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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ____ to ____
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Commission file number: 33-60032
Buckeye Technologies Inc.
incorporated pursuant to the Laws of Delaware
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Internal Revenue Service-- Employer Identification No. 62-1518973
1001 Tillman Street, Memphis, TN 38112
901-320-8100
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes |X| No ____
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes |X| No ____
As of April 26, 2004, there were outstanding 37,172,508 Common Shares of the
Registrant.
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INDEX
BUCKEYE TECHNOLOGIES INC.
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ITEM PAGE
PART I - FINANCIAL INFORMATION
1. Financial Statements:
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
March 31, 2004 and 2003...................................................................... 3
Condensed Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003.................... 4
Condensed Consolidated Statements of Cash Flows for the Three and Nine Months Ended
March 31, 2004 and 2003...................................................................... 5
Notes to Condensed Consolidated Financial Statements............................................ 6
2. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 19
3. Quantitative and Qualitative Disclosures About Market Risk...................................... 27
4. Controls and Procedures......................................................................... 27
PART II - OTHER INFORMATION
6. Exhibits and Reports on Form 8-K................................................................ 28
SIGNATURES 29
2
Item 1. Financial Statements
PART I - FINANCIAL INFORMATION
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Nine Months Ended
March 31 March 31
------------------------------ ----------------------------
2004 2003 2004 2003
------------------------------ ----------------------------
Net sales.............................................. $172,761 $163,497 $488,871 $473,068
Cost of goods sold..................................... 151,031 143,224 437,419 410,619
------------------------------ ----------------------------
Gross margin........................................... 21,730 20,273 51,452 62,449
Selling, research and administrative expenses.......... 9,445 9,573 31,985 27,353
Impairment of long-lived assets........................ 43,891 29,746 44,833 29,746
Restructuring costs.................................... 143 - 3,872 -
------------------------------ ----------------------------
Operating income (loss)................................ (31,749) (19,046) (29,238) 5,350
Net interest expense and amortization of debt costs.... 11,369 11,433 35,056 35,242
Loss on early extinguishment of debt................... - - 4,940 -
Foreign exchange, amortization of intangibles and other 149 1,163 1,703 2,181
------------------------------ ----------------------------
Loss before income taxes and cumulative effect of
change in accounting................................ (43,267) (31,642) (70,937) (32,073)
Income tax benefit..................................... (15,762) (11,888) (25,617) (12,340)
------------------------------ ----------------------------
Loss before cumulative effect of change in accounting.. (27,505) (19,754) (45,320) (19,733)
Cumulative effect of change in accounting
(net of tax of $3,359)............................. - - 5,720 -
------------------------------ ----------------------------
Net loss............................................... $(27,505) $ (19,754) $(39,600) $(19,733)
============================== ============================
Loss per share before cumulative effect of
change in accounting
Basic loss per share...................... $(0.74) $ (0.53) $ (1.22) $ (0.53)
Diluted loss per share.................... $(0.74) $ (0.53) $ (1.22) $ (0.53)
Cumulative effect of change in accounting
Basic loss per share $ - $ - $ 0.15 $ -
Diluted loss per share $ - $ - $ 0.15 $ -
Loss per share
Basic loss per share....................... $ (0.74) $ (0.53) $(1.07) $ (0.53)
Diluted loss per share..................... $ (0.74) $ (0.53) $(1.07) $ (0.53)
Weighted average shares for basic earnings per share... 37,080 36,973 37,021 36,963
Effect of dilutive stock options....................... - - - -
------------------------------ ----------------------------
Adjusted weighted average shares for diluted earnings
per share........................................ 37,080 36,973 37,021 36,963
============================== ============================
See accompanying notes.
3
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31 June 30
2004 2003
-----------------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents.................................... $21,066 $ 49,977
Cash, restricted............................................. - 3,375
Accounts receivable, net..................................... 113,713 126,283
Inventories.................................................. 113,073 136,705
Deferred income taxes and other.............................. 31,782 26,307
-----------------------------------
Total current assets................................ 279,634 342,647
Property, plant and equipment..................................... 882,258 909,733
Less accumulated depreciation..................................... (336,550) (315,595)
-----------------------------------
545,708 594,138
Goodwill, net..................................................... 132,980 129,631
Intellectual property and other, net.............................. 42,127 44,239
-----------------------------------
Total assets........................................ $1,000,449 $1,110,655
===================================
Liabilities and stockholders' equity Current liabilities:
Trade accounts payable....................................... $ 24,858 $ 37,007
Accrued expenses............................................. 45,252 48,360
Current portion of capital lease obligations................. 620 583
Current portion of long-term debt............................ 1,500 41,718
-----------------------------------
Total current liabilities........................... 72,230 127,668
Long-term debt............................................... 609,957 619,474
Deferred income taxes........................................ 63,793 79,498
Capital lease obligations.................................... 2,231 2,700
Other liabilities............................................ 19,769 19,431
Stockholders' equity.............................................. 232,469 261,884
-----------------------------------
Total liabilities and stockholders' equity..... $1,000,449 $1,110,655
===================================
See accompanying notes.
4
BUCKEYE TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
March 31
------------------------------------
2004 2003
------------------------------------
Operating activities
Net loss.......................................................... $ (39,600) $(19,733)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Cumulative effect of change in accounting.................. (5,720) -
Impairment of long-lived assets............................ 44,833 29,746
Depreciation............................................... 34,796 34,920
Amortization .............................................. 3,335 4,246
Loss on early extinguishment of debt....................... 4,940 -
Deferred income taxes and other............................ (11,943) (3,868)
Changes in operating assets and liabilities:
Accounts receivable.................................... 11,077 (26,822)
Inventories............................................ 24,560 6,098
Other assets........................................... (6,968) 14,404
Accounts payable and other current liabilities......... (11,234) 2,778
------------------------------------
Net cash provided by operating activities......................... 48,076 41,769
Investing activities
Purchases of property, plant and equipment........................ (26,457) (19,272)
Redemption of short-term investments.............................. - 3,863
Other............................................................. (403) (748)
------------------------------------
Net cash used in investing activities............................. (26,860) (16,157)
Financing activities
Proceeds from exercise of stock options........................... 1,062 -
Net payments under revolving lines of credit...................... (221,818) (19,923)
Issuance of long term debt........................................ 350,000 -
Payments for debt issuance costs.................................. (9,102) (671)
Payments related to early extinguishment of debt.................. (2,115) -
Proceeds from termination of swap................................. 4,000 -
Payments on long-term debt and other.............................. (173,182) (22,400)
------------------------------------
Net cash used in financing activities............................. (51,155) (42,994)
Effect of foreign currency rate fluctuations on cash.............. 1,028 1,057
------------------------------------
Decrease in cash and cash equivalents............................. (28,911) (16,325)
Cash and cash equivalents at beginning of period.................. 49,977 56,006
------------------------------------
Cash and cash equivalents at end of period........................ $ 21,066 $ 39,681
====================================
See accompanying notes.
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands)
NOTE A-- BASIS OF PRESENTATION
Our accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine months
ended March 31, 2004 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2004. All significant intercompany
accounts and transactions have been eliminated in consolidation. For further
information and a listing of our significant accounting policies, refer to the
financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended June 30, 2003. Except as otherwise specified, references
to years indicate our fiscal year ending June 30, 2004 or ended June 30 of the
year referenced and comparisons are to the corresponding period of the prior
year.
NOTE B-- CHANGE IN ACCOUNTING
Through June 30, 2003, we accounted for major planned maintenance
activities at our specialty fiber plant in Perry, Florida by accruing the cost
of the maintenance activities over the period between each planned maintenance
activity (the accrue in advance method), which ranged from two to five year
intervals. All other facilities expensed maintenance costs as incurred.
During the three months ended March 31, 2004, we reevaluated this
critical accounting policy and effective July 1, 2003, changed our method of
accounting from the accrue in advance method to the direct expense method. Under
the new accounting method, maintenance costs are expensed as incurred. We
believe the new method is preferable in this circumstance because the
maintenance liability is not recorded until there is an obligating event (when
the maintenance event is actually being performed). The direct expense method
eliminates significant estimates and judgments inherent under the accrual
method, and it is the predominant method used in the industry.
There is no effect of applying the new method for the three months
ended March 31, 2004 and the effect of applying the new method for the nine
months ended March 31, 2004 is a decrease in net loss of $349 or $0.01 per
share. This decrease in net loss is composed of a profit increase of $9,079
pre-tax ($5,720 net-of-tax reported as a cumulative effect of accounting
change), offset by $8,525 in additional cost of goods sold which is the cost of
the planned maintenance activity performed less the expense accrued for the six
months ended December 31, 2003 for this activity. All of these changes are
reflected retroactively in our operating results for the nine months ended March
31, 2004.
