Buckeye’s Fourth Quarter And Fiscal Year 2012 Results

Buckeye Technologies Inc. (NYSE:BKI) today announced record sales and earnings for fiscal year 2012. Net sales for the year (adjusted to exclude discontinued Americana operations) were $895 million, a new record and up $14 million or 2% compared to fiscal 2011, as higher selling prices offset a $10MM sales reduction due to the divestiture of our King converting business and lower shipment volumes from both our Foley wood specialty mill and our nonwovens business. Adjusted net income* for the 2012 fiscal year was a record $111 million, or $2.76 per share, compared to $91 million or $2.23 per share in fiscal 2011. The growth in adjusted net income was due to significantly higher selling prices for our high-end specialty wood and cotton fiber products which more than offset the impact of lower fluff pulp prices. Net income also benefited in fiscal year 2012 from reduced selling, research and administrative expenses and lower interest expense.

Fourth quarter adjusted net income* was $26.2 million or $0.66 per share. This excludes net after-tax charges of $2.8 million, or $0.08 per share, primarily relating to the sale of our Americana, Brazil cotton linter pulp plant and adjustments relating to the cellulosic biofuel credit. Adjusted net income* was off slightly compared to the prior year period’s $27.8 million or $0.68 per share, which excluded an after-tax non-cash asset impairment charge of $13.0 million, or $0.32 per share, relating to plans to close our Canadian nonwovens plant by the end of December 2012 as well as other special items of $0.6 million or $0.01 per share.

Net sales were $225 million for the fourth quarter of fiscal 2012, down $24 million or 10% versus record net sales of $249 million in the fourth quarter of fiscal 2011 (which have been adjusted to exclude discontinued Americana operations). About $5 million of the reduction in sales was related to the divestiture of our King converting business. Sales from our Foley specialty wood plant were down $10 million due to lower shipment volume. Last year’s sales benefited from significant shipments from inventory. Sales from the Memphis specialty cotton plant were off $5 million due to supply chain inventory corrections and lower growth projections in the LED TV market. In spite of the reduction in sales revenue and the $0.06 negative earnings impact of the June steam drum failure outage at Foley, adjusted EPS* of $0.66 was only down by $0.02 per share compared to the year ago quarter. Higher selling prices in Specialty Fibers, lower costs and the elimination of underperforming businesses offset most of the impact of lower sales revenue and the June production outage. We generated $50 million in free cash flow* during the quarter, including $6 million in net proceeds from the sale of our Americana assets. We repurchased 750,000 shares ($22 million) during the quarter, bringing total year repurchases to 1.2 million shares ($33 million), or 3% of outstanding shares at the beginning of the year. We also reduced debt by $12 million to $59 million. At the end of the quarter our cash and short term investments stood at $47 million.

Comparing the fourth quarter to the third quarter of fiscal 2012, sales were up $8 million or 4% primarily due to a 20% increase in shipment volume in our nonwovens segment. Adjusted EPS* of $0.66 was down $0.01 versus the third quarter as increased shipment volume, favorable shipment mix, and falling cotton linter prices mostly offset the $0.06 negative impact of the June outage at Foley.

Chairman and Chief Executive Officer John B. Crowe said, “Fiscal year 2012 was another year of record sales and earnings. During the year, we continued to generate significant cash flow, allowing us to invest in high rate of return capital projects, return cash to our shareholders through dividends and share repurchases, and essentially eliminate our debt. With a strong operating performance and actions taken to address underperforming assets, we delivered a return on invested capital (ROIC) in fiscal year 2012 of 16.5%, well above our cost of capital. While Buckeye is well positioned to continue to increase shareholder value, we believe that global economic uncertainty may generate a headwind for us in fiscal 2013.”

“Our fourth quarter results were significantly impacted by the steam drum failure and resulting production outage at our Foley facility in late June. Returning both lines to operation in just 17 days was a remarkable accomplishment by our organization.“

Buckeye has scheduled a conference call for Wednesday morning, August 8, at 11:00 a.m. ET to discuss fourth quarter and fiscal year performance. Persons interested in listening by telephone may dial in at (877) 852-6573 within the United States. International callers should dial (719) 325-4834. 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 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, and restructuring cost.
           
