Buckeye Technologies Inc. (NYSE:BKI) today announced that net sales in the July-September quarter grew by 12.1% over the prior year to $221.3 million, a new sales record for the Company. Net income for the quarter was $8.9 million ($0.23 per share), compared with $13.5 million ($0.34 per share) in the prior year. During the same quarter of the prior year, the Company’s results included a $2.2 million ($0.06 per share) tax benefit related to a reduction in Germany’s tax rate. Free cash flow(a) for the quarter was $11.0 million.
Income before taxes, at $14.4 million, was down $4.0 million compared to the year ago quarter as a $5.9 million decrease in operating income was partially offset by a $1.7 million reduction in interest expense. In spite of substantial selling price increases across all businesses, our gross margin has declined from 20.6% of sales in the year ago quarter to 16.0% in the quarter just completed due to rapidly escalating input costs at all of our plants and lower capacity utilization at our airlaid nonwovens plants. Compared to the April-June quarter, operating income rose $2.9 million and gross margin improved from 15.2% to 16.0%.
Chairman and Chief Executive Officer John B. Crowe said, “We are pleased with the improvement in our operating results compared to the April-June quarter, particularly with the increase in sales and earnings in our Nonwoven Materials segment. We were also able to hold operating income for our Specialty Fibers segment constant with the April-June quarter. While we only saw a small increase in fluff pulp prices during the quarter, we were able to offset escalating input costs through a combination of surcharges and selling price increases on our specialty products and improved performance at our Perry, Florida wood cellulose mill. We continued to generate strong cash flow and increased our cash balance by $8 million while slightly reducing our long-term debt during the quarter. I believe that all of our efforts in recent years to reduce debt, take out costs, improve our product mix, and put a new credit facility in place in July 2007 have positioned us well for these uncertain economic times. We will continue to focus on maintaining and improving the strength of our balance sheet, particularly in this economic environment.”
Buckeye has scheduled a conference call for Wednesday morning, October 29th, at 11:00 a.m. ET to discuss first quarter performance. Persons interested in listening by telephone may dial in at (877) 795-3635 within the United States. International callers should dial (719) 325-4751. 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.
(a)This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”).The non-GAAP measure used is “free cash flow”.The Company believes that the presentation of this non-GAAP measure provides information that is useful to investors as it indicates more clearly and concisely the amount of cash generated by operations that remains available for payment of debt, share repurchase or dividends after funding capital expenditures, but this information should not be considered a substitute for any measures derived in accordance with GAAP.The Company manages cash flows available for debt pay down by measuring “free cash flow”, and includes this measure in all-employee bonus and at-risk compensation bonus targets.
Net Cash provided by Operating Activities $22,056
Less Purchases of Property, Plant & Equipment (11,105)
Free Cash Flow $10,951
| BUCKEYE TECHNOLOGIES INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
| (unaudited) | |||||||||||
| (In thousands, except per share data) | |||||||||||
| Three Months Ended | |||||||||||
| September 30, 2008 | June 30, 2008 | September 30, 2007 | |||||||||
| Net sales | $ | 221,293 | $ | 215,331 | $ | 197,399 | |||||
| Cost of goods sold | 185,955 | 182,605 | 156,744 | ||||||||
| Gross margin | 35,338 | 32,726 | 40,655 | ||||||||
| Gross margin as a percentage of sales | 16.0 | % | 15.2 | % | 20.6 | % | |||||
| Selling, research and administrative expenses | 12,210 | 12,537 | 11,474 | ||||||||
| Amortization of intangibles and other | 469 | 466 | 561 | ||||||||
| Restructuring costs | - | - | 96 | ||||||||
| Operating income | 22,659 | 19,723 | 28,524 | ||||||||
| Net interest expense and amortization of debt costs | (7,438 | ) | (7,491 | ) | (9,157 | ) | |||||