The following table reflects the restated net income for the three
months ended September 30, 2003 and December 31, 2003 and for the six months
ended December 31, 2003.
Three Months Six Months
Ended Ended
---------------------- ---------------------- ---------------------
September 30, 2003 December 31, 2003 December 31, 2003
---------------------- ---------------------- ---------------------
Net loss as reported $ (2,431) $ (10,013) $ (12,444)
Restated net income (loss) 3,056 (15,151) (12,095)
Diluted earnings (loss) per share as reported $(0.07) $(0.27) $(0.34)
Restated diluted earnings (loss) per share $0.08 $(0.41) $(0.33)
6
The following table shows the actual results for the three and nine months
ended March 31, 2004 and the pro-forma results for the three and nine months
ended March 31, 2003 assuming the new accounting method is applied
retroactively.
Three Months Ended Nine Months Ended
March 31 March 31
2004 2003 2004 2003
------------ ------------- ---------------- -------------
Net income (loss) as reported $ (27,505) $ (19,754) $ (39,600) $ (19,733)
Actual/proforma net income (loss) (27,505) (19,419) (39,600) (18,729)
Diluted earnings (loss) per share as reported $ (0.74) $ (0.53) $ (1.07) $ (0.53)
Actual/proforma diluted earnings (loss) per $ (0.74) $ (0.53) $ (1.07) $ (0.51)
share
NOTE C-- SEGMENT INFORMATION
We report results for two segments, specialty fibers and nonwoven
materials. The specialty fiber segment is an aggregation of cellulosic fibers
based on both wood and cotton. Management makes financial decisions and
allocates resources based on the sales and operating income of each segment. We
allocate selling, research, and administration expenses to each segment and
management uses the resulting operating income to measure the performance of the
segments. The financial information attributed to these segments is included in
the following table:
Three Months Ended Specialty Nonwoven
March 31 Fibers Materials Corporate Total
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Net sales 2004 $121.3 $57.3 $(5.8) $172.8
2003 121.4 49.9 (7.7) 163.6
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Operating income (loss) 2004 10.9 1.3 (43.9) (31.7)
2003 9.4 1.5 (29.9) (19.0)
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Depreciation and amortization of 2004 7.0 4.8 0.9 12.7
intangibles 2003 7.5 4.1 1.0 12.6
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Capital expenditures 2004 4.6 0.6 0.1 5.3
2003 7.2 0.7 0.1 8.0
Nine Months Ended Specialty Nonwoven
March 31 Fibers Materials Corporate Total
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Net sales 2004 $343.2 $161.7 $(16.0) $488.9
2003 347.6 143.1 (17.6) 473.1
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Operating income (loss) 2004 15.5 5.0 (49.7) (29.2)
2003 33.8 2.3 (30.7) 5.4
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Depreciation and amortization of 2004 20.6 13.5 2.5 36.6
intangibles 2003 22.5 11.7 3.1 37.3
- --------------------------------------------- ------ ------------- -------------- ------------ -------------
Capital expenditures 2004 24.5 1.8 0.2 26.5
2003 16.9 1.9 0.4 19.2
Management evaluates operating performance of the specialty fibers and
nonwoven materials segments excluding the impact of impairment of long-lived
assets and charges related to restructuring. Therefore, the corporate segment
includes operating elements such as segment eliminations, impairment of
long-lived assets and charges related to restructuring. Corporate net sales
represent the elimination of intersegment sales included in the specialty fibers
reporting segment. We account for intersegment sales as if the sales were made
to third parties, that is, at current market prices.
7
NOTE D-- IMPAIRMENT COSTS
During the three months ended March 31, 2004, our Board of Directors
approved the discontinuation of production of nonwoven materials at our Cork,
Ireland facility. While the demand for nonwoven products is growing in the low
to mid-single digits, the growth in demand has not been sufficient to fully
utilize existing capacity. As such, industry participants have been
rationalizing production by taking down time, reducing operating shifts and
closing facilities.
Due to excess production capacity around the globe, we have operated
Cork below its productive capacity since the plant started up in 1998. Because
of its location and small size, our cost to produce at Cork is higher than it is
at our other locations. After careful consideration of all the options
available, management reached the decision to close the Cork facility and
consolidate production at our three other manufacturing facilities. We expect
production at Cork to cease during the first quarter of fiscal 2005. Closing our
Cork facility will reduce our nonwovens capacity by about 10%.
In accordance with SFAS No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets (SFAS No. 144), we believe the commitment to discontinue
production represented an indicator of impairment and subsequently we evaluated
the value of the property, plant, and equipment associated with the Cork
facility. Under this guidance, we determined that these long-lived assets, with
a carrying amount of $48,359 (net of $6,914 of foreign currency translation
adjustment), were impaired and wrote them down to their estimated fair value of
$5,409, resulting in an impairment charge of $42,950. Fair value was based on
the estimated salvage value of the Cork facility as we do not believe the
facility can be utilized for its intended purpose and we will eventually abandon
the property.
During the three months ended March 31, 2004, we also impaired certain
manufacturing equipment at our Perry, Florida wood pulp facility with a carrying
value of $878. The impaired equipment was replaced by an alternative technology
that was more cost effective to operate. Due to the limited use for the impaired
equipment, there was no remaining value; and, thus the equipment was fully
impaired.
During the quarter ended December 31, 2003, we fully impaired
engineering costs and capitalized interest for a long delayed project at our
Perry, Florida wood pulp facility. Based on the significant length of time
before the project would be initiated, we determined that the engineering work
had no remaining value and was fully impaired. The carrying value of the asset
was $942.
NOTE E-- RESTRUCTURING COSTS
During fiscal 2003 we initiated the first phase of our restructuring
program designed to deliver cost reductions through reduced expenses across our
company. The main component of this phase was the partial closure of our
Lumberton, North Carolina facility resulting in the consolidation of our U.S.
cotton linter pulp production at our Memphis, Tennessee facility. During the
nine months ended March 31, 2004, additional expenses of $924 were recorded and
$2,529 were paid for this phase of the program. These additional expenses
included $693 for miscellaneous costs associated with the partial closure of the
Lumberton facility. We estimate the remaining expenses for this phase of the
restructuring program to be approximately $100, which we expect to be recognized
and paid in calendar year 2004.
During the first quarter of fiscal 2004, we entered into a second phase
of our restructuring program. This program was a continuation of the program
initiated in the fourth quarter of fiscal 2003 and will enable us to improve our
operating results through reduced salaries, benefits, other employee-related
expenses and operating expenses. As a result of this restructuring, we initially
expected approximately 50 positions would be eliminated. During the three months
ended March 31, 2004, we expanded this estimate to include an additional 28
positions with an estimated cost of $690. These 78 positions include
manufacturing, sales, product development and administrative functions
8
throughout the organization. Voluntary and involuntary termination benefits
related to this phase of the program of $2,948 were expensed and $2,285 were
paid during the nine months ended March 31, 2004. We expect payments related to
this phase of the restructuring program to continue into calendar 2005. The
total cost of this phase of the restructuring program is estimated to be
approximately $3,660.
On April 1, 2004 we announced that we will discontinue production of
nonwoven materials at our Cork, Ireland facility by August of 2004. We will
continue to meet customer needs for nonwoven materials by producing these
products at our facilities in Delta, British Columbia, Canada; Steinfurt,
Germany; and Gaston County, North Carolina. We expect this consolidation will
enable us to improve our overall nonwoven materials operating results by about
$7,000 annually and reduce working capital needs by $4,000. The closure of the
Cork facility will result in the termination of 83 employees, and we expect
restructuring expenses related to the closure to be approximately $3,000 over
the remainder of calendar 2004. We expect payments related to this restructuring
program will extend through the end of calendar 2004.
Restructuring expenses are included in "Restructuring Costs" in our
condensed consolidated statements of operations. Accrual balances are included
in "Accrued expenses" in the balance sheet. The following table summarizes the
expenses and accrual balances by reporting segments for the nine months ended
March 31, 2004.