($ in Millions) Q4-2012 Q4-2011 Q3-2012 FY-2012 FY-2011
Operating income
Operating income in accordance with GAAP 40.0 32.1 41.6 164.0 134.5
Special items:
Restructuring costs --- 0.1 0.2 0.3 1.1
Asset and Goodwill impairment   0.3     13.0     0.1     4.5     13.0  
Adjusted operating income

(Excludes Americana)
40.3 45.2 41.9 168.8 148.6
 
Net income
Net income in accordance with GAAP 23.4 14.1 25.8 84.9 124.3
Special items, after-tax:
Restructuring costs 1.2 0.1 0.7 2.0 1.0
AFMC / CBC 1.8 0.6 0.4 (5.3 ) (49.9 )
Early Extinguishment of Debt 2.4
Asset and Goodwill impairment   (0.2 )   13.0     0.1     29.5     13.0  
Adjusted net income 26.2 27.8 27.0 111.0 90.8
 
Earnings per share (EPS)
EPS in accordance with GAAP $ 0.58 $ 0.35 $ 0.64 $ 2.11 $ 3.05
Special items, after-tax, per share:
Restructuring costs 0.03 --- 0.02 0.05 0.02
AFMC / CBC 0.05 0.01 0.01 (0.14 ) (1.22 )
Early Extinguishment of Debt 0.06
Asset and Goodwill Impairment   ---     0.32     ---     0.74     0.32  
Adjusted EPS $ 0.66 $ 0.68 $ 0.67 $ 2.76 $ 2.23
 

($ in Millions)

Q4-2012

Q4-2011

Q3-2012

FY-2012

FY-2011
Free Cash Flow
Net cash provided by operating activities 82.8 68.0 31.0 171.8 212.0
Purchases of property, plant & equipment / Other (38.9 ) (16.4 ) (22.2 ) (85.4 ) (57.8 )
Proceeds from sale of assets   6.1     ---     5.7     11.8     ----  
Free Cash Flow 50.0 51.6 14.5 98.2 154.2

Loss from Discontinued Operations

* As a result of the disposition of our Americana operations in Q4 2012 and resulting end to our continuing involvement with the inclusion of the waste water treatment facilities in the assets that were sold, we believe the results of the operations for this business, including the loss recognized from the sale and less applicable income taxes (benefit), should be reported in discontinued operations in our consolidated income statement. Additionally, we will report the results of prior periods for this component within discontinued operations for all years presented in our consolidated income statement in our 2012 Form 10-K. The table below shows the detail behind the loss from discontinued operations for each period reported in the press release financial statements.
           
 

($ in Millions)

Q4-2012

Q4-2011

Q3-2012

FY-2012

FY-2011
Net Sales 0.0 7.3 0.0 14.3 24.8
COGS 0.3 8.5 0.3 14.9 29.3
Gross Margin (0.3) (1.2) (0.3) (0.6) (4.4)
Asset Impairment Cost 0.1 0.0 0.0 49.2 0.0
Restructuring Costs 1.8 0.0 0.9 2.7 0.0
Operating Income (2.2) (1.2) (1.2) (52.5) (4.4)
Net Interest Expense (Income) (0.1) 0.0 (0.1) (0.5) (0.1)
Foreign Exchange & Other 0.3 0.0 0.1 0.2 0.2
Earnings before Tax (2.4) (1.2) (1.2) (52.2) (4.5)
Income tax expense (Benefit) (0.5) 0.0 0.0 (23.3) 0.0
Loss from Discontinued Operations (1.9) (1.2) (1.2) (28.9) (4.5)

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
         
 
Three Months Ended Year Ended
June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
 
Net sales $ 224,940 $ 217,065 $ 248,626 $ 894,881 $ 880,428
Cost of goods sold   171,877     163,903     187,801     677,396     678,234  
Gross margin 53,063 53,162 60,825 217,485 202,194
Gross margin as a percentage of sales 23.6 % 24.5 % 24.5 % 24.3 % 23.0 %
 
Selling, research and administrative expenses 12,257 10,761 15,096 46,704 51,705
Amortization of intangibles and other 510 515 513 2,021 1,966
Asset impairment loss 329 92 13,007 2,094 13,007
Goodwill impairment loss - - - 2,425 -
Restructuring costs - 233 85 234 1,082
Other operating income   -     (32 )   -     (32 )   (63 )
 
