Buckeye Technologies Inc. (NYSE:BKI) today announced earnings for the October – December quarter of 7 cents per share (excluding a potential goodwill impairment charge) compared to 35 cents per share in the same period last year and 23 cents per share recorded in the July – September quarter of 2008 due to weakened demand and associated production downtime at several plants resulting from the global economic slowdown. Net sales of $184.7 million for the quarter were down 12.4% compared to the same quarter a year ago and were down 16.6% versus the record July-September quarter.
Due to adverse equity market conditions which have caused a decrease in current market multiples and the price of the company’s stock, which is currently trading well below book value, it has been determined that an indicator of potential goodwill impairment exists for the October-December quarter. Accordingly, the Company has commenced performing an interim goodwill impairment test, and expects by the first week of February to have an indication of whether an impairment charge will be required. In the event that there is a determination that goodwill is impaired, a non-cash charge, which would reduce reported net income and earnings per share for the quarter, would be required. The maximum goodwill balance that would be subject to impairment as of December 31, 2008 is $140 million.
Chairman and Chief Executive Officer John B. Crowe said, “This has been a challenging quarter for Buckeye, as the global economic recession has reduced demand for some of our products. While demand for most of our high-end specialty wood products remains solid, demand for our specialty cotton fibers has weakened significantly. Sales of our airlaid nonwovens products were also down primarily due to customer inventory reductions and normal seasonal weakness in Europe in December. As we previously announced, we took market downtime at our Foley, Memphis and Americana plants during the quarter to match production to shipment demand. In addition to a company-wide focus on reducing costs and maintaining tight control over our working capital, we have reduced our planned capital spending for this fiscal year from $64 million to $40 million in order to accelerate debt reduction efforts. We have established a goal of paying down our debt from the current level of $391 million to $350 million by December 2009 in order to ensure that we have sufficient borrowing capacity on our $200 million revolving credit facility to pay off the $110 million in bonds which mature in October 2010 without going to the credit markets for new financing. Buckeye was well in compliance with all of its debt covenants and had $114 million in available borrowing capacity plus $8.5 million in cash on its balance sheet at the end of December.”
Mr. Crowe went on to say, “Because of our restructuring efforts over the last few years, which included closing high cost capacity, lowering our operating costs, and reducing our debt from $700 million to under $400 million, we believe we are well positioned to deal with this economic downturn. While our visibility into future order trends at the moment is poor, we expect that the January-March quarter will show improved profitability at similar revenue levels as compared to the quarter just completed. While we expect fluff pulp prices to decline, we have instituted price increases in our high-end wood specialty markets effective January 1st and energy and transportation costs are down. Caustic prices will start to come down in February, but our average caustic cost for the quarter is still likely to be higher than it was in the October-December quarter.”
Buckeye has scheduled a conference call for Tuesday morning, January 27th, at 11:00 a.m. ET to discuss second quarter performance. Persons interested in listening by telephone may dial in at (877) 795-3635 within the United States. International callers should dial (719) 325-4773. 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.
