BUCKEYE TECHNOLOGIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - January 24, 2012

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Exhibit 99.1

Buckeye’s Second Quarter FY 2012 Results

2Q Net sales up 8% versus Year-Ago Quarter

Gross Margin of 24.0% up from 21.2% in Year Ago Quarter

Adjusted 2Q EPS of $0.69 compared to $0.50 in 2Q-FY11

Announced Closure of Cotton Linter Pulp Production Line in Americana, Brazil

Announced Sale of Non-Core King, N.C. Converting Business

MEMPHIS, Tenn.--(BUSINESS WIRE)--January 24, 2012--Buckeye Technologies Inc. (NYSE:BKI) today announced second quarter adjusted net income* of $27.9 million or $0.69 per share, which excludes after-tax non-cash asset impairment charges of $29.7 million, or $0.74 per share, related to the announced closure of the cotton linter pulp production line in Brazil and sale of our converting business in North Carolina, and income tax expense of $3.6 million or $0.09 per share related to cellulosic biofuel credits. Adjusted net income* rose 37% as compared to the prior year period’s $20.3 million, or $0.50 per share, which excluded after tax costs of $3.2 million, or $0.08 per share, from early extinguishment of debt, restructuring and accrued interest related to cellulosic biofuel credits.

Net sales of $227 million were up 8% versus last year’s second quarter sales of $210 million. Sales benefited from higher selling prices and increased specialty wood fibers shipment volume. The $0.19 increase in adjusted EPS*, compared to the prior year period, was driven by these same factors. The prior year quarter also benefited by $0.05 per share from the final insurance settlement related to June 2010 power outage at our Florida specialty wood pulp facility. Aside from higher cotton linter costs, which were up about 30% in North America over the year ago quarter, cost inflation for chemicals, transportation and other raw materials was modest with energy prices stable.

Comparing the second quarter to the first quarter of fiscal 2012, sales were down $13 million or 5%. Nonwovens shipment volume was down 10% due to seasonal weakness in Europe and lower North American volume. Specialty cotton shipment volume was also down 11% due to the winding down of operations at Americana and supply chain inventory adjustments in the LED TV end-markets. For specialty wood, shipment volume was up 2% but this was offset by the impact of lower fluff pulp prices. Adjusted Operating Income* was off $1.4 million due to lower shipment volume and reduced fluff pulp prices, although gross margin improved from 23.7% to 24.0% and selling, research and administrative expenses were down $1.0 million compared to the first quarter. Adjusted EPS* of $0.69 was down $0.05 compared to $0.74 in the first quarter due to lower operating income ($0.02), a higher tax rate ($0.02) and foreign exchange gain/loss ($0.01).

Chairman and Chief Executive Officer John B. Crowe said, “We were pleased with our second quarter fiscal 2012 financial results, which exceeded the expectations we shared during our last earnings call in October. The key drivers of 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 continue to focus on generating free cash flow and returns on investment above our cost of capital which we did again in the quarter. One aspect of this focus is our restructuring efforts. In January, we announced the closure of our cotton linter pulp production line in Brazil and continued discussions with multiple parties for the potential sale of this facility. Also in January, we announced the sale of our non-core Merfin Systems converting business in North Carolina. These moves will allow us to redirect cash and management focus from under-performing or non-core businesses into strategic investment and growth opportunities. Key examples of that are our Foley energy project, which we expect to complete in the third quarter of fiscal year 2012, and the Foley specialty wood pulp expansion project, which is on track for completion at the end of calendar year 2012. Overall our business has good momentum.”

Buckeye has scheduled a conference call for Wednesday morning, January 25, at 11:00 a.m. ET to discuss second quarter performance. Persons interested in listening by telephone may dial in at (888) 287-5563 within the United States. International callers should dial (719) 325-2436. 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 and Canada. Its products are sold worldwide to makers of consumer and industrial goods.

