Buckeye Announces First Quarter FY 2010 Results
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Net Income of $39.2 million or $1.00 per share including $35.1 million or $0.89 per share from Alternative Fuel Mixture Credits;
Sales off 20% versus Year-Ago Quarter; Up Slightly from Fourth Quarter;
Debt Reduced by a further $32.5 million to $295MM Retired all $110MM of 2010 Notes in July;
Received $7.4 million grant from State of Florida; Restarted Energy Project
MEMPHIS, Tenn.--(BUSINESS WIRE)-- Buckeye Technologies Inc. (NYSE: BKI) today announced first quarter net income of $39.2 million or $1.00 per share. First quarter earnings included net income of $35.1 million, or $0.89 per share, from alternative fuel mixture credits earned during the quarter. Net sales were $177 million for the first quarter of fiscal 2010 compared to a record $221 million in the first quarter of fiscal 2009.
Excluding income from alternative fuel mixture credits (AFMC), adjusted net income was $4.1 million, or $0.11 per share versus first quarter fiscal 2008 net income of $8.9 million, or $0.23 per share. This $0.12 per share decrease in earnings, compared to last year, was driven by reduced operating income (-$0.17 per share after tax) due primarily to the economic downturn which has resulted in reduced shipment volumes and in a less favorable grade mix. While overall selling prices were lower, this was offset by lower input prices for raw materials, chemicals, energy and transportation costs. The impact of reduced operating income was partially offset by lower interest expense (+$0.03) and reduced foreign exchange loss (+0.01).
Adjusted earnings of $0.11 per share, excluding the impact of the AFMC, were $0.07 lower than the $0.18 earned in the fourth quarter. A higher effective tax rate accounted for $0.06 of this reduction in earnings. The drop in adjusted operating income, including a $0.01 cost relating to staffing reductions implemented during the quarter at our Memphis cotton specialty fibers plant, was mostly offset by lower interest expenses. Compared to the fourth quarter, sales were up slightly as shipment volumes were up about 4% but this was offset by lower pricing and a less favorable grade mix. Alternative fuel mixture credits earned during the quarter, at $35.8 million net of expenses, was down by $18.4 million compared to the fourth quarter because we recognized income for the first four and a half months of earned credits during that quarter.
Total debt declined by a further $32.5 million to $295.0 million during the quarter, of which $8 million was due to cash generated by the alternative fuel mixture credit, and $26 million was due to strong cash flow from operations, including a $6 million reduction in inventory. We expect to use a portion of the AFMC in fiscal year 2010 to offset U.S. federal estimated income tax payments and to receive the balance in fiscal year 2011 as a cash refund after filing our 2010 tax return. The receipt of $7.4 million in grant money from the State of Florida in support of our Foley Energy Project reduced the net cash used in investing activities to only $1.4 million for the quarter. As of September 30, we had $23 million of cash and $100 million in borrowing capacity on our credit facility.
Chairman and Chief Executive Officer John B. Crowe said, "While our sales and earnings, excluding alternative fuel mixture credits, continue to be down significantly compared to the year ago quarter, we are encouraged that our shipment volume has increased sequentially in each of the past two quarters. In the just completed quarter, shipment volumes were up for both wood and cotton specialty fibers and for nonwovens. Capacity utilization at our cotton cellulose plants in Memphis and Americana improved over the preceding quarter, but was still below 50% at both facilities. We further reduced staffing at our Memphis plant during the quarter to better align staffing levels with current market conditions. Increased demand for our high-end wood specialty fibers is expected to yield an improved mix in the current quarter."
"The Buckeye organization remains focused on reducing cost and maintaining tight control on working capital. We made significant progress during the quarter toward our recently updated fiscal year-end debt goal of $275 million, reducing our debt to $295 million during the past quarter. A key milestone for us was the redemption of all $110MM of our 2010 notes at the end of July, which moves our nearest term debt maturity out to July 2012 and will result in significant interest expense savings starting in the quarter just completed."
