Buckeye's First Quarter FY 2012 Results

MEMPHIS, Tenn.--(BUSINESS WIRE)--

Buckeye Technologies Inc. BKI today announced first quarter adjusted net income* of $29.9 million or $0.74 per share, which excludes net income of $11.2MM or $0.28 per share from cellulosic biofuel credits generated in 2009. Adjusted net income* rose 118% as compared to the prior year period's $13.7 million or $0.34 per share, which excluded net income of $51.3 million or $1.26 per share from cellulosic biofuel credits generated in 2009.

Net sales of $240 million were up 19% versus last year's first quarter sales of $202 million. Sales benefited from higher selling prices and increased cotton linter pulp shipment volume. The $0.40 increase in adjusted EPS*, compared to the prior year period, was driven by these same factors. Aside from significantly higher cotton linter costs, cost inflation for chemicals, transportation and other raw materials was modest with energy prices stable.

Comparing the first quarter of fiscal 2012 to the fourth quarter of fiscal 2011, sales were down $16 million or 6% lower as we rebuilt inventories at our Foley mill back to target levels and nonwovens shipment volume was down. Adjusted Operating Income* was flat at $44.0 million even with the lower sales revenue as selling, research and administrative expenses and direct costs were down relative to the fourth quarter, and higher selling prices were sufficient to offset increases in input costs during the first quarter. Adjusted EPS* of $0.74 was up $0.06 compared to $0.68 in the fourth quarter. Adjusted EPS* benefitted from a foreign exchange gain, lower net interest expense and a lower effective tax rate.

Chairman and Chief Executive Officer John B. Crowe said, “We were pleased with our first quarter fiscal 2012 financial results. As we said on our August earnings call, our record fourth quarter revenue of $256 million was going to be hard to duplicate in the first quarter due to very low beginning specialty wood fibers inventory levels. Our first quarter sales revenue of $240 million is our second best quarter ever, and our gross margin of 23.7% of sales was significantly better compared to last year's 18.0%. The key drivers to year over year improvements continue to be strong markets and selling prices, better capacity utilization at our Memphis specialty cotton fibers plant, and benefits from our cost improvement initiatives. We maintained a balanced approach to the allocation of the cash flow generated during the quarter. Our excellent first quarter cash flow generation allowed us to pay a record bonus to all of our employees (reflecting the record FY 2011 performance), invest $11 million in capital projects, repurchase 356,000 shares ($8.6 million) of Buckeye common stock, increase our dividend to $0.06 per share, and further reduce our debt by $7 million. We expect strong sales, earnings and cash flow trends to continue.”

Buckeye has scheduled a conference call for Wednesday morning, October 26, at 11:00 a.m. ET to discuss first quarter performance. Persons interested in listening by telephone may dial in at (800) 533-7619 within the United States. International callers should dial (785) 830-1923. 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.

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”, “adjusted earnings per share”, “free cash flow” and are equal to net income, pre-tax income, operating income and earnings per share excluding the after-tax effects of alternative fuel mixture credits (AFMC) and cellulosic biofuel credits (CBC), investment tax credits (ITC) on prior period expenditures, asset impairment cost, restructuring cost and early debt extinguishment cost.

		1st Quarter								4th Quarter
($ in Millions)		2012				2011				2011
Operating income
Operating income in accordance with GAAP			44.0				23.6				30.9
Special items:
Restructuring costs			---				0.6				0.1
Asset impairment			---				---				13.0
Adjusted operating income			44.0				24.2				44.0
Net income
Net income in accordance with GAAP			41.1				64.4				14.1
Special items, after-tax:
Restructuring costs			---				0.6				0.1
AFMC / CBC			(11.2	)			(51.3	)			0.6
Asset Impairment			---				---				13.0
Adjusted net income			29.9				13.7				27.8
Earnings per share (EPS)
EPS in accordance with GAAP		$	1.02			$	1.59			$	0.35
Special items, after-tax, per share:
Restructuring costs			---				0.01				---
AFMC / CBC			(0.28	)			(1.26	)			0.01
Asset impairment			---				---				0.32
Adjusted EPS		$	0.74			$	0.34			$	0.68
Free Cash Flow
Net cash provided by operating activities			28.5				82.0				68.0
Net cash used in investing activities			(10.8	)			(12.0	)			(16.5	)
Free Cash Flow			17.7				70.0				51.5

Note Regarding Forward-Looking Statements

This press release also 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 the Company and the demand for its product, 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 the Company's Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
		Three Months Ended
		September 30, 2011				June 30, 2011				September 30, 2010
Net sales		$	240,067			$	255,900			$	202,075
Cost of goods sold			183,215				196,333				165,762
Gross margin			56,852				59,567				36,313
Gross margin as a percentage of sales			23.7	%			23.3	%			18.0	%
Selling, research and administrative expenses			12,339				15,096				11,671
Amortization of intangibles and other			496				513				479
Asset impairment			-				13,007				-
Restructuring costs			-				85				552
Other operating income			-				-				(7	)
Operating income			44,017				30,866				23,618
Net interest expense and amortization of debt costs			(3,311	)			(1,716	)			(3,597	)
Foreign exchange and other			502				(12	)			(614	)
Income before income taxes			41,208				29,138				19,407
Income tax expense (benefit)			101				15,041				(45,018	)
Net income		$	41,107			$	14,097			$	64,425
Computation of diluted earnings per share under the two-class method:
Net income attributable to shareholders		$	41,107			$	14,097			$	64,425
Less: Distributed and undistributed income allocated to participating securities (nonvested stock)			(606	)			(204	)			(1,186	)
Distributed and undistributed income available to shareholders		$	40,501			$	13,893			$	63,239
Diluted weighted average shares outstanding			39,839				40,118				39,716
Diluted earnings per share		$	1.02			$	0.35			$	1.59