Operating income 39,967 41,593 32,124 164,039 134,497
 
Net interest expense and amortization of debt costs (547 ) (1,240 ) (1,748 ) (6,257 ) (8,769 )
Early extinguishment of debt - - - - (3,649 )
Foreign exchange and other   301     (280 )   (31 )   386     (1,506 )
Income before income taxes 39,721 40,073 30,345 158,168 120,573
Income tax expense (benefit)   14,482     13,052     15,041     44,418     (8,233 )
Income from continuing operations 25,239 27,021 15,304 113,750 128,806
Loss from discontinued operations   (1,889 )   (1,176 )   (1,207 )   (28,887 )   (4,538 )
Net income $ 23,350   $ 25,845   $ 14,097   $ 84,863   $ 124,268  
 
 
Computation of diluted earnings per share under the two-class method:
 
Net income attributable to shareholders $ 23,350 $ 25,845 $ 14,097 $ 84,863 $ 124,268

Less: Distributed and undistributed income allocated to participating securities (nonvested stock)
  (284 )   (371 )   (203 )   (1,180 )   (2,150 )

Distributed and undistributed income available to shareholders
$ 23,066   $ 25,474   $ 13,894   $ 83,683   $ 122,118  
 
Diluted weighted average shares outstanding 39,466 39,816 40,118 39,710 40,003
 
Income per share from continuing operations $ 0.63 $ 0.67 $ 0.38 $ 2.84 $ 3.16
Loss per share from discontinued operations   (0.05 )   (0.03 )   (0.03 )   (0.73 )   (0.11 )
Diluted earnings per share $ 0.58   $ 0.64   $ 0.35   $ 2.11   $ 3.05  

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
     
 
June 30 March 31 June 30
2012 2012 2011
Current assets:
Cash and cash equivalents $ 38,284 $ 37,167 $ 30,494
Short term investments 8,813 - -
Accounts receivable, net 126,705 130,803 140,582
Inventories 90,183 111,129 91,024
Deferred income taxes and other   28,649   45,828   12,216
Total current assets 292,634 324,927 274,316
 
Property, plant and equipment, net 492,109 481,474 530,468
Goodwill - - 2,425
Deferred income taxes 41,924 22,004 32,741
Intellectual property and other, net   13,193   13,713   29,901
Total assets $ 839,860 $ 842,118 $ 869,851
 
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 40,600 $ 34,148 $ 41,437
Accrued expenses 51,228 49,161 71,722
Other current liabilities   -   311   -
Total current liabilities 91,828 83,620 113,159
 
Long-term debt 58,578 70,139 96,921
Deferred income taxes 4,451 5,503 7,968
Other liabilities 87,132 72,193 72,506
Stockholders' equity   597,871   610,663   579,297
Total liabilities and stockholders' equity $ 839,860 $ 842,118 $ 869,851

BUCKEYE TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(In thousands)
             
Three Months Ended Year Ended
June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
OPERATING ACTIVITIES
Net income $ 23,350 $ 25,845 $ 14,097 $ 84,863 $ 124,268
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 12,091 12,228 13,146 50,136 50,030
Amortization 665 670 668 2,641 2,629
Loss on early extinguishment of debt - - - - 3,649
Asset impairment loss 465 92 13,007 51,268 13,007
Loss on goodwill impairment - - - 2,425 -
Deferred income taxes (1,675 ) 434 (591 ) (17,382 ) (81,565 )
Noncurrent AFMC refund payable (3,648 ) - (1,650 ) 10,247 39,494
Provision for bad debts 37 (698 ) (124 ) (57 ) (198 )
Excess tax benefit from stock based compensation (1,367 ) (1,142 ) (1,667 ) (4,062 ) (2,495 )
Stock-based compensation expense 868 1,166 1,224 4,245 4,594
Loss on disposal of equipment 954 (118 ) 387 1,602 1,297
Other 2,107 110 (401 ) 1,861 (492 )
Change in operating assets and liabilities: -
Accounts receivable 3,114 2,897 (1,174 ) 6,548 (14,805 )
Income tax receivable - - 1,460 - 68,356
Inventories 20,227 (6,553 ) 7,182 (5,119 ) (13,532 )
Other assets (2,889 ) 6,580 31 803 122
Accounts payable and other liabilities   28,503     (5,944 )   22,442     (18,256 )   17,643  
Net cash provided by operating activities 82,802 35,567 68,037 171,763 212,002
 
INVESTING ACTIVITIES
Purchases of property, plant & equipment (38,734 ) (21,907 ) (16,175 ) (84,940 ) (57,307 )
Proceeds from sale of assets held for sale 6,085 5,675 - 11,760 -
Purchase of short term investments (9,213 ) - - (9,213 ) -
Other   (128 )   (227 )   (287 )   (481 )   (471 )
Net cash used in investing activities (41,990 ) (16,459 ) (16,462 ) (82,874 ) (57,778 )
 
