 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.). Prior period amounts have been adjusted to conform to the definition contained in our new credit facility. | ||||||||||||||||||||||
Contacts:
Steve Dean, 901-320-8352
Senior Vice
President and Chief Financial Officer
or
Investor Relations:
Daryn
Abercrombie, 901-320-8908
www.bkitech.com