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Buckeye Announces Fourth Quarter and Fiscal Year 2013 Results

Buckeye Technologies Inc. (NYSE:BKI) today announced earnings for fiscal year 2013. Net sales for the year were $812 million, down $82 million or 9% compared to net sales from continuing operations in fiscal 2012. Specialty Fibers external sales were down $72 million or 11% due to a small drop in shipment volume, lower fluff pulp and specialty cotton fibers pricing, and unfavorable sales mix due to weak market conditions in Europe. Nonwovens sales were down $10 million entirely due to the sale of the Merfin Systems converting business in mid-fiscal year 2012.

Adjusted net income* for the 2013 fiscal year was $92 million or $2.32 per share, compared to a record $111 million or $2.76 per share in fiscal 2012, and the previous record net income of $91 million or $2.23 per share in fiscal 2011. The two biggest drivers of the reduction in adjusted net income between fiscal years 2012 and 2013 were lower fluff pulp prices and unfavorable sales mix in the specialty fibers segment, where operating income was down $34 million year over year. Operating income for the nonwoven materials segment was up $9 million in fiscal year 2013 compared to fiscal year 2012 due to a large reduction in fixed manufacturing costs resulting from the closure of our Delta, B.C., Canada airlaid facility in December 2012.

Fourth quarter net sales were $216 million, down $9 million or 4% versus net sales of $225 million in the fourth quarter of fiscal 2012. While shipment volume was up 9%, driven by increased shipments from our Foley wood fibers facility, this was offset by unfavorable mix and lower selling prices in our specialty fibers segment.

Fourth quarter adjusted net income* was $23.0 million or $0.58 per share. This excludes net after-tax charges of $5.0 million, or $0.13 per share, primarily relating to the pending merger with Georgia-Pacific and adjustments related to the CBC fuel tax credit. Adjusted net income* was down compared to the prior year’s $26.2 million or $0.66 per share, which excluded net income of $2.3 million, or $0.05 per share, primarily consisting of adjustments relating to the cellulosic biofuel credit. This $3.2 million reduction in adjusted net income* was mainly driven by unfavorable sales mix and by lower selling prices for fluff and specialty wood pulp. We generated $61.4 million in net cash provided by operating activities during the quarter, invested $30.2 million in capital projects (including $15.5 million on the oxygen delignification and specialty conversion projects), reduced debt by $21.1 million to $41.2 million, and paid a regular quarterly dividend of $3.5 million. At the end of the quarter our cash and short term investments stood at $58.1 million.

Comparing the fourth quarter to the third quarter of fiscal 2013, sales were up $20 million or 10% as shipment volume was up 15% in our specialty fibers segment and was flat in our nonwovens segment. Adjusted EPS* of $0.58 was up $0.05 versus the third quarter on the increase in shipment volume.

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 and Germany. 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, Buckeye’s pending business combination with Georgia-Pacific LLC, 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”, “and adjusted earnings per share”, “free cash flow”. The first three measures are equal to operating income, net 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, gain on sale of assets, and GP merger related expenses. “Free cash flow” is equal to net cash provided by operating activities less net cash used in investing activities (excluding purchase of short term investments).

($ in Millions)Q4-2013Q4-2012Q3-2013YTD-2013YTD-2012

Operating income

Operating income in accordance with GAAP$27.8$40.0$29.9$121.4$164.0
Special items:
GP merger related expenses5.5------5.5---
Restructuring costs0.3---
Asset and Goodwill impairment---
Adjusted operating income

(Excludes Americana)


Net income

Net income in accordance with GAAP$18.0$28.5$28.3$88.7$90.0
Special items, after-tax:
GP merger related expenses3.6------3.6---
Gain on sale of assets held for sale------(7.3)(7.3)---
Earn-out from King sale------(0.2)(0.2)---
AFMC / CBC1.1(3.3)0.1(4.4)(10.5)
Restructuring costs0.
Asset and Goodwill impairment---(0.2)(0.7)2.229.6
Adjusted net income$23.0$26.2$21.0$92.2$111.0

Earnings per share (EPS) - Diluted

EPS in accordance with GAAP$0.45$0.71$0.71$2.23$2.24
Special items, after-tax, per share:
GP merger related expenses0.09------0.09


Gain on sale of assets held for sale------(0.19)(0.19)


Earn-out from King sale---------------
AFMC / CBC0.03(0.08)---(0.11)(0.27)
Restructuring costs0.
Asset and Goodwill Impairment------(0.01)0.060.74
Adjusted EPS$0.58$0.66$0.53$2.32$2.76

($ in Millions)






Free Cash Flow

Net cash provided by operating activities$61.4$87.4$46.1$136.2$171.8
Proceeds from sale of assets0.26.119.920.111.7
Purchases of property, plant & equipment / Other(30.4)(38.9)(27.4)(109.9)(85.4)
Proceeds from insurance settlement related to capital investments---------4.3---
Free Cash Flow$31.2$54.6$38.6$50.7$98.1

Loss from Discontinued Operations

As a result of the disposition of our Americana operations in Q4 2012, we have reported the results of the operations for this business, including the loss recognized from the sale and less applicable income taxes (benefit), in discontinued operations in our consolidated income statement. The table below shows the detail behind the loss from discontinued operations for each period reported in the press release financial statements.