Mr. Crowe went on to say, "Buckeye made progress on several other fronts during the past quarter. We have restarted the energy independence project at our Foley mill, with the help of a $7.4 MM grant from the State of Florida, which will help us complete the project. Through September, we have spent $20MM on this $45MM project. We are also finalizing an agreement with the University of Florida for a pilot biorefinery facility at our Foley facility. We continue to look for opportunities in energy and other areas to grow our revenues. While debt reduction continues to be our highest priority, we are now in a better position to allocate capital to high return opportunities like the energy independence project."
Buckeye has scheduled a conference call for November 4, 2009 at 11:00 a.m. ET to discuss first quarter fiscal year 2010 results. Those interested in listening by telephone may dial in at (888) 634-7543 within the United States. International callers should dial (719) 457-2656. 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.
*This release includes certain financial information not derived in accordance with generally accepted accounting principles ("GAAP"). The non-GAAP measures used are "adjusted operating income," "adjusted net income," and "adjusted earnings per share" and are equal to net income, operating income and earnings per share excluding income from alternative fuel mixture credits and goodwill impairment. The Company believes that the presentation of these non-GAAP measures provides information that is useful to investors as it allows for a more meaningful comparison of these financial measures to prior periods, but this information should not be considered a substitute for any measures derived in accordance with GAAP. The Company manages its business units by financial measures which exclude these two items. Operating income and earnings per share targets for our all-employee bonus and at-risk compensation also exclude the benefit of alternative fuel mixture credits and the goodwill impairment charge.
($ in Millions) Jul-Sep Apr-Jun Jul-Sep
2009 2009 2008
Operating income
Operating income in accordance with GAAP 48.0 68.5 22.7
Alternative fuel mixture credits (35.8 ) (54.2 ) --
Adjusted operating income 12.2 14.3 22.7
Net income
Net income in accordance with GAAP 39.2 46.5 8.9
Alternative fuel mixture credits (35.1 ) (39.6 ) --
Adjusted net income 4.1 6.8 8.9
Diluted earnings per share (EPS)
EPS in accordance with GAAP $ 1.00 $ 1.20 $ 0.23
Alternative fuel mixture credits ($0.89 ) ($1.02 ) --
Adjusted EPS $ 0.11 $ 0.18 $ 0.23
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
Three Months Ended
September 30, 2009 June 30, 2009 September 30, 2008
Net sales $ 177,274 $ 176,936 $ 221,293
Cost of goods sold 153,131 149,941 185,955
Gross margin 24,143 26,995 35,338
Gross margin as a 13.6 % 15.3 % 16.0 %
percentage of sales
Selling, research and 11,549 12,241 12,210
administrative expenses
Amortization of 473 475 469
intangibles and other
Alternative fuel mixture (35,842 ) (54,232 ) -
credits
Operating income 47,963 68,511 22,659
Net interest expense and
amortization of debt (5,289 ) (6,941 ) (7,438 )
costs
Early extinguishment of 165 - -
debt
Foreign exchange and (100 ) 100 (831 )
other
Income before income 42,739 61,670 14,390
taxes
Income tax expense 3,507 15,210 5,540
Net income $ 39,232 $ 46,460 $ 8,850
Earnings per share $ 1.01 $ 1.20 $ 0.23
Diluted earnings per $ 1.00 $ 1.20 $ 0.23
share
Weighted average shares
for basic earnings per 38,726 38,707 38,704
share
Weighted average shares
for diluted earnings per 39,136 38,815 38,883
share
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 30 June 30 September 30
2009 2009 2008
Current assets:
Cash and cash equivalents $ 23,255 $ 22,061 $ 18,451
Accounts receivable, net 113,395 111,292 128,549
Income tax and alternative fuel mixture 32,114 9,374 -
credits receivable
Inventories 82,861 87,637 109,211
Deferred income taxes and other 7,382 6,507 11,355