| Early extinguishment of debt | - | (88 | ) | (786 | ) | ||||||
| Foreign exchange and other | (831 | ) | 530 | (168 | ) | ||||||
| Income before income taxes | 14,390 | 12,674 | 18,413 | ||||||||
| Income tax expense | 5,540 | 3,358 | 4,916 | ||||||||
| Net income | $ | 8,850 | $ | 9,316 | $ | 13,497 | |||||
| Earnings per share | $ | 0.23 | $ | 0.24 | $ | 0.35 | |||||
| Diluted earnings per share | $ | 0.23 | $ | 0.24 | $ | 0.34 | |||||
| Weighted average shares for basic | |||||||||||
| earnings per share | 38,704 | 38,843 | 38,743 | ||||||||
| Weighted average shares for diluted | |||||||||||
| earnings per share | 38,883 | 39,009 | 39,260 | ||||||||
| BUCKEYE TECHNOLOGIES INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| September 30 | June 30 | September 30 | ||||||
| 2008 | 2008 | 2007 | ||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 18,451 | $ | 10,393 | $ | 14,003 | ||
| Accounts receivable, net | 128,549 | 127,521 | 120,199 | |||||
| Inventories | 109,211 | 110,254 | 94,050 | |||||
| Deferred income taxes and other | 11,355 | 11,530 | 9,514 | |||||
| Total current assets | 267,566 | 259,698 | 237,766 | |||||
| Property, plant and equipment, net | 537,556 | 555,708 | 541,582 | |||||
| Goodwill | 156,800 | 163,622 | 162,116 | |||||
| Intellectual property and other, net | 28,036 | 30,197 | 30,439 | |||||
| Total assets | $ | 989,958 | $ | 1,009,225 | $ | 971,903 | ||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 41,618 | $ | 49,157 | $ | 42,032 | ||
| Accrued expenses | 59,248 | 50,451 | 58,861 | |||||
| Current portion of capital lease obligations | 253 | 358 | 407 | |||||
| Short-term debt | 285 | 207 | 505 | |||||
| Total current liabilities | 101,404 | 100,173 | 101,805 | |||||
| Long-term debt | 392,439 | 393,910 | 418,917 | |||||
| Deferred income taxes | 57,754 | 57,963 | 47,019 | |||||
| Capital lease obligations | - | - | 251 | |||||
| Other liabilities | 25,423 | 27,622 | 26,115 | |||||
| Stockholders' equity | 412,938 | 429,557 | 377,796 | |||||
| Total liabilities and stockholders' equity | $ | 989,958 | $ | 1,009,225 | $ | 971,903 | ||
| BUCKEYE TECHNOLOGIES INC. | ||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||
| (unaudited) | ||||||||||||||
| (In thousands) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| September 30, 2008 | June 30, 2008 | September 30, 2007 | ||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $ | 8,850 | $ | 9,316 | $ | 13,497 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Depreciation | 12,743 | 12,794 | 12,629 | |||||||||||
| Amortization | 639 | 489 | 502 | |||||||||||
| Loss on early extinguishment of debt | - | 88 | 786 | |||||||||||
| Deferred income taxes | 1,345 | (741 | ) | 4,624 | ||||||||||
| Loss on disposal of equipment | 167 | 161 | 116 | |||||||||||
| Provision for bad debts | (27 | ) | 78 | (9 | ) | |||||||||
| Excess tax benefit from stock based compensation | - | - | (15 | ) | ||||||||||
| Other | 391 | (969 | ) | 184 | ||||||||||
| Change in operating assets and liabilities | ||||||||||||||
| Accounts receivable | (5,125 | ) | (4,559 | ) | (1,726 | ) | ||||||||
| Inventories | (841 | ) | (6,230 | ) | (5,571 | ) | ||||||||
| Other assets | 142 | (185 | ) | (219 | ) | |||||||||
| Accounts payable and other liabilities | 3,772 | 1,341 | 6,955 | |||||||||||
| Net cash provided by operating activities | 22,056 | 11,583 | 31,753 | |||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Purchases of property, plant & equipment | (11,082 | ) | (17,992 | ) | (8,990 | ) | ||||||||
| Proceeds from sale of assets | - | 17 | - | |||||||||||
| Other | (23 | ) | (198 | ) | (46 | ) | ||||||||
| Net cash used in investing activities | (11,105 | ) | (18,173 | ) | (9,036 | ) | ||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Net borrowings (payments) under line of credit | (1,232 | ) | 14,031 | 88,267 | ||||||||||
| Payments on long term debt and other | (105 | ) | (15,101 | ) | (113,719 | ) | ||||||||
| Payments for debt issuance costs | - | 80 | (1,289 | ) | ||||||||||
| Excess tax benefit from stock based compensation | - | - | 15 | |||||||||||
| Purchase of treasury shares | (494 | ) | (2,720 | ) | - | |||||||||
| Net proceeds from sale of equity interests | - | 77 | 2,705 | |||||||||||
| Net cash used in financing activities | (1,831 | ) | (3,633 | ) | (24,021 | ) | ||||||||