Nine Months Ended
March 31, 2004
-------------------------------------
Accrual Accrual
Balance Impact Balance as
as of of of Program Total
June 30, Additional Foreign March 31, Charges Estimated
2003 Charges Currency Payments 2004 to Date Charges
2002 Restructuring Program
- -------------------------------------------------- ------------ ----------- ------------ ------------- ------------------------
Nonwoven materials $ 17 $ - $ - $ (17) $ - $1,605 $1,605
2003 Restructuring Program-Phase 1
- -------------------------------------------------- ------------ ----------- ------------ ------------- -- ----------- ------------
Severance and employee benefits
Specialty Fibers 1,437 231 - (1,666) 2 1,692 1,692
Nonwoven Materials 87 - - (87) - 87 87
Other miscellaneous expenses
Specialty Fibers - 693 - (693) - 699 800
Nonwoven Materials 83 - - (83) - 83 83
------------ ------------ ----------- ------------ ------------- ----------- ------------
Total 2003 Program-Phase 1 1,607 924 - (2,529) 2 2,561 2,662
2003 Restructuring Program-Phase 2
- -------------------------------------------------- ------------ ----------- ------------ ------------- ----------- ------------
Severance and employee benefits
Specialty fibers - 1,401 61 (936) 526 1,401 2,101
Nonwoven materials - 39 - (39) - 39 39
Corporate - 1,508 (4) (1,310) 194 1,508 1,520
------------ ------------ ----------- ------------ ------------- ----------- ------------
Total 2003 Program-Phase 2 - 2,948 57 (2,285) 720 2,948 3,660
2004 Restructuring Program
- -------------------------------------------------- ------------ ----------- ------------ ------------- ----------- ------------
Nonwoven materials
Severance and employee
benefits - - - - - - 2,700
Other miscellaneous expenses 300
------------ ------------ ----------- ------------ ------------- -- ----------- ------------
Total 2004 Program - - - - - - 3,000
------------ ------------ ----------- ------------ ------------- -- ----------- ------------
Total All Programs $1,624 3,872 57 (4,831) 722 7,114 10,927
============ ============ =========== ============ ============= =========== ============
9
NOTE F -- INVENTORIES
The components of inventory consist of the following:
March 31 June 30
2004 2003
-----------------------------
Raw materials..................... $30,411 $36,827
Finished goods.................... 59,444 75,394
Storeroom and other supplies...... 23,218 24,484
-----------------------------
$113,073 $136,705
=============================
NOTE G -- DEBT
The components of long-term debt consist of the following:
March 31 June 30
2004 2003
--------------------------
Senior Notes due:
2013 $200,000 $ -
Senior Subordinated Notes due:
2005 - 149,816
2008 99,725 99,688
2010 153,188 155,470
Credit facilities 151,544 227,315
Notes payable - 21,903
Other 7,000 7,000
--------------------------
611,457 661,192
Less current portion 1,500 41,718
--------------------------
$609,957 $619,474
==========================
Senior notes - On September 22, 2003, we placed privately $200,000 in
aggregate principal amount of 8.5% senior notes due October 1, 2013. The notes
are unsecured obligations and are senior to any of our subordinated debt. The
notes are guaranteed by our direct and indirect domestic subsidiaries that are
also guarantors on our senior secured indebtedness. We used the net proceeds
from the private placement to redeem our $150,000 senior subordinated notes due
2005, make a permanent reduction of $40,000 to our revolving credit facility and
pay the related transaction costs. Total costs for the issuance of these notes
was $5,274 and will be amortized over the life of the senior notes using the
effective interest method. On September 22, 2003, we called the senior
subordinated notes due in 2005. These notes were redeemed on October 22, 2003.
On December 18, 2003, we completed our offer to exchange the privately placed
unregistered senior notes for debt securities of like principal amount of senior
notes that have been registered under the Securities Act of 1933, as amended.
During the first quarter of fiscal 2004, $3,300 was expensed related to
the early extinguishment of the $150,000 senior subordinated notes due 2005.
These expenses included a $2,115 call premium and $1,185 related to the
write-off of deferred financing costs.
Senior subordinated notes - Under the indentures governing our senior
subordinated notes, as well as the indenture that governs the senior notes, our
ability to incur additional debt is limited. Under these indentures, additional
debt must be incurred as so-called "ratio debt" or, alternatively, must be
permitted in form and amount as "Permitted Indebtedness." In order to incur
ratio debt, a specified consolidated fixed charge coverage ratio (as defined in
the indentures) must equal or exceed 2:1 (measured on a rolling four-quarter
basis). At March 31, 2002, our fixed charge coverage ratio fell below 2:1. This
development did not breach any covenant or constitute an event of default under
10
any of our debt agreements. However, until such time as the ratio again equals
or exceeds 2:1, we can only incur debt that is Permitted Indebtedness.
On October 16, 2003, we successfully completed a solicitation of
consents from holders of our notes due in 2008 (2008 notes) to amend this
indenture to conform certain provisions of the 2008 notes to the provisions in
our notes due in 2010 and to current market practice. This amendment allowed us
to refinance our revolving credit facility (discussed later in this note), while
we are still limited to Permitted Indebtedness as defined in the indentures.
Under each of these indentures, the fixed charge coverage ratio test is
measured on a rolling four-quarter basis. While we can offer no assurance in
this regard, we believe that our operating results will improve over the next
several quarters and that such improved results together with recent reductions
in our outstanding debt, will enable us to exceed the required 2:1 ratio
necessary to incur ratio debt under indentures governing the senior notes and
the senior subordinated notes.
Interest rate swap - In May 2001, we entered into an interest rate swap
on $100,000 of 8% fixed rate notes maturing in October 2010. The swap converted
interest payments from a fixed rate to a floating rate of LIBOR plus 1.97%. This
arrangement qualified as a fair value hedge under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. As such, the net effect from the
interest rate swap was recorded as part of interest expense. On October 15,
2003, the swap counter party exercised its right to change the termination date
of the swap from October 15, 2010 to October 15, 2003. By exercising this right,
the swap counter party paid us $4,000 as an early termination fee, which is
being amortized as a reduction to interest expense through October 15, 2010. At
March 31, 2004 the unamortized portion of the termination fee was recorded as an
increase in debt of $3,738. During the three months ended March 31, 2004 and
2003, the swap reduced our interest expense by $143 and $1,100, respectively and
will continue to reduce interest expense through the amortization period of the
termination fee. Based upon interest rates for similar transactions, the fair
value of the interest rate swap agreement was recorded as an asset and a
corresponding increase in debt of $6,067 at June 30, 2003.
Revolving credit facility - We amended our revolving credit facility on
July 28, 2003 to modify the financial covenants from June 30, 2003 through March
31, 2005. Additionally, this amendment authorized the issuance of $200,000 of
senior notes (to refinance our $150,000 of senior subordinated notes due in
2005) and required a permanent reduction in the credit facility of $40,000.
On November 5, 2003, we established a $220,000 senior secured credit
facility, comprised of a $70,000 revolving credit facility (the revolver)
maturing on September 15, 2008 and a $150,000 term loan (the term loan) maturing
on October 15, 2010. This facility amends and restates our existing $215,000
revolving credit facility. We used the proceeds of the new credit facility to
pay the outstanding balance on the former revolving credit facility plus
transaction fees and expenses. The interest rate applicable to borrowings under
the revolver is the agent's prime rate plus 1.50% to 1.75% or a LIBOR-based rate
ranging from LIBOR plus 2.50% to LIBOR plus 3.25%. The interest rate applicable
to the term loan is the agent's prime rate plus 1.50% or a LIBOR-based rate plus
2.50%. The credit facility is secured by substantially all of our assets located
in the United States.
The credit facility contains covenants customary for financing of this
type. The financial covenants include: maximum ratio of consolidated net senior
secured debt to consolidated EBITDA, minimum ratio of consolidated EBITDA to
consolidated interest expense and minimum ratio of consolidated EBITDA minus
capital expenditures and taxes to consolidated fixed charges; as well as
limitations on capital expenditures. At March 31, 2004, we were in compliance
with these financial covenants.
As of March 31, 2004, we had $64,481 borrowing capacity on the
revolving credit facility. The portion of this amount that we could borrow will
depend on our financial results and ability to comply with certain borrowing
conditions under the revolving credit facility. Total costs for the issuance of
11
the new facility were approximately $3,300 and are being amortized using the
effective interest method over the life of the facility. During the nine months
ending March 31, 2004, $1,640 was expensed as early extinguishment of debt
related to the write-off of deferred financing costs for the former revolving
credit facility.
Other credit facilities - On December 5, 2003, we paid off the
remaining balance on our receivables-based credit facility. We used cash on hand
and the restricted cash held as collateral for the facility to make the final
payment.
On September 30, 2003, we renewed our Canadian credit facility. The
renewal extended the maturity to November 30, 2004 and required a 20% reduction
of the principal to Canadian $16,000 (U.S. $12,240 equivalent based on exchange
rates in effect at March 31, 2004). As of March 31, 2004, we had Canadian $3,000
(U.S. $2,295 equivalent) outstanding on this facility. Availability on this
facility is incorporated in, the availability of our revolving credit facility
and subject to the same borrowing conditions previously discussed. All other
terms and conditions remained the same. We intend to refinance this facility
with available long-term credit facilities and, therefore, have included the
balance in long-term debt.