Total current assets 259,007 236,871 267,566
Property, plant and equipment, net 532,851 526,589 537,556
Goodwill 2,425 2,425 156,800
Intellectual property and other, net 26,141 26,499 28,036
Total assets $ 820,424 $ 792,384 $ 989,958
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 28,943 $ 30,882 $ 41,618
Accrued expenses 42,922 40,804 59,248
Current portion of capital lease - - 253
obligations
Short-term debt - - 285
Total current liabilities 71,865 71,686 101,404
Long-term debt 295,000 327,465 392,439
Deferred income taxes 48,961 48,399 57,754
Other liabilities 34,722 26,803 25,423
Stockholders' equity 369,876 318,031 412,938
Total liabilities and stockholders' $ 820,424 $ 792,384 $ 989,958
equity
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
Three Months Ended
September 30, 2009 June 30, 2009 September 30, 2008
OPERATING ACTIVITIES
Net income $ 39,232 $ 46,460 $ 8,850
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 11,294 11,454 12,743
Amortization 748 655 639
Loss on early (165 ) - -
extinguishment of debt
Deferred income taxes 201 3,755 1,345
Loss on disposal of 31 406 167
equipment
Provision for bad debts (159 ) 224 (27 )
Other (414 ) 766 391
Change in operating -
assets and liabilities
Accounts receivable (201 ) 4,121 (5,125 )
Income tax and
alternative fuel (22,740 ) (9,374 ) -
mixture credits
receivable
Inventories 5,769 15,367 (841 )
Other assets (1,400 ) (2,507 ) 142
Accounts payable and 1,905 129 3,772
other liabilities
Net cash provided by 34,101 71,456 22,056
operating activities
INVESTING ACTIVITIES
Purchases of property, (8,762 ) (8,418 ) (11,082 )
plant & equipment
Proceeds from State of 7,381 - -
Florida grant
Other (16 ) (169 ) (23 )
Net cash used in (1,397 ) (8,587 ) (11,105 )
investing activities
FINANCING ACTIVITIES
Net borrowings
(payments) under line of 77,529 (61,016 ) (1,232 )
credit
Payments on long term (110,000 ) - (105 )
debt and other
Purchase of treasury - - (494 )
shares
Net proceeds from sale 122 - -
of equity interests
Net cash used in (32,349 ) (61,016 ) (1,831 )
financing activities
Effect of foreign
currency rate 839 1,329 (1,062 )
fluctuations on cash
Increase (decrease) in 1,194 3,182 8,058
cash and cash equivalents
Cash and cash equivalents 22,061 18,879 10,393
at beginning of period
Cash and cash equivalents $ 23,255 $ 22,061 $ 18,451
at end of period
BUCKEYE TECHNOLOGIES INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(In thousands)
Three Months Ended
SEGMENT September 30, 2009 June 30, 2009 September 30, 2008
RESULTS
Specialty
Fibers
Net sales $ 122,159 $ 125,059 $ 164,979
Operating 8,537 11,420 20,118
income (a)
Depreciation and 7,040 7,171 8,348
amortization (b)
Capital 7,436 7,651 10,097
expenditures
Nonwoven
Materials
Net sales $ 62,728 $ 59,765 $ 65,862
Operating 5,144 4,325 3,593
income (a)
Depreciation and 3,807 3,785 4,045
amortization (b)
Capital 728 512 778
expenditures
Corporate
Net sales $ (7,613 ) $ (7,888 ) $ (9,548 )
Operating
income (loss) 34,282 52,766 (1,052 )
(a)
Depreciation and 921 973 819
amortization (b)
Capital 598 255 207
expenditures
Total
Net sales $ 177,274 $ 176,936 $ 221,293
Operating
income (loss) 47,963 68,511 22,659
(a)
Depreciation and 11,768 11,929 13,212
amortization (b)
Capital 8,762 8,418 11,082
expenditures
(a) The corporate segment includes operating elements such as segment
eliminations, amortization of intangibles, impairment of long-lived assets,
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
ADJUSTED September 30, 2009 June 30, 2009 September 30, 2008
EBITDA
Net income $ 39,232 $ 46,460 $ 8,850
(loss)
Income tax 3,507 15,210 5,540
expense
Interest 5,067 6,764 7,233
expense
Amortization 269 262 262
of debt costs
Early
extinguishment (165 ) - -
of debt
Depreciation, depletion 11,767 11,929 13,212
and amortization
EBITDA 59,677 80,625 35,097
Non cash 90 462 208
charges
Adjusted $ 59,767 $ 81,087 $ 35,305
EBITDA
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.).
Source: Buckeye Technologies Inc.
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