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
December 31, 2008 | September 30, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | |||||||||||||||
Net sales | $ | 184,665 | $ | 221,293 | $ | 210,922 | $ | 405,958 | $ | 408,321 | |||||||||
Cost of goods sold | 161,533 | 185,955 | 168,943 | 347,488 | 325,687 | ||||||||||||||
Gross margin | 23,132 | 35,338 | 41,979 | 58,470 | 82,634 | ||||||||||||||
Gross margin as a percentage of sales | 12.5 | % | 16.0 | % | 19.9 | % | 14.4 | % | 20.2 | % | |||||||||
Selling, research and administrative expenses | 11,266 | 12,210 | 11,796 | 23,476 | 23,270 | ||||||||||||||
Amortization of intangibles and other | 471 | 469 | 361 | 940 | 922 | ||||||||||||||
Restructuring costs | - | - | - | - | 96 | ||||||||||||||
Operating income | 11,395 | 22,659 | 29,822 | 34,054 | 58,346 | ||||||||||||||
Net interest expense and amortization of debt costs | (7,469 | ) | (7,438 | ) | (8,524 | ) | (14,907 | ) | (17,681 | ) | |||||||||
Early extinguishment of debt | 401 | - | 251 | 401 | (535 | ) | |||||||||||||
Foreign exchange and other | 213 | (831 | ) | (94 | ) | (618 | ) | (262 | ) | ||||||||||
Income before income taxes | 4,540 | 14,390 | 21,455 | 18,930 | 39,868 | ||||||||||||||
Income tax expense | 1,926 | 5,540 | 7,589 | 7,466 | 12,505 | ||||||||||||||
Net income | $ | 2,614 | $ | 8,850 | $ | 13,866 | $ | 11,464 | $ | 27,363 | |||||||||
Earnings per share | $ | 0.07 | $ | 0.23 | $ | 0.36 | $ | 0.30 | $ | 0.70 | |||||||||
Diluted earnings per share | $ | 0.07 | $ | 0.23 | $ | 0.35 | $ | 0.30 | $ | 0.70 | |||||||||
Weighted average shares for basic earnings per share | |||||||||||||||||||
38,669 | 38,704 | 38,953 | 38,687 | 38,848 | |||||||||||||||
Weighted average shares for diluted earnings per share | |||||||||||||||||||
38,829 | 38,883 | 39,448 | 38,856 | 39,354 |
BUCKEYE TECHNOLOGIES INC. | ||||||||
CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands) | ||||||||
December 31 | September 30 | June 30 | ||||||
2008 | 2008 | 2008 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,491 | $ | 18,451 | $ | 10,393 | ||
Accounts receivable, net | 108,111 | 128,549 | 127,521 | |||||
Inventories | 115,548 | 109,211 | 110,254 | |||||
Deferred income taxes and other | 11,186 | 11,355 | 11,530 | |||||
Total current assets | 243,336 | 267,566 | 259,698 | |||||
Property, plant and equipment, net | 522,785 | 537,556 | 555,708 | |||||
Goodwill | 140,433 | 156,800 | 163,622 | |||||
Intellectual property and other, net | 26,088 | 28,036 | 30,197 | |||||
Total assets | $ | 932,642 | $ | 989,958 | $ | 1,009,225 | ||
Liabilities and stockholders' equity | ||||||||
Current liabilities: | ||||||||
Trade accounts payable | $ | 33,678 | $ | 41,618 | $ | 49,157 | ||
Accrued expenses | 42,892 | 59,248 | 50,451 | |||||
Current portion of capital lease obligations | - | 253 | 358 | |||||
Short-term debt | - | 285 | 207 | |||||
Total current liabilities | 76,570 | 101,404 | 100,173 | |||||
Long-term debt | 391,311 | 392,439 | 393,910 | |||||
Deferred income taxes | 58,941 | 57,754 | 57,963 | |||||
Other liabilities | 25,430 | 25,423 | 27,622 | |||||
Stockholders' equity | 380,390 | 412,938 | 429,557 | |||||
Total liabilities and stockholders' equity | $ | 932,642 | $ | 989,958 | $ | 1,009,225 |
BUCKEYE TECHNOLOGIES INC. | ||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||
December 31, 2008 | September 30, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | ||||||||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||||||||
Net income | $ | 2,614 | $ | 8,850 | $ | 13,866 | $ | 11,464 | $ | 27,363 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||||||||
Depreciation | 12,026 | 12,743 | 12,780 | 24,769 | 25,409 | |||||||||||||||||