NOTE H-- COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) consist of the following:
Three Months Ended Nine Months Ended
March 31 March 31
---------------------------- -----------------------------
2004 2003 2004 2003
---------------------------- -----------------------------
(In thousands) (In thousands)
Net income (loss)............................... $(27,505) $(19,754) $(39,600) $(19,733)
Foreign currency translation adjustments - net.. (13,045) 16,527 9,012 12,657
---------------------------- -----------------------------
Comprehensive income (loss)..................... $(40,550) $(3,227) $(30,588) $ (7,076)
============================ =============================
The change in the foreign currency translation adjustment is primarily
due to fluctuations in the exchange rate of the US dollar and the Euro of
$5,318, the Brazilian real of $(255) and the Canadian dollar of $3,949 for the
nine months ended March 31, 2004. During the three months ended March 31, 2004,
the foreign currency translation adjustment included a reduction of $6,914 as
part of the impairment of the Cork, Ireland assets. See Note D - Impairment
Costs for further discussion of this impairment.
NOTE I - STOCK-BASED COMPENSATION
At March 31, 2004, the Company has stock-based compensation plans which
we account for under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to Employees, and related Interpretations.
No stock-based compensation cost is reflected in our statements of operations.
The following table illustrates the effect on net loss and earnings per share if
we had applied the fair value recognition provisions of SFAS 123, Accounting for
Stock-Based Compensation, to stock-based compensation.
12
Three Months Ended Nine Months Ended
March 31 March 31
--------------------------- -------------------------
2004 2003 2004 2003
--------------------------- -------------------------
Net loss as reported $(27,505) $(19,754) $(39,600) $(19,733)
Deduct: Total stock-based compensation expense determined
under fair value based method , net of related tax
effects (326) (643) (995) (2,146)
--------------------------- -------------------------
Pro forma net loss $(27,831) $(20,397) $(40,595) $(21,879)
=========================== =========================
Basic loss per share:
As reported $ (0.74) $ (0.53) $ (1.07) $ (0.53)
Pro forma $ (0.75) $ (0.55) $ (1.10) $ (0.59)
Diluted loss per share:
As reported $ (0.74) $ (0.53) $ (1.07) $ (0.53)
Pro forma $ (0.75) $ (0.55) $ (1.10) $ (0.59)
NOTE J - EMPLOYEE BENEFIT PLANS
We provide medical, dental and life insurance postretirement plans
covering certain U.S. employees who meet specified age and service requirements.
The components of net periodic benefit costs are as follows:
Three Months Ended Nine Months Ended
March 31 March 31
---------------------------- -----------------------------
2004 2003 2004 2003
---------------------------- -----------------------------
Service cost for benefits earned.................. $188 $165 $565 $495
Interest cost on benefit obligation............... 313 283 939 849
Amortization of unrecognized prior service cost... (281) (281) (844) (844)
(Gain)/loss....................................... 84 24 251 71
---------------------------- -----------------------------
Total cost........................................ $ 304 $191 $911 $571
============================ =============================
In accordance with Financial Staff Position No. FAS 1601-1 (FSP 106-1),
the impact, if any, of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (the Act) has not been recognized in the consolidated
Financial Statements as of March 31, 2004. Authoritative guidance on the
accounting for the federal subsidy in the Act is pending on guidance that, when
issued, could require us to change previously reported information.
NOTE K - CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
The guarantor subsidiaries presented below represent our subsidiaries
that are subject to the terms and conditions outlined in the indenture governing
the senior notes and that guarantee the notes, jointly and severally, on a
senior unsecured basis. The non-guarantor subsidiaries presented below represent
the foreign subsidiaries and the receivables subsidiary which do not guarantee
the senior notes. Each subsidiary guarantor is 100% owned directly or indirectly
by Buckeye Technologies Inc. and all guarantees are full and unconditional.
Supplemental financial information for Buckeye Technologies Inc. and
our guarantor subsidiaries and non-guarantor subsidiaries for the senior notes
is presented in the following tables.
13
STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2004
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Net sales $22,672 $95,241 $61,164 $(6,316) $172,761
Cost of goods sold 17,518 82,292 57.503 (6,282) 151,031
--------------- --------------- -------------- ---------------- ---------------
Gross margin 5,154 12,949 3,661 (34) 21,730
Selling, research and administrative expenses 2,326 4,741 2,378 - 9,445
Restructuring and impairment costs (96) 1,082 43,048 - 44,034
--------------- --------------- -------------- ---------------- ---------------
Operating income (loss) 2,924 7,126 (41,765) (34) (31,749)
Other income (expense):
Net interest expense and
amortization of debt (11,411) (77) 119 - (11,369)
Other income/(expense), including equity
income in affiliates (36,932) (547) 441 36,889 (149)
Intercompany interest income/(expense) 8,420 (6,402) (2,018) - -
--------------- --------------- -------------- ---------------- ---------------
Income/(loss) before income taxes (36,999) 100 (43,223) 36,855 (43,267)
Income tax expense/(benefit) (9,494) (3,640) (14,938) 12,310 (15,762)
--------------- --------------- -------------- ---------------- ---------------
Net income (loss) $(27,505) $3,740 $(28,285) $24,545 $(27,505)
=============== =============== ============== ================ ===============
STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2003
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Net sales $19,727 $99,665 $53,377 $(9,272) $163,497
Cost of goods sold 15,823 89,247 47,548 (9,394) 143,224
--------------- --------------- -------------- ---------------- ---------------
Gross margin 3,904 10,418 5,829 122 20,273
Selling, research and administrative expenses 2,441 5,220 1,912 - 9,573
Restructuring and impairment costs 406 29,340 - - 29,746
--------------- --------------- -------------- ---------------- ---------------
Operating income (loss) 1,057 (24,142) 3,917 122 (19,046)
Other income (expense):
Net interest expense and
amortization of debt (10,749) 1,555 (2,239) - (11,433)
Other income/(expense), including equity
income in affiliates (35,225) 127 (2,111) 36,046 (1,163)
Intercompany interest income/(expense) 6,515 (6,233) (282) - -
Intercompany miscellaneous
income/(expense) (332) (791) 1,123 - -
--------------- --------------- -------------- ---------------- ---------------
Income/(loss) before income taxes (38,734) (29,484) 408 36,168 (31,642)
Income tax expense/(benefit) (18,980) (10,631) - 17,723 (11,888)
--------------- --------------- -------------- ---------------- ---------------
Net income (loss) $(19,754) $(18,853) $408 $18,445 $(19,754)
=============== =============== ============== ================ ===============
14
STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 2004
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Net sales $63,657 $277,295 $168,091 $(20,172) $488,871
Cost of goods sold 51,090 251,289 154,607 (19,567) 437,419
--------------- --------------- -------------- ---------------- ---------------
Gross margin 12,567 26,006 13,484 (605) 51,452
Selling, research and administrative expenses 10,987 14,256 6,742 - 31,985
Restructuring and impairment costs 1,589 3,489 43,627 - 48,705
--------------- --------------- -------------- ---------------- ---------------
Operating income (loss) (9) 8,261 (36,885) (605) (29,238)
Other income (expense):
Net interest expense and
amortization of debt (34,182) (243) (631) - (35,056)
Other income/(expense), including equity
income in affiliates (50,041) (1,430) (128) 44,956 (6,643)
Intercompany interest income/(expense) 24,220 (17,403) (6,817) - -
Intercompany miscellaneous
income/(expense) (446) (950) 1,396 - -
--------------- --------------- -------------- ---------------- ---------------
Income/(loss) before income taxes and
cumulative effect of change in accounting (60,458) (11,765) (43,065) 44,351 (70,937)
Income tax expense/(benefit) (20,858) (5,289) (14,771) 15,301 (25,617)
--------------- --------------- -------------- ---------------- ---------------
Income/(loss) before cumulative effect
of change in accounting (39,600) (6,476) (28,294) 29,050 (45,320)
Cumulative effect of change in
accounting (net of tax) - 5,720 - - 5,720
--------------- --------------- -------------- ---------------- ---------------
Net income (loss) $(39,600) $ (756) $(28,294) $29,050 $(39,600)
=============== =============== ============== ================ ===============
STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 2003
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Net sales $62,440 $283,551 $146,897 $(19,820) $473,068
Cost of goods sold 48,303 252,713 128,610 (19,007) 410,619
--------------- --------------- -------------- ---------------- ---------------
Gross margin 14,137 30,838 18,287 (813) 62,449
Selling, research and administrative expenses 6,562 15,374 5,417 - 27,353
Restructuring and impairment costs 406 29,340 - - 29,746
--------------- --------------- -------------- ---------------- ---------------
Operating income (loss) 7,169 (13,876) 12,870 (813) 5,350
Other income (expense):