| Effect of foreign currency rate fluctuations on cash | (1,062 | ) | (219 | ) | 517 | |||||||||
| Increase (decrease) in cash and cash equivalents | 8,058 | (10,442 | ) | (787 | ) | |||||||||
| Cash and cash equivalents at beginning of period | 10,393 | 20,835 | 14,790 | |||||||||||
| Cash and cash equivalents at end of period | $ | 18,451 | $ | 10,393 | $ | 14,003 | ||||||||
| BUCKEYE TECHNOLOGIES INC. | |||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | |||||||||||||
| (unaudited) | |||||||||||||
| (In thousands) | |||||||||||||
| Three Months Ended | |||||||||||||
| SEGMENT RESULTS | September 30, 2008 | June 30, 2008 | September 30, 2007 | ||||||||||
| Specialty Fibers | |||||||||||||
| Net sales | $ | 164,979 | $ | 160,945 | $ | 135,701 | |||||||
| Operating income (a) | 20,118 | 20,351 | 21,971 | ||||||||||
| Depreciation and amortization (b) | 8,348 | 8,504 | 8,015 | ||||||||||
| Capital expenditures | 10,097 | 14,978 | 7,920 | ||||||||||
| Nonwoven Materials | |||||||||||||
| Net sales | $ | 65,862 | $ | 61,798 | $ | 71,630 | |||||||
| Operating income (a) | 3,593 | 764 | 7,908 | ||||||||||
| Depreciation and amortization (b) | 4,045 | 3,870 | 4,232 | ||||||||||
| Capital expenditures | 778 | 2,113 | 707 | ||||||||||
| Corporate | |||||||||||||
| Net sales | $ | (9,548 | ) | $ | (7,413 | ) | $ | (9,932 | ) | ||||
| Operating loss (a) | (1,052 | ) | (1,391 | ) | (1,355 | ) | |||||||
| Depreciation and amortization (b) | 819 | 883 | 944 | ||||||||||
| Capital expenditures | 207 | 901 | 363 | ||||||||||
| Total | |||||||||||||
| Net sales | $ | 221,293 | $ | 215,330 | $ | 197,399 | |||||||
| Operating income (a) | 22,659 | 19,724 | 28,524 | ||||||||||
| Depreciation and amortization (b) | 13,212 | 13,257 | 13,191 | ||||||||||
| Capital expenditures | 11,082 | 17,992 | 8,990 | ||||||||||
| (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 Ended | |||||||||||||
| ADJUSTED EBITDA | September 30, 2008 | June 30, 2008 | September 30, 2007 | ||||||||||
| Income | $ | 8,850 | $ | 9,316 | $ | 13,497 | |||||||
| Income tax expense | 5,540 | 3,358 | 4,916 | ||||||||||
| Interest expense | 7,233 | 7,331 | 8,972 | ||||||||||
| Amortization of debt costs | 262 | 259 | 302 | ||||||||||
| Early extinguishment of debt | - | 88 | 786 | ||||||||||
| Depreciation, depletion and amortization | 13,212 | 13,260 | 13,191 | ||||||||||
| EBITDA | 35,097 | 33,612 | 41,664 | ||||||||||
| Interest income | - | - | - | ||||||||||
| Asset impairments | - | - | - | ||||||||||
| Non cash charges | 208 | 176 | 117 | ||||||||||
| Gain on sale of assets held for sale | - | - | - | ||||||||||
| Restructuring charges | - | - | - | ||||||||||
| Restatement due to change in accounting | - | - | - | ||||||||||
| Other (gains) losses | |||||||||||||
| Adjusted EBITDA | $ | 35,305 | $ | 33,788 | $ | 41,781 | |||||||
| 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.). | |||||||||||||
| BUCKEYE TECHNOLOGIES INC. | ||||||||
| SUPPLEMENTAL RECONCILIATIONS | ||||||||
| (unaudited) | ||||||||
| (In thousands, except per share data) | ||||||||
| Three Months Ended | ||||||||
| September 30, 2007 reconciled to September 30, 2008 | June 30, 2008 reconciled to September 30, 2008 | |||||||
| NET SALES RECONCILIATION | ||||||||
| Net sales | $ | 197.4 | $ | 215.3 | ||||
| Volume (1) | (3.2 | ) | 0.9 | |||||
| Pricing (2) | 23.9 | 6.1 | ||||||
| Product sales mix and other (3) | 3.2 | (1.0 | ) | |||||
| Net sales | $ | 221.3 | $ | 221.3 | ||||
(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 have on the currency translation of sales denominated in currencies other than the US dollar. | ||||||||
| Three Months Ended | ||||||||
| September 30, 2007 reconciled to September 30, 2008 | June 30, 2008 reconciled to September 30, 2008 | |||||||
| EARNINGS PER SHARE RECONCILIATION (4) | ||||||||
| EARNINGS (LOSS) PER SHARE | 0.34 | 0.24 | ||||||
| Volume (5) | (0.02 | ) | (0.00 | ) | ||||
| Pricing / product mix (6) | 0.45 | 0.11 | ||||||
| Costs (7) | (0.53 | ) | (0.06 | ) | ||||
| Restructuring, impairment, early debt extinguishment costs | 0.01 | 0.00 | ||||||
Corporate / Other (8) | (0.02 | ) | (0.06 | ) | ||||
| EARNINGS PER SHARE | 0.23 | 0.23 | ||||||
(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. | ||||||||
Contacts:
Steve Dean, 901-320-8352
Senior Vice
President
and Chief Financial Officer
or
Investor
Relations:
Daryn Abercrombie, 901-320-8908
www.bkitech.com
