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Buckeye Announces Fourth Quarter and Fiscal Year Results

Buckeye Technologies Inc. (NYSE:BKI) today announced that net sales in the April-June quarter grew by 7.6% over the prior year to $215.3 million, a new sales record for the Company. Earnings for the quarter were $9.3 million after tax ($0.24 per share, compared with $15.9 million ($0.41 per share) in the prior year. During the same quarter of the prior year, the Companys results included a $2.0 million pre-tax benefit from a water conservation partnership payment, a $2.1 million pre-tax benefit from reversal of accrued interest related to cancellation of a contingent note owed to Stac-Pac Technologies Inc., and a $3.3 million tax benefit from adjustments relating to federal and state valuation allowances and credits. The combined benefit of these three items on our year ago fourth quarter earnings was $0.15 per share.

Increased selling prices across all of our businesses as compared to the year-ago quarter were sufficient to offset significantly higher raw materials, energy, chemicals and transportation costs. However, reduced production volumes due to unplanned maintenance outages at our Perry, Florida wood cellulose mill and lower Nonwovens sales were the primary drivers behind a year-over-year reduction in Operating Income of $7.1 million. Excluding reversal of the accrued Stac-Pac interest that impacted the fourth quarter of last year, our net interest expense was reduced by about $2 million compared to last year mainly due to the reduction in debt. Also, our effective tax rate of 26.5% for the quarter, while higher than last years 21.9% rate, was favorably impacted by about $1.3 million in adjustments relating to identification of additional R&D tax credits and tax planning associated with intercompany interest charges to our Brazilian subsidiary.

Net sales for the fiscal year grew 7.3% over the prior year to $825.5 million, also a new sales record for the Company. Earnings for the fiscal year were $47.1 million after tax ($1.20 per share) compared to $30.1 million after tax ($0.79 per share) in the prior year.

Chairman and Chief Executive Officer John B. Crowe said, Fiscal year 2008 was an outstanding year for Buckeye. Building on the momentum from 2007, we achieved a variety of significant performance milestones, including our highest ever sales revenue, debt below $400 million and EPS up 52% over the prior year. Due to the unprecedented cost escalation we have experienced over the past 6 months, we have implemented additional price increases and surcharges which went into effect on July 1st. While oil and natural gas prices have moderated from recent peaks, we are still facing rising cost trends for energy, raw materials, chemicals and transportation in the July-September quarter compared to the April-June quarter.

Mr. Crowe went on to say, We continue to involve the entire organization in Lean Enterprise as a key strategy to grow our business and improve margins, and we have made progress in eliminating waste and non-value added activities. We are entering the second year of a three-year energy savings project at our wood fibers facility in Florida, which when completed will save the equivalent of over 200,000 barrels of #6 fuel oil annually and reduce our dependency on fossil fuels and purchased electricity. Complementing this project are several innovative renewable energy opportunities with the potential to further reduce our reliance on fossil fuels while creating additional value streams. Finally, during the past quarter we have formed a Strategic Growth Team, which includes strong outside expertise, responsible for evaluating and developing options to support our corporate objective of executing profitable growth strategies.

Buckeye has scheduled a conference call for tomorrow morning, August 12th, at 10:00 a.m. EDT to discuss fourth quarter and fiscal year performance. Persons interested in listening by telephone may dial in at (877) 856-1961 within the United States. International callers should dial (719) 325-4808.

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 Companys 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.

(In thousands, except per share data)
Three Months EndedTwelve Months Ended
June 30, 2008March 31, 2008June 30, 2007June 30, 2008June 30, 2007
Net sales $ 215,331 $ 201,865 $ 200,176 $ 825,517 $ 769,321
Cost of goods sold 182,605 167,664 159,652 675,955 637,505
Gross margin32,72634,20140,524149,562131,816
Gross margin as a percentage of sales15.2%16.9%20.2%18.1%17.1%
Selling, research and administrative expenses 12,537 11,470 12,974 47,277 47,021
Amortization of intangibles and other 466 468 697 1,856 2,335
Restructuring costs - - 25 96 1,249
Operating income19,72322,26326,828100,33381,211
Net interest expense and amortization of debt costs (7,491 ) (7,814 ) (7,587 ) (32,986 ) (38,798 )
Early extinguishment of debt (88 ) - (95 ) (623 ) (832 )
Gain on sale of assets held for sale - - - - 355
Foreign exchange and other 530 313 1,228 581 1,902
Income before income taxes12,67414,76220,37467,30543,838
Income tax expense 3,358 4,340 4,456 20,203 13,720
Net income$9,316$10,422$15,918$47,102$30,118
Earnings per share $ 0.24 $ 0.27 $ 0.42 $ 1.21 $ 0.80
Diluted earnings per share $ 0.24 $ 0.26 $ 0.41 $ 1.20 $ 0.79