Note Regarding Forward-Looking Statements

This press release 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 Buckeye and the demand for its products, the results and timing of Buckeye’s strategic investments and growth opportunities 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 Buckeye’s Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.

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), goodwill and long-term asset impairment cost, restructuring cost and early debt extinguishment cost.

 
   

2nd Quarter

 

1st Quarter

($ in Millions)

2012

 

2011

2012

Operating income

Operating income in accordance with GAAP

(10.5

)

31.6

44.0

Special items:

Restructuring costs

---

0.6

---

Asset and Goodwill impairment

 

53.1

     

---

     

---

 

Adjusted operating income

42.6

32.2

44.0

 

Net income

Net income in accordance with GAAP

(5.4

)

17.1

41.1

Special items, after-tax:

Restructuring costs

---

0.5

---

AFMC / CBC

3.6

0.4

(11.2

)

Early Extinguishment of Debt

2.3

Asset and Goodwill Impairment

 

29.7

     

---

     

---

 

Adjusted net income

27.9

20.3

29.9

 

Earnings per share (EPS)

EPS in accordance with GAAP

($0.14

)

$

0.42

$

1.02

Special items, after-tax, per share:

Restructuring costs

---

0.01

---

AFMC / CBC

0.09

0.01

(0.28

)

Early Extinguishment of Debt

 

0.06

Asset and Goodwill Impairment

 

0.74

     

---

     

---

 

Adjusted EPS

$

0.69

$

0.50

$

0.74

 

Free Cash Flow

Net cash provided by operating activities

24.9

23.9

28.5

Net cash used in investing activities

 

(13.7

)

   

(19.5

)

   

(10.8

)

Free Cash Flow

11.2

4.4

17.7

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
           
 
Three Months Ended Six Months Ended
December 31, 2011 September 30, 2011 December 31, 2010 December 31, 2011 December 31, 2010
 
Net sales $ 227,097 $ 240,067 $ 209,516 $ 467,164 $ 411,591
Cost of goods sold   172,662     183,215     165,090     355,877     330,852  
Gross margin 54,435 56,852 44,426 111,287 80,739
Gross margin as a percentage of sales 24.0 % 23.7 % 21.2 % 23.8 % 19.6 %
 
Selling, research and administrative expenses 11,348 12,339 11,836 23,687 23,507
Amortization of intangibles and other 500 496 486 996 965
Asset impairment loss 50,711 - - 50,711 -
Goodwill impairment loss 2,425 - - 2,425 -
Restructuring costs - - 570 - 1,122
Other operating income   -     -     (39 )   -     (46 )
 
Operating income (loss) (10,549 ) 44,017 31,573 33,468 55,191
 
Net interest expense and amortization of debt costs (898 ) (3,311 ) (1,717 ) (4,209 ) (5,314 )
Early extinguishment of debt - - (3,649 ) - (3,649 )
Foreign exchange and other   (19 )   502     (199 )   483     (813 )
Income (loss) before income taxes (11,466 ) 41,208 26,008 29,742 45,415
Income tax expense (benefit)   (6,027 )   101     8,955     (5,926 )   (36,063 )
Net income (loss) $ (5,439 ) $ 41,107   $ 17,053   $ 35,668   $ 81,478  
 
 
Computation of diluted earnings per share under the two-class method:
 
Net income attributable to shareholders $ (5,439 ) $ 41,107 $ 17,053 $ 35,668 $ 81,478

Less: Distributed and undistributed income allocated to participating securities (nonvested stock)

  77     (606 )   (312 )   (520 )   (1,495 )

Distributed and undistributed income available to shareholders

$ (5,362 ) $ 40,501   $ 16,741   $ 35,148   $ 79,983  
 
Diluted weighted average shares outstanding 39,719 39,839 39,984 39,779 39,850
 
Diluted earnings per share $ (0.14 ) $ 1.02   $ 0.42   $ 0.88   $ 2.01  
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
       