Amortization | 613 | 639 | 624 | 1,252 | 1,126 | |||||||||||||||||
Loss on early extinguishment of debt | (401 | ) | - | (251 | ) | (401 | ) | 535 | ||||||||||||||
Deferred income taxes | 2,476 | 1,345 | 5,834 | 3,821 | 10,458 | |||||||||||||||||
Loss on disposal of equipment | 507 | 167 | 448 | 674 | 564 | |||||||||||||||||
Provision for bad debts | 17 | (27 | ) | (1 | ) | (10 | ) | (10 | ) | |||||||||||||
Excess tax benefit from stock based compensation | - | - | (29 | ) | - | (44 | ) | |||||||||||||||
Other | (327 | ) | 391 | 364 | 64 | 548 | ||||||||||||||||
Change in operating assets and liabilities | ||||||||||||||||||||||
Accounts receivable | 16,705 | (5,125 | ) | 951 | 11,580 | (775 | ) | |||||||||||||||
Inventories | (8,540 | ) | (841 | ) | 2,166 | (9,381 | ) | (3,405 | ) | |||||||||||||
Other assets | 181 | 142 | 555 | 323 | 336 | |||||||||||||||||
Accounts payable and other liabilities | (19,387 | ) | 3,772 | (14,925 | ) | (15,615 | ) | (7,970 | ) | |||||||||||||
Net cash provided by operating activities | 6,484 | 22,056 | 22,382 | 28,540 | 54,135 | |||||||||||||||||
INVESTING ACTIVITIES | ||||||||||||||||||||||
Purchases of property, plant & equipment | (13,929 | ) | (11,082 | ) | (9,702 | ) | (25,011 | ) | (18,692 | ) | ||||||||||||
Other | (50 | ) | (23 | ) | (89 | ) | (73 | ) | (135 | ) | ||||||||||||
Net cash used in investing activities | (13,979 | ) | (11,105 | ) | (9,791 | ) | (25,084 | ) | (18,827 | ) | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||||||||
Net borrowings (payments) under line of credit | 3,773 | (1,232 | ) | (6,267 | ) | 2,541 | 82,000 | |||||||||||||||
Payments on long term debt and other | (5,253 | ) | (105 | ) | (98 | ) | (5,358 | ) | (113,817 | ) | ||||||||||||
Payments for debt issuance costs | - | - | (112 | ) | - | (1,401 | ) | |||||||||||||||
Excess tax benefit from stock based compensation | - | - | 29 | - | 44 | |||||||||||||||||
Purchase of treasury shares | - | (494 | ) | - | (494 | ) | - | |||||||||||||||
Net proceeds from sale of equity interests | - | - | 3,037 | - | 5,742 | |||||||||||||||||
Net cash used in financing activities | (1,480 | ) | (1,831 | ) | (3,411 | ) | (3,311 | ) | (27,432 | ) | ||||||||||||
Effect of foreign currency rate fluctuations on cash | (985 | ) | (1,062 | ) | 383 | (2,047 | ) | 900 | ||||||||||||||
Increase (decrease) in cash and cash equivalents | (9,960 | ) | 8,058 | 9,563 | (1,902 | ) | 8,776 | |||||||||||||||
Cash and cash equivalents at beginning of period | 18,451 | 10,393 | 14,790 | 10,393 | 14,790 | |||||||||||||||||
Cash and cash equivalents at end of period | $ | 8,491 | $ | 18,451 | $ | 24,353 | $ | 8,491 | $ | 23,566 |
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||||||||
SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
(In thousands) | |||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||
SEGMENT RESULTS | December 31, 2008 | September 30, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | ||||||||||||||||
Specialty Fibers | |||||||||||||||||||||
Net sales | $ | 137,739 | $ | 164,979 | $ | 148,208 | $ | 302,718 | $ | 283,909 | |||||||||||
Operating income (a) | 11,577 | 20,118 | 25,889 | 31,695 | 47,955 | ||||||||||||||||
Depreciation and amortization (b) | 8,060 | 8,348 | 8,157 | 16,408 | 16,172 | ||||||||||||||||
Capital expenditures | 11,855 | 10,097 | 8,468 | 21,952 | 16,388 | ||||||||||||||||
Nonwoven Materials | |||||||||||||||||||||
Net sales | $ | 56,841 | $ | 65,862 | $ | 71,966 | $ | 122,703 | $ | 143,596 | |||||||||||
Operating income (a) | 1,586 | 3,593 | 5,273 | 5,179 | 13,227 | ||||||||||||||||
Depreciation and amortization (b) | 3,497 | 4,045 | 4,241 | 7,542 | 8,473 | ||||||||||||||||