FINANCING ACTIVITIES
Net borrowings (payments) under line of credit (11,561 ) (16,701 ) (39,649 ) (38,343 ) (609 )
Payments on long term debt - - - - (140,000 )
Payments for debt issuance costs - - - - (2,586 )
Payments related to early extinguishment of debt - - - - (1,984 )
Purchase of treasury shares (22,327 ) - (9,799 ) (32,916 ) (9,799 )
Cash used to settle net share equity awards (1,057 ) - (1,186 ) (1,526 ) (1,186 )
Net proceeds from sale of equity interests 253 1,161 677 3,054 4,011
Excess tax benefit from stock based compensation 1,367 1,142 1,667 4,062 2,495
Payment of dividend   (3,164 )   (2,808 )   (2,012 )   (10,756 )   (7,252 )
Net cash used in financing activities (36,489 ) (17,206 ) (50,302 ) (76,425 ) (156,910 )
 
Effect of foreign currency rate fluctuations on cash (3,206 ) (733 ) 1,429 (4,674 ) 11,059
 
Increase in cash and cash equivalents   1,117     1,169     2,702     7,790     8,373  
Cash and cash equivalents at beginning of period   37,167     35,998     27,792     30,494     22,121  
Cash and cash equivalents at end of period $ 38,284   $ 37,167   $ 30,494   $ 38,284   $ 30,494  

BUCKEYE TECHNOLOGIES INC.
SUPPLEMENTAL FINANCIAL DATA
(unaudited)
(In thousands)
               
Three Months Ended Year Ended
SEGMENT RESULTS June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Specialty Fibers
Net sales $ 170,950 $ 169,989 $ 186,609 $ 686,733 $ 648,487
Operating income (a) 39,106 40,611 43,828 165,441 147,544
Depreciation and amortization (b) 7,670 7,854 7,766 31,033 30,124
Total assets 486,328 488,190 517,866 486,328 517,866
Capital expenditures 33,368 19,501 12,726 73,364 49,526
 
Nonwoven Materials
Net sales $ 61,827 $ 54,188 $ 69,896 $ 239,007 $ 264,931
Operating income (a) 3,626 3,016 5,274 11,735 13,768
Depreciation and amortization (b) 3,945 3,916 4,084 16,087 15,202
Total assets 182,924 185,739 239,530 182,924 239,530
Capital expenditures 4,171 1,670 3,156 9,368 6,870
 
Corporate
Net sales $ (7,837 ) $ (7,112 ) $ (7,879 ) $ (30,859 ) $ (32,990 )
Operating income (loss) (a) (2,765 ) (2,034 ) (16,978 ) (13,137 ) (26,815 )
Depreciation and amortization (b) 987 971 1,011 3,861 3,837
Total assets 170,608 168,189 112,455 170,608 112,455
Capital expenditures 1,195 572 293 2,208 911
 
Total
Net sales $ 224,940 $ 217,065 $ 248,626 $ 894,881 $ 880,428
Operating income (a) 39,967 41,593 32,124 164,039 134,497
Depreciation and amortization (b) 12,602 12,741 12,861 50,981 49,163
Total assets 839,860 842,118 869,851 839,860 869,851
Capital expenditures 38,734 21,743 16,175 84,940 57,307
 
(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 Year Ended
ADJUSTED EBITDA June 30, 2012 March 31, 2012 June 30, 2011 June 30, 2012 June 30, 2011
 
Net income $ 23,350 $ 25,845 $ 14,097 $ 84,863 $ 124,268
Income tax expense (benefit) 13,935 13,052 15,041 21,061 (8,233 )
Interest expense 462 1,210 1,635 5,888 8,190
Amortization of debt costs 155 155 155 620 663
Early extinguishment of debt - - - - 3,649
Depreciation, depletion and amortization   12,601     12,743     13,659     52,157     51,996  
EBITDA 50,503 53,005 44,587 164,589 180,533
Asset impairments 465 92 13,007 53,693 13,007
Restructuring 1,834 1,137 85 2,971 531
Non cash charges   803     61     424     1,645     1,335  
Adjusted EBITDA $ 53,605   $ 54,295   $ 58,103   $ 222,898   $ 195,406  
 
 
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.

Copyright Business Wire 2010

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