Net interest expense and
amortization of debt (32,624) 1,360 (3,978) - (35,242)
Other income/(expense), including equity
income in affiliates (26,341) (1,856) 792 25,224 (2,181)
Intercompany interest income/(expense) 21,378 (16,457) (4,921) - -
Intercompany miscellaneous
income/(expense) (1,104) (2,603) 3,707 - -
--------------- --------------- -------------- ---------------- ---------------
Income/(loss) before income taxes (31,522) (33,432) 8,470 24,411 (32,073)
Income tax expense/(benefit) (11,789) (12,408) 2,727 9,130 (12,340)
--------------- --------------- -------------- ---------------- ---------------
Net income (loss) $(19,733) $(21,024) $5,743 $15,282 $(19,773)
=============== =============== ============== ================ ===============
15
BALANCE SHEETS
As of March 31, 2004
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Assets
Current assets
Cash and cash equivalents $12,201 $ 420 $ 8,445 $ - $ 21,066
Accounts receivable, net 12,038 61,645 40,030 - 113,713
Inventories 22,366 53,457 37,685 (435) 113,073
Other current assets 16,680 18,868 (3,766) - 31,782
Intercompany accounts receivable 2,036 2,378 5,941 (10,355) -
--------------- --------------- -------------- ---------------- ---------------
Total current assets 65,321 136,768 88,335 (10,790) 279,634
Property, plant and equipment, net 55,002 350,000 140,706 - 545,708
Goodwill and intangibles, net 21,024 55,774 85,960 - 162,758
Intercompany notes receivable 370,780 - - (370,780) -
Other assets, including investment in
subsidiaries 294,284 329,998 114,904 (726,837) 12,349
--------------- --------------- -------------- ---------------- ---------------
Total assets $806,411 $872,540 $429,905 $(1,108,407) $1,000,449
=============== =============== ============== ================ ===============
Liabilities and stockholders' equity
Current liabilities
Trade accounts payable $ 4,893 $14,627 $ 5,338 $ - $ 24,858
Other current liabilities 22,659 15,052 9,662 (1) 47,372
Intercompany accounts payable - - 10,355 (10,355) -
--------------- --------------- -------------- ---------------- ---------------
Total current liabilities 27,552 29,679 25,355 (10,356) 72,230
Long-term debt 605,662 2,000 2,295 - 609,957
Deferred income taxes (22,679) 67,671 18,801 - 63,793
Other long-term liabilities 5,693 15,088 1,219 - 22,000
Intercompany notes payable - 235,068 135,712 (370,780) -
Stockholders'/invested equity 190,183 523,034 246,523 (727,271) 232,469
--------------- --------------- -------------- ---------------- ---------------
Total liabilities and stockholders' equity $806,411 $872,540 $429,905 $(1,108,407) $1,000,449
=============== =============== ============== ================ ===============
16
BALANCE SHEETS
As of June 30, 2003
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor Consolidating
Inc. Subsidiaries Subsidiaries Adjustments Consolidated
--------------- --------------- -------------- ---------------- ---------------
Assets
Current assets
Cash and cash equivalents $26,075 $ 4,349 $19,553 $ - $ 49,977
Restricted cash and short-term investments - - 3,375 - 3,375
Accounts receivable, net 6,672 42,657 76,954 - 126,283
Inventories 28,711 61,532 46,291 171 136,705
Other current assets 9,573 18,913 (2,179) - 26,307
Intercompany accounts receivable 9,553 - - (9,553) -
--------------- --------------- -------------- ---------------- ---------------
Total current assets 80,584 127,451 143,994 (9,382) 342,647
Property, plant and equipment, net 51,753 354,057 188,328 - 594,138
Goodwill and intangibles, net 3,698 56,575 100,036 - 160,309
Intercompany notes receivable 379,941 - - (379,941) -
Other assets, including investment in
subsidiaries 337,654 279,717 107,625 (711,435) 13,561
--------------- --------------- -------------- ---------------- ---------------
Total assets $853,630 $817,800 $539,983 $(1,100,758) $1,110,655
=============== =============== ============== ================ ===============
Liabilities and stockholders' equity
Current liabilities
Trade accounts payable $ 6,153 $20,659 $10,195 $ - $ 37,007
Other current liabilities 12,553 25,978 52,129 1 90,661
Intercompany accounts payable - 1,710 7,843 (9,553) -
--------------- --------------- -------------- ---------------- ---------------
Total current liabilities 18,706 48,347 70,167 (9,552) 127,668
Long-term debt 617,474 2,000 - - 619,474
Deferred income taxes (6,320) 67,671 18,147 - 79,498
Other long-term liabilities 5,543 15,387 1,201 - 22,131
Intercompany notes payable - 211,392 168,549 (379,941) -
Stockholders'/invested equity 218,227 473,003 281,919 (711,265) 261,884
--------------- --------------- -------------- ---------------- ---------------
Total liabilities and stockholders' equity $853,630 $817,800 $539,983 $(1,100,758) $1,110,655
=============== =============== ============== ================ ===============
17
STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 2004
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor
Inc. Subsidiaries Subsidiaries Consolidated
--------------- --------------- -------------- ----------------
Net cash provided by (used in) operations $ (650) $(8,347) $ 57,073 $ 48,076
Investing activities:
Purchases of property, plant and equipment (6,356) (18,419) (1,682) (26,457)
Other - (406) 3 (403)
--------------- --------------- -------------- ----------------
Net cash used in investing activities (6,356) (18,825) (1,679) (26,860)
Financing activities
Net payments under revolving line of credit (209,125) - (12,693) (221,818)
Payments for debt issuance and
extinguishment (9,102) - - (9,102)
Net issuance of (payments on) long-term
debt and other 211,359 23,243 (54,837) 179,765
--------------- --------------- -------------- ----------------
Net cash provided by (used in)
financing activities (6,868) 23,243 (67,530) (51,155)
Effect of foreign currency rate fluctuations
on cash - - 1,028 1,028
Decrease in cash and cash equivalents (13,874) (3,929) (11,108) (28,911)
Cash and cash equivalents at beginning
of period 26,075 4,349 19,553 49,977
--------------- --------------- -------------- ----------------
Cash and cash equivalents at end of period $12,201 $ 420 $8,445 $ 21,066
=============== =============== ============== ================
STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 2003
Guarantors
-------------------------------
Buckeye Non-
Technologies US Guarantor
Inc. Subsidiaries Subsidiaries Consolidated
--------------- --------------- -------------- ----------------
Net cash provided by operations $ 7,948 $26,617 $7,204 $ 41,769
Investing activities:
Purchases of property, plant and equipment (1,575) (15,345) (2,352) (19,272)
Redemptions of short term investments 3,863 - - 3,863
Other - (802) 54 (748)
--------------- --------------- -------------- ----------------
Net cash used in investing activities 2,288 (16,147) (2,298) (16,157)
Financing activities
Net borrowings (payments) under revolving
lines of credit (19,923) - - (19,923)
Payments for debt issuance costs (256) - (415) (671)
Net issuance of (payments on) long-term
debt and other (10,020) (10,680) (1,700) (22,400)
--------------- --------------- -------------- ----------------
Net cash provided by (used in) financing
Activities (30,199) (10,680) (2,115) (42,994)
Effect of foreign currency rate fluctuations
on cash - (19) 1,076 1,057
Increase (decrease) in cash and cash
equivalents (19,963) (229) 3,867 (16,325)
Cash and cash equivalents at beginning
of period 36,443 1,358 18,205 56,006
--------------- --------------- -------------- ----------------
Cash and cash equivalents at end of period $ 16,480 $1,129 $ 22,072 $ 39,681
=============== =============== ============== ================
18
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following management's discussion and analysis describes the
principal factors affecting the results of operations, liquidity and capital
resources, as well as the critical accounting policies and estimates of Buckeye.
This discussion should be read in conjunction with the accompanying financial
statements and our Annual Report on Form 10-K for the year ended June 30, 2003,
which include additional information about our practices and the transactions
that underlie our financial results.
Critical Accounting Policies
The preparation of our financial statements requires estimates,
assumptions and judgements that affect our assets, liabilities, revenues and
expenses. Our management bases these estimates and assumptions on historical
data and trends, current fact patterns, expectations and other sources of
information they believe are reasonable. Actual results may differ from these
estimates under different conditions.
Through June 30, 2003, we accounted for major planned maintenance
activities for our specialty fiber plant in Perry, Florida by accruing the cost
of the maintenance activities over the period between each planned maintenance
activity (the accrue in advance method), which ranged from two to five year
intervals. All other facilities expensed those costs as incurred.
During the three months ended March 31, 2004, we reevaluated this
critical accounting policy and effective July 1, 2003 changed our method of
accounting from the accrue in advance method to the direct expense method. Under
the new accounting method, maintenance costs are expensed as incurred. We
believe the new method is preferable in this circumstance because the
maintenance liability is not recorded until there is an obligating event (when
the maintenance event is actually being performed). The direct expense method
eliminates significant estimates and judgments inherent under the accrual
method, and it is the predominant method used in the industry.