 
December 31 September 30 June 30
2011 2011 2011
Current assets:
Cash and cash equivalents $ 35,998 $ 32,794 $ 30,494
Accounts receivable, net 136,571 135,322 140,582
Inventories 106,756 101,588 91,024
Deferred income taxes and other   14,328   11,396   12,216
Total current assets 293,653 281,100 274,316
 
Property, plant and equipment, net 476,020 514,743 530,468
Goodwill - 2,425 2,425
Deferred income taxes 48,670 44,970 32,741
Intellectual property and other, net   14,138   29,026   29,901
Total assets $ 832,481 $ 872,264 $ 869,851
 
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 32,846 $ 37,728 $ 41,437
Accrued expenses 40,323 60,418 71,722
Other current liabilities   863   -   -
Total current liabilities 74,032 98,146 113,159
 
Long-term debt 86,840 90,351 96,921
Deferred income taxes 5,531 5,438 7,968
Other liabilities 85,486 87,374 72,506
Stockholders' equity   580,592   590,955   579,297
Total liabilities and stockholders' equity $ 832,481 $ 872,264 $ 869,851
BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
               
Three Months Ended Six Months Ended
December 31, 2011   September 30, 2011   December 31, 2010 December 31, 2011   December 31, 2010
OPERATING ACTIVITIES
Net income (loss) $ (5,439 ) $ 41,107 $ 17,053 $ 35,668 $ 81,478

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

Asset impairment loss 50,711 - - 50,711 -
Depreciation 12,791 13,026 12,132 25,817 24,106
Amortization 655 651 641 1,306 1,318
Loss on early extinguishment of debt - - 3,649 - 3,649
Loss on goodwill impairment 2,425 - - 2,425 -
Deferred income taxes (2,509 ) (13,632 ) (420 ) (16,141 ) (65,855 )
Noncurrent AFMC refund payable (1,567 ) 15,462 - 13,895 41,144
Loss on disposal of equipment 483 283 712 766 811
Insurance proceeds applied to capital investments - - (161 ) - (161 )
Provision for bad debts 49 555 (24 ) 604 88
Excess tax benefit from stock based compensation (788 ) (765 ) (435 ) (1,553 ) (445 )
Stock-based compensation expense 1,245 966 1,200 2,211 2,135
Other (244 ) (112 ) 88 (356 ) (44 )
Change in operating assets and liabilities
Accounts receivable 1,999 (1,462 ) 7,838 537 6,462
Income tax and AFMC receivable - - 7,924 - 51,767
Inventories (6,346 ) (12,447 ) (7,065 ) (18,793 ) (16,814 )
Other assets (3,247 ) 359 932 (2,888 ) 1,829
Accounts payable and other liabilities   (25,288 )   (15,527 )   (20,201 )   (40,815 )   (25,565 )
Net cash provided by operating activities 24,930 28,464 23,863 53,394 105,903
 
INVESTING ACTIVITIES
Purchases of property, plant & equipment (13,586 ) (10,713 ) (19,520 ) (24,299 ) (31,436 )

Proceeds from insurance settlement related to capital investments

- - 161 - 161
Other   (75 )   (51 )   (139 )   (126 )   (207 )
Net cash used in investing activities (13,661 ) (10,764 ) (19,498 ) (24,425 ) (31,482 )
 
FINANCING ACTIVITIES
Net borrowings (payments) under line of credit (3,511 ) (6,570 ) 139,026 (10,081 ) 66,496
Payments on long term debt - - (140,000 ) - (140,000 )
Payments for debt issuance costs - - (2,586 ) - (2,586 )
Payments related to early extinguishment of debt - - (1,984 ) - (1,984 )
Excess tax benefit from stock based compensation 788 765 435 1,553 445
Purchase of treasury shares (1,941 ) (8,648 ) - (10,589 ) -
Net proceeds from sale of equity interests 1,002 638 2,338 1,640 2,379
Payment of dividend (2,374 ) (2,410 ) (1,605 ) (4,784 ) (3,222 )
Other   -     (469 )   -     (469 )   -  
Net cash used in financing activities (6,036 ) (16,694 ) (4,376 ) (22,730 ) (78,472 )
 
