Buckeye Technologies Reports FY Second Quarter Earnings

Jan. 25, 2011 - Buckeye Technologies Inc. announced second quarter net income of $17.1 million or $0.42 per share. Second quarter earnings included after-tax costs relating to early retirement of debt, restructuring, and accrued interest associated with the cellulosic biofuel credit totaling $3.2 million, or $0.08 per share. This compared to net income of $46.3 million or $1.18 per share in the prior year comparable period, which included net income of $37.5 million, or $0.96 per share, from alternative fuel mixture credits (“AFMC”).

Net sales were $209.5 million for the second quarter of fiscal 2011, up 14% versus net sales of $183.3 million in the second quarter of fiscal 2010 due to higher selling prices and improved mix. Shipment volume was down 4% year over year as we finished rebuilding inventories at our Foley mill and specialty cotton fibers shipments were impacted by limited availability and high prices of cotton linters.

Excluding AFMC and cellulosic biofuel tax credits, early debt retirement costs and restructuring expenses, adjusted net income was $20.3 million, or $0.50 per share versus second quarter fiscal 2010 adjusted net income* of $8.8 million, or $0.22 per share. The $0.28 per share increase in adjusted EPS*, compared to the prior year period, was largely driven by higher selling prices in the specialty fibers segment and reduced interest expense. Also, the final insurance settlement related to the June power outage at our Florida specialty wood pulp facility added $0.05 (net of expenses) to second quarter EPS, representing a partial recovery of related costs of $0.04 per share in the July-September 2010 quarter and $0.06 per share in the April-June 2010 quarter.

Comparing the second quarter to the first quarter of FY11, sales were up $7.4 million as increased shipment volume from the Company’s specialty cotton fibers plants combined with higher selling prices and improved mix in the specialty fibers segment offset the impact of reduced nonwovens shipment volumes. Adjusted EPS* was up $0.16 from the first quarter’s $0.34. The impact of the final insurance settlement on the second quarter versus the cost impact of the power outage on the first quarter accounted for $0.09 of the increase in adjusted EPS. Net interest expense was down $1.9 million due to the refinancing of $140 million of public debt at the beginning of the quarter with our lower cost bank revolver, accounting for another $0.03 improvement in EPS. The remaining $0.04 improvement was due to increased production volumes across our wood and cotton specialty fibers plants, an increase in specialty cotton shipment volume, and selling price increases for specialty cotton and fluff pulps, which were partially offset by lower operating income in nonwovens due to seasonally reduced volumes. Overall, gross margin improved from 18.0% in the first quarter to 21.2% in the second quarter.

Chairman and Chief Executive Officer John B. Crowe said, “We were very pleased with our second quarter financial results. Excluding special items such as the significant income we recognized in past quarters related to the various fuel tax credits, this was a record earnings quarter for Buckeye. Earnings showed strong improvement compared both to the same quarter a year ago and to the immediately preceding quarter, and we expect this upward trend to continue. The demand for specialty wood pulp remains very strong, with average selling prices up by about 17% on January 1 compared to the second quarter average and up more than 20% compared to the prior year quarter. Fluff pulp prices remain at high levels. We now have more than 90% of our Memphis cotton linter pulp demand covered by long-term sales contracts containing cost pass-through provisions. Input costs for specialty fibers remain fairly stable with the exception of cotton linters. After the seasonally weak second quarter, we expect nonwovens sales and earnings to improve in the third quarter on increased shipments, increased selling prices and stable fluff pulp prices. We should start to realize cost savings during the next two quarters as phase one of our Foley energy independence project continues to ramp up this quarter and from the recent move to one-machine operation at our Delta airlaid plant.”

Mr. Crowe continued, “In spite of increased capital spending for acquiring land adjacent to our Florida specialty wood facility and on our Foley energy independence project along with cash outflows for bond interest, retirement plan funding and property taxes, our long-term debt was reduced by $1 million during the second quarter. We expect to generate sufficient cash flow during the next two quarters which should allow us to reduce long-term debt to about $100 million by the end of the fiscal year. Based on several measures, this would be the lowest debt level in our history. Given our positive outlook going forward and our demonstrated ability to consistently generate strong cash flows, Buckeye will be increasing its quarterly cash dividend by 25% from $0.04 to $0.05 with its March 15th dividend payment. We continue to be encouraged about our outlook and ability to continue to increase shareholder value.”

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.

SOURCE: Buckeye Technologies Inc.