Buckeye Technologies' CEO Discusses F4Q2012 Results - Earnings Call

Buckeye Technologies Inc. (BKI)

F4Q2012 Earnings Call

August 8, 2012 11:00 am ET

Executives

Eric Whaley – Director of Investor Relations

John Crowe – Chairman and CEO

Steve Dean – EVP and CFO

Marko Rajamaa – SVP, Nonwovens

Doug Dowdell – EVP, Specialty Fibers

Hank Hall – Vice President of Cotton Specialties

Analysts

Gail Glazerman – UBS

Tim Quillin – Stephens, Incorporated

Chip Dillon – Vertical Research Partners

Steve Chercover – D.A. Davidson & Co.

Paul Quinn – RBC Capital Markets

Stuart Benway – S&P Capital IQ

Presentation

Operator

Good day and welcome to the Buckeye Technologies fourth quarter and fiscal year 2012 earnings results conference call. Today’s call is being recorded. Presently all parties participating in this call will listen to opening remarks made by the company. After the prepared remarks, Buckeye management will answer questions.

At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Eric Whaley, Director of Investor Relations for Buckeye Technologies. Please go ahead, sir.

Eric Whaley

Thanks, Jeanine. Good morning and welcome to Buckeye’s conference call commenting on our results for the April to June quarter 2012.

Today I’m joined on this call by John Crowe, Chairman and Chief Executive Officer; Steve Dean, Executive Vice President and Chief Financial Officer; Doug Dowdell, Executive Vice President, Specialty Fibers; Marko Rajamaa, Senior Vice President of Nonwovens; and Hank Hall, Vice President of Cotton Specialties. After John and Steve make some introductory remarks, we will respond to your questions.

First, let me briefly cover our Safe Harbor statement. The matters discussed in this call include forward-looking statements that involve risks and uncertainties that may cause the company’s actual results to differ materially from those projected in such forward-looking statements.

For further information on factors that could impact the company and statements contained herein, please refer to the slides accompanying this presentation as well as the company’s most recent annual report on Form 10-K and quarterly report on Form 10-Q.

I’d also like to refer you to the supplemental earnings slides posted on our website and on www.streetevents.com for additional details related to this call.

Now I’ll turn it over to John.

John Crowe

Thanks, Eric. Good morning, and I’ll be referring to Slide 3. Our fourth quarter fiscal 2012 was challenging, but productive. Unfortunately, we were impacted by an unplanned outage at our Florida facility due to a steam drum failure on our Pluck Mill paper machine. We shared several press releases on the failure and the recovery executed by our organization and onsite contractor. Considering the significance of the event, the plant restarted from the failure in a safe and remarkably short period of time.

During the quarter we made progress on our specialty expansion project at our Florida wood fibers facility and complete the sale of our Americana facility in Brazil.

Due to the unplanned outage that began in mid-June and the subsequent downtime at our Foley facility, our financial performance was below the expectations we communicated with you on our earnings call in April. The impact of the outage on quarter four results was approximately $0.06 per share. Net sales revenue for the quarter was $225 million, off 10$ from our record fourth quarter revenue last year of $249 million and was a 4% improvement over the previous quarter. Approximately $5 million of the $24 million decline year-over-year was due to the sale of the converting business at King, North Carolina. The additional shortfall was due to lower shipment volumes and fluff pulp prices.

With a strong gross margin of 23.6$, our quarter four adjusted earnings of $26 million or $0.66 per share was a good quarter given the impact of the unplanned outage. This compares with adjusted earnings of $28 million, or $0.68 per share, and $27 million, or $0.67 per share, for the same quarter last year, and immediately preceding quarter respectively.

We continue to focus on generating strong cash flow and taking a balanced approach to the allocation of capital. Yesterday the Board of Directors voted to pay a quarterly cash dividend on $0.08 per share on September 14 th, 2012. During quarter four, we applied $22 million to share repurchases, $12 million to debt reduction, and increased our cash on the balance sheet by $10 million, leaving us with net debt on June 30 th of approximately $11 million. As I can as first of August, our net debt is now zero.

Also, we increased our CapEx in the quarter to $39 million from $22 million in quarter 3 as we ramped up spending on the specialty expansion project.

Fiscal 2012 was another record year for Buckeye. Our sales revenue of $895 million, our adjusted net income of $111 million, and our return on invested capital of 16.5% were all records. It was a very productive year with the completion of the energy project, the groundbreaking on our specialty fibers expansion project, the closure and sale of our Americana assets, the sale of our King converting facility, and the positioning of our Delta facility for closure and sale of the property by the end of calendar year 2012. These assets were underperforming and are noncore to our growth strategy.

Excluding the income from cellusoic biofuel credit, noncash asset impairment charges, and other special items, Buckeye’s adjusted earnings was strong at $111 million, or $2.76 per share in fiscal 2012. This compares with adjusted earnings from fiscal 2011 of $91 million, or $2.23 per share, a 24% earnings growth.

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