There is no effect of applying the new method for the three months
ended March 31, 2004 and the effect of applying the new method for the nine
months ended March 31, 2004 is a decrease in net loss of $0.3 million. This
decrease in net loss is composed of a before tax profit increase of $9.1 million
($5.7 million net-of-tax, reported as a cumulative effect of accounting change),
offset by $8.5 million in additional cost of goods sold which is the cost of the
planned maintenance activity performed less the expense accrued for the six
months ended December 31, 2003 for this activity. All of these changes are
reflected retroactively in the operating results for the nine months ended March
31, 2004.
For the nine months ended March 31, 2004 we spent $9.6 million on major
planned maintenance costs related to the Perry, Florida plant which are
reflected in cost of goods sold for the period. Although we are not certain as
to the timing or future costs, we believe that we will incur similar planned
maintenance costs over similar time intervals on a going basis.
For a full description of our critical accounting policies, see the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our 2003 Annual Report on Form 10-K.
Results of Operations
Buckeye manufactures and distributes value-added cellulose-based
specialty products used in numerous applications including disposable diapers,
personal hygiene products, engine air and oil filters, food casings, rayon
filaments, acetate plastics, thickeners and papers.
Except as otherwise specified, references to years indicate our fiscal
year ending June 30, 2004 or ended June 30 of the year referenced and
comparisons are to the corresponding period of the prior year.
19
The following discussion includes a comparison of the results of
operations for the three and nine months ended March 31, 2004 to the three and
nine months ended March 31, 2003.
Overview
In early April 2004, we announced the closure of our Cork, Ireland
nonwoven materials facility. During the three months ended March 31, 2004, the
Board of Directors approved the closure which resulted in an impairment charge
of $27.9 million after tax during the quarter. Total restructuring and
impairment charges for the three months ending March 31, 2004 were $28.6 million
after tax; and net loss for the three months was $27.5 million (74 cents per
share). During the same period in 2003, we incurred $19.3 million after tax in
restructuring and impairment charges relating to the partial closure of the
Lumberton, North Carolina cotton linter pulp plant and reported net loss of
$19.7 million (53 cents per share).
Total net sales and operating loss
(millions)
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------
March 31, March 31, March 31, March 31,
2004 2003 Change 2004 2003 Change
- ------------------------------------------------------------------------------------------------------------
Net sales $172.8 $163.5 $9.3 $488.9 $473.1 $15.8
Operating income
(loss) (31.7) (19.0) (12.7) (29.2) 5.4 (34.6)
Net sales for the three months ended March 31, 2004 increased 5.7%. Net
sales for the nine months ended March 31, 2004 increased 3.3%. Growth in sales
of our nonwoven materials was responsible for the majority of the sales
improvements in both the three and nine month periods. This is discussed further
in the analysis of segment results.
Operating income (loss) for the three months ended March 31, 2004
decreased $12.7 million to a loss of $31.7 million. Operating income (loss) for
the nine months ending March 31, 2004 decreased $34.6 million from the same
period in 2003. These decreases in operating performance were the result of
several factors. The largest impact was additional impairment and restructuring
charges of $48.7 million. These impairment and restructuring charges are
discussed in more detail later in this discussion and analysis as well as in the
related notes to the interim financial statements.
Segment results
We report results in two segments: nonwoven materials and specialty
fibers. The specialty fiber segment is an aggregation of cellulosic fibers based
on both wood and cotton. We make financial decisions and allocate resources
based on the sales and operating income of each segment. We allocate selling,
research, and administration expense to each segment and we use the resulting
operating income to measure the performance of the segments. We exclude items
that are not included in measuring business performance, such as restructuring
costs, asset impairment and certain financing and investing costs.
Specialty fibers
($ millions) Three Months Ended Nine Months Ended
- -------------------------------------------------------------------------------------------------------------------
March 31, March 31, Change March 31, March 31, Change
2004 2003 2004 2003
- -------------------------------------------------------------------------------------------------------------------
Net sales $121.3 $121.4 $(0.1) $343.2 $347.6 $(4.4)
Operating income 10.9 9.4 1.5 15.5 33.8 (18.3)
Operating income as % of sales 9.0% 7.7% 4.5% 9.7%
20
Net sales for the three months ended March 31, 2004 were down 0.1% from
the same period the previous year. These consistent results are the combination
of increased selling prices of product produced at our Perry, Florida wood pulp
facility, offset by lower wood pulp volumes and lower selling prices for
cotton-based products. Net sales for the nine months ended March 31, 2004
decreased 1.3% from the same period in 2003. The decrease in net sales during
the nine month period was due primarily to lower selling prices for our
cotton-based products.
Sales price increases and decreases for cotton-based products are
influenced by the variability in the cost and supply of cotton fibers. As the
cost of these fibers fell over the last year, we reduced our sales prices. The
selling prices for our cotton-based products decreased by approximately 1.7% for
the three months and 5.0% for the nine months ended March 31, 2004 from the same
periods in 2003.
Market supply constraints, coupled with a weakening U.S. dollar and
higher energy costs, provided the basis for us to increase our list prices of
certain wood pulps by $40 - $50 per metric ton effective April 1, 2003. The
higher prices were partially implemented during the fiscal fourth quarter of
2003. The full impact of these price increases were realized in the three months
ended March 31, 2004 once we renewed our calendar year supply agreements.
Operating income for the three months ended March 31, 2004 increased
16.0%. This increase was due to the higher wood pulp selling prices, improved
product mix and lower raw material costs at our Perry, Florida wood pulp
facility. These increases were offset by the previously mentioned lower selling
prices at our cotton based facilities and currency driven manufacturing cost
increases at our Glueckstadt, Germany cotton cellulose facility. Operating
income for the nine months ended March 31, 2004 decreased by 54.1% from the same
period in 2003. The decrease in operating income, for the nine month period, was
the result of several additional charges related to unusual events and special
situations discussed below:
- - Lenzing Fibers, a specialty fibers customer which owes us $3.7 million, filed
for Chapter 11 reorganization bankruptcy during the three months ending December
31, 2003. Based on an evaluation of the potential to recover this debt from our
customer, we established a reserve of $3.2 million during the quarter ended
December 31, 2003. In light of new information that became available during the
three months ended March 31, 2004, we reevaluated our allowance for bad debt for
Lenzing Fibers and increased the allowance to 90% or $3.3 million of the
outstanding balance. The reserve represents our best estimate at this time for
the amounts we may not recover as a result of this customer's bankruptcy. We
cannot offer any assurance to the the timing of our recovery, if any, of the
Lenzing receivable.
- - We incurred high manufacturing costs and reduced production at both our Perry,
Florida wood pulp mill and our Memphis, Tennessee cotton cellulose facility
during the quarter ended December 31, 2003. The poor operating results were
related to maintenance work completed in October at each location. The Perry,
Florida plant had difficulty reestablishing stable operations following the
maintenance shutdown, and the Memphis plant was impacted by the startup of new
equipment and processes associated with the production of paper grade products
previously produced at the recently closed Lumberton cotton cellulose plant.
Both plants have now returned to normal operations.
- On October 21, 2003, the union at our Perry, Florida plant, ratified a new
labor agreement effective through March 31, 2008. The agreement included a
one-time retroactive payment of approximately $0.8 million.
Operating income during the nine month period ending March 31, 2004 was
also negatively impacted by currency driven manufacturing cost increases at our
Glueckstadt, Germany cotton facility due to the weakening of the U.S. dollar.
All of these decreases were partially offset by a more favorable specialty wood
pulp sales mix, higher specialty wood pulp prices, and operating the Americana,
Brazil facility for the entire nine months ending March 31, 2004.
21
Nonwoven materials
($millions) Three Months Ended Nine Months Ended
- --------------------------------------------------------------------------------------------------------------------
March 31, March 31, Change March 31, March 31, Change
2004 2003 2004 2003
- --------------------------------------------------------------------------------------------------------------------
Net sales $57.3 $49.8 $7.5 $161.7 $143.1 $18.6
Operating income 1.3 1.5 (0.2) 5.0 2.3 2.7
Operating income as % of sales 2.3% 3.0% 3.1% 1.6%
Net sales for the three months ended March 31, 2004 increased 15.1%.
Net sales for the nine months ended March 31, 2004 increased 13.0%. The
increases in net sales were primarily due to an increase in shipments and
strengthening of the Euro versus the U.S. dollar during both periods.