Weighted average shares for basic earnings per share

38,843 39,011 38,166 38,888 37,842

Weighted average shares for diluted earnings per share

39,009 39,372 38,772 39,401 38,218

(In thousands)
June 30March 31June 30
Current assets:
Cash and cash equivalents$10,393$20,835$14,790
Accounts receivable, net127,521121,985116,865
Deferred income taxes and other11,5309,7169,452
Total current assets259,698256,067227,884
Property, plant and equipment, net555,708544,957537,655
Intellectual property and other, net30,19729,94730,346
Total assets$1,009,225$991,256$951,822
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable$49,157$44,659$41,030
Accrued expenses50,45155,30349,532
Current portion of capital lease obligations358459399
Short-term debt207647-
Total current liabilities100,173101,06890,961
Long-term debt393,910394,532445,138
Deferred income taxes59,70256,37941,761
Capital lease obligations--356
Other liabilities25,88327,70226,452
Stockholders' equity429,557411,575347,154
Total liabilities and stockholders' equity$1,009,225$991,256$951,822

(In thousands)
Three Months EndedTwelve Months Ended
June 30, 2008March 31, 2008June 30, 2007June 30, 2008June 30, 2007
Net income$9,316$10,676$15,918$47,102$30,118

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

Depreciation 12,794 12,670 12,758 50,873 49,212
Amortization 489 540 904 2,155 3,258
Loss on early extinguishment of debt 88 - 95 623 832
Deferred income taxes 998 2,879 2,855 14,589 7,205
Gain on sale of assets held for sale - - - - (355 )
Loss on disposal of equipment 161 230 489 955 1,190
Provision for bad debts 78 (52 ) 107 16 277
Excess tax benefit from stock based compensation - - 18 (44 ) (24 )
Other (969 ) 408 (287 ) (14 ) 971
Change in operating assets and liabilities
Accounts receivable (4,559 ) (541 ) (408 ) (5,875 ) (1,931 )
Inventories (6,230 ) (10,550 ) (2,722 ) (20,185 ) 13,159
Other assets (185 ) (1,356 ) (287 ) (1,205 ) (1,041 )
Accounts payable and other liabilities (398 ) 11,684 1,859 3,316 8,490
Net cash provided by operating activities11,58326,58831,29992,306111,361
Purchases of property, plant & equipment (17,992 ) (12,513 ) (18,965 ) (49,197 ) (45,200 )
Proceeds from sale of assets 17 - - 17 521
Other (198 ) (118 ) (159 ) (451 ) (539 )
Net cash used in investing activities(18,173)(12,631)(19,124)(49,631)(45,218)
Net borrowings (payments) under line of credit 14,031 (17,796 ) (3,368 ) 78,235 (3,000 )
Payments on long term debt and other (15,101 ) (101 ) (17,625 ) (129,019 ) (67,752 )
Payments for debt issuance costs 80 - - (1,321 ) -
Excess tax benefit from stock based compensation - - (18 ) 44 24
Purchase of treasury shares (2,720 ) - - (2,720 ) -
Net proceeds from sale of equity interests 77 - 7,549 5,819 9,857
Net cash used in financing activities(3,633)(17,897)(13,462)(48,962)(60,871)
Effect of foreign currency rate fluctuations on cash (219 ) 1,209 580 1,890 784
Increase (decrease) in cash and cash equivalents(10,442)(2,731)(707)(4,397)6,056
Cash and cash equivalents at beginning of period20,83523,56615,49714,7908,734
Cash and cash equivalents at end of period$10,393$20,835$14,790$10,393$14,790