Effect of foreign currency rate fluctuations on cash (2,029 ) 1,294 2,763 (735 ) 7,082
 
Increase in cash and cash equivalents   3,204     2,300     2,752     5,504     3,031  
Cash and cash equivalents at beginning of period   32,794     30,494     22,400     30,494     22,121  
Cash and cash equivalents at end of period $ 35,998   $ 32,794   $ 25,152   $ 35,998   $ 25,152  
BUCKEYE TECHNOLOGIES INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(In thousands)
             
Three Months Ended Six Months Ended
SEGMENT RESULTS December 31, 2011   September 30, 2011   December 31, 2010 December 31, 2011   December 31, 2010
Specialty Fibers
Net sales $ 176,660 $ 183,422 $ 155,323 $ 360,082 $ 298,115
Operating income (a) 41,920 43,831 34,445 85,751 56,585
Depreciation and amortization (b) 8,325 8,359 8,160 16,684 15,947
Total assets 482,236 520,636 498,015 482,236 498,015
Capital expenditures 11,510 8,985 17,362 20,495 28,265
 
Nonwoven Materials
Net sales $ 58,307 $ 64,685 $ 62,427 $ 122,992 $ 130,547
Operating income (a) 2,765 2,328 817 5,093 5,420
Depreciation and amortization (b) 4,009 4,217 3,506 8,226 7,233
Total assets 193,950 198,576 211,874 193,950 211,874
Capital expenditures 1,674 1,689 1,789 3,363 2,571
 
Corporate
Net sales $ (7,870 ) $ (8,040 ) $ (8,234 ) $ (15,910 ) $ (17,071 )
Operating income (loss) (a) (55,234 ) (2,142 ) (3,689 ) (57,376 ) (6,814 )
Depreciation and amortization (b) 957 946 953 1,903 1,892
Total assets 152,595 153,052 134,657 152,595 134,657
Capital expenditures 402 39 369 441 600
 
Total
Net sales $ 227,097 $ 240,067 $ 209,516 $ 467,164 $ 411,591
Operating income (loss) (a) (10,549 ) 44,017 31,573 33,468 55,191
Depreciation and amortization (b) 13,291 13,522 12,619 26,813 25,072
Total assets 828,781 872,264 844,546 828,781 844,546
Capital expenditures 13,586 10,713 19,520 24,299 31,436
 
(a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, goodwill impairment, 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 Six Months Ended
ADJUSTED EBITDA December 31, 2011   September 30, 2011   December 31, 2010 December 31, 2011   December 31, 2010
 
Net income (loss) $ (5,439 ) $ 41,107 $ 17,053 $ 35,668 $ 81,478
Income tax expense (6,027 ) 101 8,955 (5,926 ) (36,063 )
Interest expense 868 3,348 1,589 4,216 5,022
Amortization of debt costs 155 155 155 310 353
Early extinguishment of debt - - 3,649 - 3,649
Depreciation, depletion and amortization   13,291     13,522     12,618     26,813     25,071  
EBITDA 2,848 58,233 44,019 61,081 79,510
Goodwill and asset impairments 53,136 - - 53,136 -
Non cash charges   481     300     712     781     812  
Adjusted EBITDA $ 56,465   $ 58,533   $ 44,731   $ 114,998   $ 80,322  
 
 
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, goodwill impairment, 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.
 
 
 

CONTACT:
Buckeye Technologies Inc.
Steve Dean, 901-320-8352
Senior Vice President and Chief Financial Officer
or
Investor Relations:
Daryn Abercrombie, 901-320-8908
www.bkitech.com

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