($ in Millions)





Net Sales$---$---$--$14.3
Gross Margin---(0.3)--(0.6)
Asset Impairment Cost---0.1--49.2
Other Operating Expense---1.8---2.7
Operating Loss---(2.2)--(52.5)
Net Interest Income---0.1--0.5
Foreign Exchange & Other---(0.3)---(0.2)
Loss before Tax---(2.4)--(52.2)
Income Tax Benefit---(0.5)(1.4)(23.3)
Income (Loss) from Discontinued Operations$---$(1.9)$1.4$(28.9)

(In thousands, except per share data)
Three Months EndedYear Ended
June 30, 2013March 31, 2013June 30, 2012June 30, 2013June 30, 2012
Net sales $ 215,597 $ 195,562 $ 224,940 $ 812,450 $ 894,881
Cost of goods sold 167,247 152,204 171,877 623,303 677,396
Gross margin48,35043,35853,063189,147217,485
Gross margin as a percentage of sales22.4%22.2%23.6%23.3%24.3%
Selling, research and administrative expenses 19,776 11,408 12,257 56,568 46,704
Amortization of intangibles and other 531 517 510 2,070 2,021
Asset impairment loss - 701 329 3,591 2,094
Goodwill impairment loss - - - - 2,425
Restructuring costs 304 855 - 9,918 234
Other operating income (71 ) - - (4,351 ) (32 )
Operating income27,81029,87739,967121,351164,039
Net interest expense and amortization of debt costs (352 ) (314 ) 5,211 (1,869 ) (499 )
Gain on sale of assets held for sale - 7,346 - 7,346 -
Foreign exchange and other 1 508 301 88 386
Income from continuing operations before income taxes27,45937,41745,479126,916163,926
Income tax expense 9,443 10,524 15,075 39,607 45,011
Income from continuing operations18,01626,89330,40487,309118,915
Income (loss) from discontinued operations, net of tax - 1,369 (1,889 ) 1,369 (28,887 )
Net Income$18,016$28,262$28,515$88,678$90,028
Computation of diluted earnings per share under the two-class method:
Net income attributable to shareholders $ 18,016 $ 28,262 $ 28,515 $ 88,678 $ 90,028

Less: Distributed and undistributed income allocated to participating securities (nonvested stock)

(186 ) (287 ) (341 ) (929 ) (1,248 )

Distributed and undistributed income available to shareholders

$ 17,830 $ 27,975 $ 28,174 $ 87,749 $ 88,780
Diluted income per share from continuing operations $ 0.45 $ 0.68 $ 0.76 $ 2.20 $ 2.98
Diluted income (loss) per share from discontinued operations - 0.03 (0.05 ) 0.03 (0.74 )
Diluted earnings per share$0.45$0.71$0.71$2.23$2.24

(In thousands)
June 30March 31June 30
Current assets:
Cash and cash equivalents$17,130$55,220$38,284
Short term investments40,932-8,813
Accounts receivable, net125,682128,624126,705
Deferred income taxes and other7,95510,88225,697
Total current assets288,520299,784289,682
Property, plant and equipment, net551,234532,278492,109
Deferred income taxes44,42140,67842,427
Intellectual property and other, net11,14611,62413,193
Total assets$895,321$884,364$837,411
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable$38,269$28,372$40,600
Accrued expenses43,66435,70843,135
Other current liabilities---
Total current liabilities81,93364,08083,735
Long-term debt41,17262,27158,578
Deferred income taxes4,3994,5364,930
Other liabilities85,12489,63787,132
Stockholders' equity682,693663,840603,036
Total liabilities and stockholders' equity$895,321$884,364$837,411

(In thousands)
Three Months EndedYear Ended
June 30, 2013March 31, 2013June 30, 2012June 30, 2013June 30, 2012
Net income$18,016$28,262$28,515$88,678$90,028

Adjustments to reconcile net income to net cash provided by operating activities:

Asset impairment loss - 701 465 3,591 51,268
Depreciation 11,517 10,975 12,091 46,377 50,136
Amortization 686 672 665 2,691 2,641
Loss on goodwill impairment - - - - 2,425
Deferred income taxes 81 (422 ) 1,253 3,533 (14,454 )
Noncurrent AFMC refund payable (3,676 ) - (3,648 ) (388 ) 10,247
Gain on sale of assets held for sale - (7,346 ) - (7,346 ) -
Loss on disposal of equipment 319 253 954 1,653 1,602
Insurance settlement - - - (4,277 ) -
Provision for bad debts 330 373 37 663 (57 )
Excess tax benefit from stock based compensation (89 ) (81 ) (1,367 ) (2,380 ) (4,062 )
Stock-based compensation expense 1,723 1,210 868 5,603 4,245
Other 2,076 241 2,107 2,320 1,861
Change in operating assets and liabilities
Accounts receivable (5,212 ) (359 ) 3,108 1,052 6,548
Income tax receivable 8,104 8,747 6 (2 ) -
Inventories 8,437 366 20,227 (6,046 ) (5,119 )
Other assets (1,659 ) 13,120 (2,889 ) 12,074 803
Accounts payable and other liabilities 20,715 (10,651 ) 24,977 (11,612 ) (26,349 )
Net cash provided by operating activities61,36846,06187,369136,184171,763
Purchases of property, plant & equipment (30,233 ) (27,178 ) (38,734 ) (109,362 ) (84,940 )
Proceeds from sale of assets 220 19,896 6,085 20,116 11,760
Short term investments (41,274 ) 9,075 (9,213 ) (32,199 ) (9,213 )

Proceeds from insurance settlement related to capital investments






Other (191 ) (202 ) (128 ) (520 ) (481 )
Net cash provided by (used in) investing activities(71,478)1,591(41,990)(117,688)(82,874)
Net borrowings (payments) under revolving line of credit (21,099 ) (37,008 ) (11,561 ) (17,406 ) (38,343 )
Excess tax benefit from stock based compensation 89 81 1,367 2,380 4,062
Purchase of treasury shares - - (22,327 ) (9,203 ) (32,916 )
Net proceeds from sale of equity interests 284 135 253 2,503 3,054
Payment of dividend (3,536 ) (3,608 ) (3,164 ) (13,737 ) (10,756 )
Other - - (1,057 ) (938 ) (1,526 )
Net cash provided by (used in) financing activities(24,262)(40,400)(36,489)(36,401)(76,425)
Effect of foreign currency rate fluctuations on cash (3,718 ) (1,342 ) (7,773 ) (3,249 ) (4,674 )
Increase in cash and cash equivalents(38,090)5,9101,117(21,154)7,790
Cash and cash equivalents at beginning of period55,22049,31037,16738,28430,494
Cash and cash equivalents at end of period$17,130$55,220$38,284$17,130$38,284

(In thousands)
Three Months EndedYear Ended
SEGMENT RESULTSJune 30, 2013March 31, 2013June 30, 2012June 30, 2013June 30, 2012
Specialty Fibers
Net sales$161,862$142,601$170,950$601,173$686,733
Operating income (a)31,42727,72339,106131,295165,441
Depreciation and amortization (b)8,2047,6827,67031,24631,033
Total assets571,305549,821487,764571,305487,764
Capital expenditures25,70624,32333,36896,90173,364
Nonwoven Materials
Net sales$58,599$57,380$61,827$228,543$239,007
Operating income (a)6,1725,7863,62621,19911,735
Depreciation and amortization (b)(8,395)2,9053,9452,16016,087
Total assets147,258153,970182,924147,258182,924
Capital expenditures3,1452,0024,1718,6979,368
Net sales$(4,864)$(4,419)$(7,837)$(17,266)$(30,859)
Operating income (loss) (a)(9,790)(3,632)(2,765)(31,143)(13,137)
Depreciation and amortization (b)9,82990598712,6313,861
Total assets176,758180,573166,723176,758166,723
Capital expenditures1,3828531,1953,7642,208
Net sales$215,597$195,562$224,940$812,450$894,881
Operating income (a)27,80929,87739,967121,351164,039
Depreciation and amortization (b)9,63811,49212,60246,03750,981
Total assets895,321884,364837,411895,321837,411
Capital expenditures30,23327,17838,734109,36284,940
(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 EndedYear Ended
ADJUSTED EBITDAJune 30, 2013March 31, 2013June 30, 2012June 30, 2013June 30, 2012
Net income$18,015$28,262$28,515$88,678$90,028
Elimination of discontinued operations-(1,369)1,889(1,369)28,887
Income tax expense (benefit)9,4439,15515,07539,60745,011
Interest expense220202(5,296)1,407140
Amortization of debt costs156155155622620
Depreciation, depletion and amortization12,04811,49212,60148,44750,980
Asset impairments-701(2,408)3,5911,782
Non cash charges3192538031,6681,645
Gain on sale of assets held for sale-(7,346)-(7,346)-
Adjusted EBITDA$40,505$42,360$54,071$185,223$222,064
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.


Buckeye Technologies Inc.
Steve Dean, 901-320-8352
Executive Vice President
and Chief Financial Officer
Eric Whaley, 901-320-8509
Investor Relations

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