(In thousands)
Three Months EndedYear Ended
SEGMENT RESULTSJune 30, 2008March 31, 2008June 30, 2007June 30, 2008June 30, 2007
Specialty Fibers
Net sales$ 160,945$ 150,928$ 143,432$ 595,782$ 543,831
Operating income (a)20,09722,43123,15290,64065,847
Depreciation and amortization (b)8,5048,4928,31233,16831,770
Capital expenditures14,97810,98116,23142,34736,614
Nonwoven Materials
Net sales$ 61,798$ 58,157$ 66,002$ 263,551$ 258,843
Operating income (a)6421,3564,97215,30022,210
Depreciation and amortization (b)3,8703,7914,01316,13416,047
Capital expenditures2,1131,2981,4744,8554,316
Net sales$ (7,413)$ (7,219)$ (9,258)$ (33,816)$ (33,353)
Operating loss (a)(1,015)(1,524)(1,296)(5,607)(6,846)
Depreciation and amortization (b)8838541,1263,4253,775
Capital expenditures9012341,2601,9954,270
Net sales$ 215,330$ 201,866$ 200,176$ 825,517$ 769,321
Operating income (a)19,72422,26326,828100,33381,211
Depreciation and amortization (b)13,25713,13713,45152,72751,592
Capital expenditures17,99212,51318,96549,19745,200
(a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. We have reclassified the at-risk compensation and stock based compensation from the specialty fibers and nonwovens segments for previous periods for comparability. 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, 2008March 31, 2008June 30, 2007June 30, 2008June 30, 2007
Income$ 9,316$ 10,677$ 15,919$ 47,102$ 30,118
Income tax expense3,3584,0864,45620,20313,720
Interest expense7,3317,7317,37732,46937,853
Amortization of debt costs2592593211,0881,300
Early extinguishment of debt88-95623832
Depreciation, depletion and amortization13,26013,13813,45152,72951,592
Non cash charges1762304909701,451
Gain on sale of assets held for sale----(355)
Restructuring charges--24-1,249
Adjusted EBITDA$ 33,788$ 36,121$ 42,133$ 155,184$ 137,760
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, restructuring charges prior to July 1, 2007 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.).

(In thousands, except per share data)
Three Months EndedTwelve months Ended
June 30, 2007March 31, 2008June 30, 2007
reconciled toreconciled toreconciled to
NET SALES RECONCILIATIONJune 30, 2008June 30, 2008June 30, 2008
Net sales$200.2$201.9$769.3
Volume (1)(9.6)6.8(27.4)
Pricing (2)20.85.969.4
Product sales mix and other (3)3.90.714.2
Net sales$215.3$215.3$825.5
(1) Volume relates to the change in volume on comparable products
(2) Pricing relates to the changes in unit prices on comparable products
(3) Product sales mix relates to the impact of changes in the mix of products shipped. Other includes the impact of changes in foreign currency exchange rates on the translation of sales denominated in currencies other than the US dollar.
Three Months EndedTwelve months Ended
June 30, 2007March 31, 2008June 30, 2007
reconciled toreconciled toreconciled to
EARNINGS PER SHARE RECONCILIATION (4)June 30, 2008June 30, 2008June 30, 2008
EARNINGS (LOSS) PER SHARE$0.41$0.26$0.79
Volume (5)(0.04)0.02(0.10)
Pricing / product mix (6)0.370.101.20
Costs (7)(0.45)(0.16)(0.81)
Restructuring, impairment, early debt extinguishment costs--0.02

Corporate / Other (8)

EARNINGS PER SHARE$0.24$0.24$1.20
(4) All calculations are net of taxes
(5) Volume - Changes in volume on comparable products at prior period gross margins (price, unit cost and mix are at the same levels as the prior quarter).
(6) Pricing / Product Mix - Impact of changes in selling prices (on comparable products) and changes in the mix of products shipped.
(7) Costs - Changes in production volume, energy related prices, price and usage of chemicals and raw materials, transportation costs, direct spending and selling, research and administrative expenses.
(8) Corporate / Other - Net interest expense, intangible amortization, foreign exchange gain(loss), gain(loss) on sale of assets, other income(expense), and tax adjustments and changes in tax rate.


Buckeye Technologies Inc.
Steve Dean, 901-320-8352
Senior Vice President and Chief Financial Officer
Daryn Abercrombie, 901-320-8908
Investor Relations

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