Nonwoven materials operating income for the three months ended March
31, 2004 decreased 13.3% from the same period in 2003. While sales were up year
over year, sales mix was unfavorable. Additionally, much of the growth in
shipment volume from the previous year was supplied from our high cost Cork,
Ireland facility. Although the strengthening of the Canadian Dollar hurt the
profitability of our Canadian plant by about $0.7 million, the strengthening
Euro helped the profitability of our European operations by approximately the
same amount.
Operating income for the nine months ended March 31, 2004 improved by
117.4%. Our increase in operating income is reflective of increased shipment
volume, improved sales mix as well as improvements in reliability and cost
reductions during the nine months ended March 31, 2004.
Restructuring and impairment costs
($millions) Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------
March 31, March 31, March 31, March 31, Change
2004 2003 Change 2004 2003
- ------------------------------------------------------------------------------------------------------------
Restructuring costs $ 0.1 $ $ 0.1 $ 3.9 $ - $ 3.9
Impairment of long-lived
assets 43.9 29.7 14.2 44.8 29.7 15.1
Restructuring costs
During fiscal 2003 we initiated the first phase of our restructuring
program designed to deliver cost reductions through reduced expenses across our
company. The main component of this phase was the partial closure of our
Lumberton, North Carolina facility resulting in the consolidation of our U.S.
cotton linter pulp production at our Memphis, Tennessee facility. During the
nine months ended March 31, 2004, additional expenses of $0.9 million were
recorded and $2.5 million were paid for this phase of the program. These
additional expenses included $0.7 million for miscellaneous costs associated
with the partial closure of the Lumberton facility. We estimate the remaining
expenses for this phase of the restructuring program to be approximately $0.1
million, which we expect to be recognized and paid in calendar year 2004.
During the first quarter of fiscal 2004, we entered into a second phase
of our restructuring program. This program was a continuation of the program
initiated in the fourth quarter of fiscal 2003 and will enable us to improve our
operating results by approximately $7.7 million annually through reduced
salaries, benefits, other employee-related expenses and operating expenses. As a
result of this restructuring, we initially expected approximately 50 positions
would be eliminated. During the three months ended March 31, 2004, we expanded
this estimate to include an additional 28 positions with an estimated cost of
$0.7 million. These 78 positions include manufacturing, sales, product
development and administrative functions throughout the organization. Voluntary
and involuntary termination benefits related to this phase of the program of
$2.9 million were expensed and $2.3 million were paid during the nine months
ended March 31, 2004. We expect payments related to this phase of the
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restructuring program to continue into calendar 2005. The total cost of this
phase of the restructuring program is estimated to be approximately $3.7
million.
On April 1, 2004 we announced that we will discontinue production of
nonwoven materials at our Cork, Ireland facility by August of 2004. We will
continue to meet customer needs for nonwoven materials by producing these
products at our facilities in Delta, British Columbia, Canada; Steinfurt,
Germany; and Gaston County, North Carolina. We expect this consolidation will
enable us to improve our overall nonwoven materials operating results by about
$7.0 million annually and reduce working capital needs by $4.0 million. The
closure of the facility will result in the termination of 83 employees, and we
expect restructuring expenses for severance and employee benfits related to the
closure to be approximately $3.0 million over the remainder of calendar 2004. We
expect payments related to this restructuring program will extend through the
end of calendar year 2004.
Impairment costs
During the three months ended March 31, 2004, our Board of Directors
approved the discontinuation of production of nonwoven materials at our Cork,
Ireland facility. While the demand for nonwovens products is growing in the low
to mid-single digits, the growth in demand has not been sufficient to fully
utilize existing capacity. As such, industry participants have been
rationalizing production by taking down time, reducing operating shifts and
closing facilities.
Due to excess production capacity around the globe, we have operated
Cork below its productive capacity since the plant started up in 1998. Because
of its location and small size, our cost to produce at Cork is higher than it is
at our other locations. After careful consideration of all the options
available, management reached the decision to close the Cork facility and
consolidate production at our three other nonwovens manufacturing facilities. We
expect production at Cork to cease during the first quarter of fiscal 2005.
Closing our Cork facility will reduce our nonwovens capacity by about 10%.
In accordance with SFAS No. 144, Accounting for Impairment or Disposal
of Long-Lived Assets (SFAS No. 144), we believe the commitment to discontinue
production represented an indicator of impairment and subsequently we evaluated
the value of the property, plant, and equipment associated with the Cork
facility. Under this guidance, we determined that these long-lived assets, with
a carrying amount of $48.4 million (net of $6.9 million of foreign currency
translation adjustment), were impaired and wrote them down to their estimated
fair value of $5.4 million, resulting in an impairment charge of $43.0 million.
Fair value was based on the estimated salvage value of the Cork facility as we
do not believe the facility can be utilized for its intended purpose and we will
eventually abandon the property.
During the three months ended March 31, 2004, we also impaired certain
manufacturing equipment at our Perry, Florida wood pulp facility with a carrying
value of $0.9 million. The impaired equipment was replaced by an alternative
technology that was more cost effective to operate. Due to the limited use for
the impaired equipment, there was no remaining value and thus the equipment was
fully impaired.
During the quarter ended December 31, 2003, we fully impaired
engineering costs and capitalized interest for a long delayed project at our
Perry, Florida wood pulp mill. Based on the significant length of time before
the project would be initiated, we determined that the engineering work has no
remaining value and was fully impaired. The carrying value of the asset was $0.9
million.
Net interest expense and amortization of debt costs
Net interest expense and amortization of debt costs remained flat for
the three months ended March 31, 2004 compared to the same period in 2003 and
decreased $0.2 million for the nine months ended March 31, 2004 versus the same
period in 2003. The consistency is the result of several offsetting factors.
Lower interest rates and average debt levels during the nine months ended March
31, 2004 offset both the negative impact of the termination of the interest rate
swap and the additional interest expense of holding the $150 million of senior
23
subordinated notes due 2005 and the $200 million of senior notes due 2013
concurrently for 30 days during the first nine months of fiscal 2004.
Loss on early extinguishment of debt
During the first quarter of fiscal 2004, $3.3 million was expensed due
to the early extinguishment of the $150 million senior subordinated notes due
2005. These expenses included a $2.1 million call premium and $1.2 million for
the write-off of deferred financing costs. During the second quarter of fiscal
2004, $1.6 million was expensed due to the write-off of the deferred financing
costs of the former revolving credit facility. The total expense related to the
early extinguishment of debt for the nine months ending March 31, 2004 was $4.9
million.
Foreign exchange, amortization of intangibles and other
The favorable variance of $1.1 million for the three months ended March
31, 2004 was primarily the result of an increase in foreign currency gains with
the recent strengthening of the U.S. dollar versus foreign currency losses due
to the weakening of the U.S. dollar during the same period in 2003. The
favorable variance of $0.5 million in the nine-month period was due primarily to
the absence of expenses related to the settlement of a lawsuit and the negative
impact of a natural gas forward contract recognized during the first quarter of
fiscal 2003. These increases were partially offset by a decrease in foreign
currency gains of $0.8 million in fiscal 2004 from the same period in fiscal
2003.
Financial Condition
Cash flow
Cash flow provided by operating activities of $48.1 million for the
nine months ended March 31, 2004 was $6.3 million higher than the same period in
the prior year. Although our net loss increased by $19.9 million during the
period, the increase in net loss was primarily generated by non-cash impairment
expenses and the extended maintenance shutdown taken at our Perry, Florida
specialty fibers facility. Contributing to the improved cash flow provided by
operating activities were decreases in both inventories and accounts receivable
during the period. Approximately $10.0 million of the accounts receivable
decrease was a permanent reduction due to a change in our cash management
strategy, as we began discounting large letters of credit, enabling us to reduce
our debt and interest costs. These improvements were offset by the deferred
income tax benefit related to the Cork, Ireland impairment and decreases in
accounts payable and other current liabilities generated as a result of seasonal
payments related to employee retirement benefits and property taxes.
Cash provided from operations and cash on hand financed capital
expenditures of $26.5 million and were used to make debt payments net of
issuance proceeds of $45.0 million during the nine months ended March 31, 2004.
The $7.2 million increase in capital expenditures versus the same period in 2003
was primarily attributable to capital expenditures at our Memphis, Tennessee
facility to provide the capability to manufacture cotton cellulose products
previously manufactured at our Lumberton, North Carolina facility and to the
maintenance shutdown at the Perry, Florida plant during calendar 2003.
Contractual obligations
There have been no material changes to our contractual obligations
discussed in our 2003 Form 10-K other than those changes in long-term debt
discussed in "Liquidity and capital resources" below.
Liquidity and capital resources
We have the following major sources of financing: revolving credit
facility, senior notes and senior subordinated notes. Our revolving credit
facility, senior notes and senior subordinated notes contain various covenants.
At March 31, 2004, we were in compliance with such covenants and believe we will
remain in compliance.