Capital expenditures | 1,558 | 778 | 737 | 2,336 | 1,444 | ||||||||||||||||
Corporate | |||||||||||||||||||||
Net sales | $ | (9,915 | ) | $ | (9,549 | ) | $ | (9,252 | ) | $ | (19,463 | ) | $ | (19,184 | ) | ||||||
Operating loss (a) | (1,768 | ) | (1,052 | ) | (1,340 | ) | (2,820 | ) | (2,836 | ) | |||||||||||
Depreciation and amortization (b) | 940 | 819 | 744 | 1,759 | 1,688 | ||||||||||||||||
Capital expenditures | 516 | 207 | 497 | 723 | 860 | ||||||||||||||||
Total | |||||||||||||||||||||
Net sales | $ | 184,665 | $ | 221,292 | $ | 210,922 | $ | 405,958 | $ | 408,321 | |||||||||||
Operating income (a) | 11,395 | 22,659 | 29,822 | 34,054 | 58,346 | ||||||||||||||||
Depreciation and amortization (b) | 12,497 | 13,212 | 13,142 | 25,709 | 26,333 | ||||||||||||||||
Capital expenditures | 13,929 | 11,082 | 9,702 | 25,011 | 18,692 | ||||||||||||||||
(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 | Six Months Ended | ||||||||||||||||||||
ADJUSTED EBITDA | December 31, 2008 | September 30, 2008 | December 31, 2007 | December 31, 2008 | December 31, 2007 | ||||||||||||||||
Income | $ | 2,614 | $ | 8,850 | $ | 13,866 | $ | 11,464 | $ | 27,363 | |||||||||||
Income tax expense | 1,926 | 5,540 | 7,589 | 7,466 | 12,505 | ||||||||||||||||
Interest expense | 7,271 | 7,233 | 8,435 | 14,504 | 17,407 | ||||||||||||||||
Amortization of debt costs | 261 | 262 | 268 | 523 | 570 | ||||||||||||||||
Early extinguishment of debt | (401 | ) | - | (251 | ) | (401 | ) | 535 | |||||||||||||
Depreciation, depletion and amortization | 12,497 | 13,212 | 13,140 | 25,709 | 26,331 | ||||||||||||||||
EBITDA | 24,168 | 35,097 | 43,047 | 59,265 | 84,711 | ||||||||||||||||
Asset impairments | - | - | - | - | - | ||||||||||||||||
Non cash charges | 522 | 208 | 447 | 730 | 564 | ||||||||||||||||
Other (gains) losses | - | - | - | - | - | ||||||||||||||||
Adjusted EBITDA | $ | 24,690 | $ | 35,305 | $ | 43,494 | $ | 59,995 | $ | 85,275 | |||||||||||
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.). |
BUCKEYE TECHNOLOGIES INC. | |||||||||||||||
SUPPLEMENTAL RECONCILIATIONS | |||||||||||||||
(unaudited) | |||||||||||||||
(In thousands, except per share data) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
December 31, 2007 reconciled to December 31, 2008 | September 30, 2008 reconciled to December 31, 2008 | September 30, 2008 reconciled to December 31, 2008 | |||||||||||||
NET SALES RECONCILIATION | |||||||||||||||
Net sales | $ | 210.9 | $ | 221.3 | $ | 408.3 | |||||||||
Sales volume (1) | (41.6 | ) | (35.3 | ) | (43.5 | ) | |||||||||
Pricing (2) | 17.9 | 2.6 | 40.4 | ||||||||||||
Product sales mix and other (3) | (2.5 | ) | (3.9 | ) | 0.8 | ||||||||||
Net sales | $ | 184.7 | $ | 184.7 | $ | 406.0 | |||||||||
(1) Sales volume relates to the change in sales 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 | Six Months Ended | ||||||||||||||
December 31, 2007 reconciled to December 31, 2008 | September 30, 2008 reconciled to December 31, 2008 | December 31, 2008 reconciled to December 31, 2008 | |||||||||||||
EARNINGS PER SHARE RECONCILIATION (4) | |||||||||||||||
EARNINGS (LOSS) PER SHARE | 0.35 | 0.23 | 0.70 | ||||||||||||
Sales volume (5) | (0.12 | ) | (0.07 | ) | (0.15 | ) | |||||||||
Pricing / product mix (6) | 0.28 | 0.02 | 0.73 | ||||||||||||
Costs (7) | (0.48 | ) | (0.14 | ) | (0.99 | ) | |||||||||
Restructuring, impairment, early debt extinguishment costs | - | 0.01 | 0.01 | ||||||||||||
Corporate / Other (8) | 0.04 | 0.02 | - | ||||||||||||
EARNINGS PER SHARE | 0.07 | 0.07 | 0.30 | ||||||||||||
(4) All calculations are net of taxes | |||||||||||||||
(5) Sales volume - Changes in sales 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