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
		September 30				June 30			September 30
		2011				2011			2010
Current assets:
Cash and cash equivalents		$	32,794			$	30,494		$	22,400
Accounts receivable, net			135,322				140,582			126,887
Income tax and AFMC Receivable			-				-			24,513
Inventories			101,588				91,024			85,862
Deferred income taxes and other			11,396				12,216			10,101
Total current assets			281,100				274,316			269,763
Property, plant and equipment, net			514,743				530,468			530,790
Goodwill			2,425				2,425			2,425
Deferred income taxes			44,970				32,741			14,824
Intellectual property and other, net			29,026				29,901			26,569
Total assets		$	872,264			$	869,851		$	844,371
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable		$	37,728			$	41,437		$	33,715
Accrued expenses			60,418				71,722			49,020
Current portion of long-term debt			-				-			17,580
Total current liabilities			98,146				113,159			100,315
Long-term debt			90,351				96,921			147,420
Deferred income taxes			5,438				7,968			6,602
Other liabilities			87,374				72,506			77,644
Stockholders' equity			590,955				579,297			512,390
Total liabilities and stockholders' equity		$	872,264			$	869,851		$	844,371

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
		Three Months Ended
		September 30, 2011				June 30, 2011				September 30, 2010
OPERATING ACTIVITIES
Net income		$	41,107			$	14,097			$	64,425
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of long-lived assets			-				13,007				-
Depreciation			13,026				13,146				11,974
Amortization			651				668				677
Deferred income taxes			(13,632	)			(735	)			(65,435	)
Payable for exchange of alternative fuel mixture credits			15,462				1,516				41,144
Loss on disposal of equipment			283				387				99
Provision for bad debts			555				(124	)			112
Excess tax benefit from stock based compensation			(765	)			(1,666	)			(10	)
Stock-based compensation expense			966				1,224				935
Other			(112	)			(258	)			(132	)
Change in operating assets and liabilities
Accounts receivable			(1,462	)			(1,174	)			(1,376	)
Income tax and AFMC receivable			-				1,460				43,843
Inventories			(12,447	)			7,182				(9,749	)
Other assets			359				31				897
Accounts payable and other liabilities			(15,527	)			19,276				(5,364	)
Net cash provided by operating activities			28,464				68,037				82,040
INVESTING ACTIVITIES
Purchases of property, plant & equipment			(10,713	)			(16,175	)			(11,916	)
Proceeds from sale of assets			-				3				4
Other			(51	)			(290	)			(72	)
Net cash used in investing activities			(10,764	)			(16,462	)			(11,984	)
FINANCING ACTIVITIES
Net borrowings (payments) under line of credit			(6,570	)			(39,649	)			(72,530	)
Excess tax benefit from stock based compensation			765				1,666				10
Purchase of treasury shares			(8,648	)			(9,799	)			-
Net proceeds from sale of equity interests			638				678				41
Payment of dividend			(2,410	)			(2,013	)			(1,617	)
Other			(469	)			(1,185	)			-
Net cash used in financing activities			(16,694	)			(50,302	)			(74,096	)
Effect of foreign currency rate fluctuations on cash			1,294				1,429				4,319
Increase in cash and cash equivalents			2,300				2,702				279
Cash and cash equivalents at beginning of period			30,494				27,792				22,121
Cash and cash equivalents at end of period		$	32,794			$	30,494			$	22,400

BUCKEYE TECHNOLOGIES INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(In thousands)
		Three Months Ended
SEGMENT RESULTS		September 30, 2011				June 30, 2011				September 30, 2010
Specialty Fibers
Net sales		$	183,422			$	193,883			$	142,792
Operating income (a)			43,831				42,570				22,140
Depreciation and amortization (b)			8,359				8,565				7,787
Capital expenditures			8,985				12,726				10,903
Nonwoven Materials
Net sales		$	64,685			$	69,896			$	68,120
Operating income (a)			2,328				5,274				4,603
Depreciation and amortization (b)			4,217				4,084				3,727
Capital expenditures			1,689				3,156				782
Corporate
Net sales		$	(8,040	)		$	(7,879	)		$	(8,837	)
Operating income (loss) (a)			(2,142	)			(16,978	)			(3,125	)
Depreciation and amortization (b)			946				1,011				939
Capital expenditures			39				293				231
Total
Net sales		$	240,067			$	255,900			$	202,075
Operating income (loss) (a)			44,017				30,866				23,618
Depreciation and amortization (b)			13,522				13,660				12,453
Capital expenditures			10,713				16,175				11,916
(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 EBITDA	September 30, 2011			June 30, 2011			September 30, 2010
Net income (loss)	$	41,107		$	14,097		$	64,425
Income tax expense		101			15,041			(45,018	)
Interest expense		3,348			1,635			3,433
Amortization of debt costs		155			155			198
Depreciation, depletion and amortization		13,522			13,659			12,453
EBITDA		58,233			44,587			35,491
Asset impairments		-			13,007			-
Restructuring		-			85			-
Non cash charges		300			424			100
Adjusted EBITDA	$	58,533		$	58,103		$	35,591
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, 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.