24
Senior notes - On September 22, 2003 we placed privately $200 million
in aggregate principal amount of 8.5% senior notes due October 1, 2013. The
senior notes are unsecured obligations and are senior to any of our subordinated
debt. The notes are guaranteed by our direct and indirect domestic subsidiaries
that are also guarantors on our senior secured indebtedness. We used the net
proceeds from the private placement to redeem our $150 million senior
subordinated notes due 2005, make a permanent reduction of $40 million to our
revolving credit facility and pay the related transaction costs. On September
22, 2003, we called the senior subordinated notes due in 2005. These notes were
redeemed on October 22, 2003. On December 18, 2003 we completed our offer to
exchange these privately placed unregistered senior notes for debt securities of
like principal amount that have been registered under the Securities Act of
1933, as amended.
We incurred an additional $1.1 million of interest expense associated
with maintaining the 2005 notes through the call period. Of the $1.1 million, we
expensed $0.3 million during the first three months of fiscal 2004 and recorded
the remaining $0.8 million during the three months ended December 31, 2003. The
total costs for the issuance of these notes was $5.3 million and will be
amortized over the life of the notes using the effective interest method.
Senior subordinated notes - Under the indentures governing our senior
subordinated notes, as well as the indenture that governs the senior notes, our
ability to incur additional debt is limited. Under these indentures, additional
debt must be incurred as so-called "ratio" debt or, alternatively, must be
permitted in form and amount as "Permitted Indebtedness." In order to incur
ratio debt, a specified consolidated fixed charge coverage ratio (as defined in
the indentures) must equal or exceed 2:1 (measured on a rolling four-quarter
basis). At March 31, 2002, our fixed charge coverage ratio fell below 2:1. This
development did not breach any covenant or constitute an event of default under
any of our debt agreements. However, until such time as the ratio again equals
or exceeds 2:1, we can only incur debt that is Permitted Indebtedness.
On October 16, 2003, we successfully completed a solicitation of
consents from holders of our notes due in 2008 (2008 notes) to amend this
indenture to conform certain provisions of the 2008 notes to the provisions in
our notes due in 2010 and to current market practice. This amendment allowed us
to refinance our revolving credit facility (discussed later in this note) while
we are still limited to Permitted Indebtedness as defined in the indentures.
Under each of our indentures, the fixed charge coverage ratio test is
measured on a rolling four-quarter basis. While we can offer no assurance in
this regard, we believe that our operating results will improve over the next
several quarters and that such improved results together with recent reductions
in our outstanding debt, will enable us to exceed the required 2:1 ratio
necessary to incur ratio debt under indentures governing the senior notes and
the senior subordinated notes.
Interest rate swap - In May 2001, we entered into an interest rate swap
on $100 million of 8% fixed rate notes maturing in October 2010. The swap
converted interest payments from a fixed rate to a floating rate of LIBOR plus
1.97%. This arrangement qualified as a fair value hedge under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. As such, the net
effect from the interest rate swap was recorded as part of interest expense. The
swap agreement settled quarterly. On October 15, 2003, the swap counter party
exercised its right to change the termination date of the swap from October 15,
2010 to October 15, 2003. By exercising this right, the swap counter party paid
us $4.0 million as an early termination fee, which is being amortized as a
reduction to interest expense through October 15, 2010. During the three months
ended March 31, 2004 and 2003, the swap reduced the Company's interest expense
by $0.1 million and $1.1 million, respectively and will continue to reduce
interest expense by approximately $0.1 million per quarter through the
amortization period of the termination fee.
Revolving credit facility - On November 5, 2003, we established a $220
million senior secured credit facility, comprised of a $70 million revolving
credit facility (the revolver) maturing on September 15, 2008 and a $150 million
25
term loan (the term loan) maturing on October 15, 2010. This facility amends and
restates our existing $215 million revolving credit facility. We used the
proceeds of the new credit facility to pay the outstanding balance on the
revolving credit facility plus transaction fees and expenses. The interest rate
applicable to borrowings under the revolver is the agent's prime rate plus 1.50%
to 1.75% or a LIBOR-based rate ranging from LIBOR plus 2.50% to LIBOR plus
3.25%. The interest rate applicable to the term loan is the agent's prime rate
plus 1.50% or a LIBOR-based rate plus 2.50%. The credit facility is secured by
substantially all of our assets located in the United States.
The credit facility contains covenants customary for financing of this
type. The financial covenants include: maximum ratio of consolidated net senior
secured debt to consolidated EBITDA, minimum ratio of consolidated EBITDA to
consolidated interest expense and minimum ratio of consolidated EBITDA minus
capital expenditures and taxes to consolidated fixed charges; as well as
limitations on capital expenditures.
As of March 31, 2004 we had $64.5 million borrowing capacity on the
revolving credit facility. The portion of this amount that we could borrow will
depend on our financial results and ability to comply with certain borrowing
conditions under the revolving credit facility. Total costs for the issuance of
the new facility were approximately $3.3 million and will be amortized using the
effective interest method over the life of the facility.
Other credit facilities - On December 5, 2003 we paid off the remaining
balance on our receivables-based credit facility. We used cash on hand and the
restricted cash held as collateral for the facility to make the final payment.
On September 30, 2003, we renewed our Canadian credit facility. The
renewal extended the maturity to November 30, 2004 and required a 20% reduction
of the principal to Canadian $16.0 million (U.S. $12.2 million equivalent based
on exchange rates in effect at March 31, 2004). As of March 31, 2004, we had
Canadian $3.0 million (U.S. $2.3 million equivalent) outstanding on this
facility. Availability on this facility is incorporated in the availability of
our revolving credit facility and subject to the same borrowing conditions
previously discussed. All other terms and conditions remained the same. We
intend to refinance this facility with available long-term credit facilities
and, therefore, have included the balance in long-term debt.
On April 21, 2004, we announced our intent to invest approximately
$18.0 million at our Americana, Brazil cotton cellulose manufacturing facility
to upgrade the operation to produce a variety of specialty market pulps. The
investment will be made over the next 18 months to enable the plant to begin
production of more technically advanced products in the fall of 2005.
Forward-Looking Statements
Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q are forward-looking statements
that involve risks and uncertainties that could cause our actual results to
differ materially, including but not limited to, economic, competitive,
governmental, and technological factors affecting our operations, financing,
markets, products, services, prices, and other factors. The forward-looking
statements included in this Quarterly report on From 10-Q are made only as the
date hereof. We expressly disclaim any intent or obligations to publicly update
any forward-looking statements to reflect subsequent events or circumstances or
the occurrence of unanticipated events. For additional factors that could impact
future results, please see our 2003 Annual Report on Form 10-K on file with the
Securities and Exchange Commission.
26
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the nine months ending March 31, 2004, there have been no
material changes to our market risk except for the interest rate implications
caused by the changes in our debt structure. Our amended and restated revolving
credit facility improved our variable interest rates by over 1.0%. We also fixed
an additional $50 million of debt at 8.5% which was previously variable rate
debt. In addition, the early termination of the swap fixed $100 million of debt
at 8.0% that under the swap was effectively variable debt.
Item 4. Controls and Procedures
Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted
an evaluation as of March 31, 2004 of our disclosure controls and procedures, as
such term is defined under Rule 13a-15(e) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation,
our Chief Executive Officer and our Chief Financial Officer concluded that our
disclosure controls and procedures were effective.
No changes in our internal control over financial reporting occurred
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
27
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Listing of Exhibits
18 Letter regarding change in accounting principles executed
by Ernst & Young LLP, on April 20, 2004.
31.1 Certification of the Chief Executive Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
signed by David B. Ferraro, Chief Executive Officer of Buckeye
Technologies Inc. on April 29, 2004.
31.2 Certification of the Chief Financial Officer, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002,
signed by Kristopher J. Matula, Chief Financial Officer of
Buckeye Technologies Inc. on April 29, 2004.
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
signed by David B. Ferraro, Chief Executive Officer of Buckeye
Technologies Inc. on April 29, 2004.
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
signed by Kristopher J. Matula, Chief Financial Officer of
Buckeye Technologies Inc. on April 29, 2004.
(b) Reports on Form 8-K
During the three months ended March 31, 2004, the following reports
were filed or furnished on Form 8-K:
- Report dated January 7, 2004 announcing the conference call
regarding operating results for the three months ended December
31, 2003.
- Report dated January 20, 2004 announcing the press release
regarding the results of operations for the three months ended
December 31, 2003.
(c) Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
28
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Buckeye Technologies Inc.
By: /s/ David B. Ferraro
________________________________________
David B. Ferraro, Chief Executive Officer
Date: April 29, 2004
By: /s/ Kristopher J. Matula
__________________________________________
Kristopher J. Matula, Executive Vice President
and Chief Financial Officer
Date: April 29, 2004