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| 8-K - BUCKEYE TECHNOLOGIES INC. 8K - BUCKEYE TECHNOLOGIES INC | a50451599.htm |
Exhibit 99.1
Buckeye’s First Quarter FY 2013 Results
1Q Sales down 15% versus year-ago quarter
Foley outage reduced 1Q EPS by $0.04; Sales by $17 million
Gross margin improved to 25.4% vs. 24.3% in 1Q-12
Adjusted 1Q EPS* of $0.62 compared to a record $0.74 in 1Q-FY12
MEMPHIS, Tenn.--(BUSINESS WIRE)--October 23, 2012--Buckeye Technologies Inc. (NYSE:BKI) today announced first quarter net sales of $197 million and adjusted net income* of $24.6 million or $0.62 per share. Net sales for the quarter were down $35 million or 15% compared to the year ago quarter, mainly due to lost sales resulting from the June steam drum failure outage at our Foley facility and weaker demand in some of our wood and cotton specialty fibers markets. The sale of the Merfin Systems converting business in the third quarter of fiscal 2012 accounted for $5 million of the year over year reduction in net sales.
Adjusted operating income of $39.0 million was down $4.4 million compared to the year ago quarter on lower sales volumes, although gross margin was very strong at 25.4% for the quarter compared to 24.3% in the year ago quarter, driven by margin improvements at our cotton cellulose and nonwovens plants. The June outage at our Foley mill had a negative impact of $2.2 million on first quarter operating income and $0.04 on EPS. Selling, general and administrative (SRA) expenses of $13.2 million were up $0.8 million year over year due to growth initiative consulting and legal fees incurred during the quarter.
Adjusted net income* of $24.6 million, or $0.62 per share, excludes net income of $5.5 million or $0.14 per share relating to the cellulosic biofuel credit and after-tax restructuring charges of $0.6 million or $0.02 per share. Adjusted net income* was down $5.3 million or $0.12 per share compared to the prior year period’s $29.9 million or $0.74 per share, which excluded net income of $11.2 million or $0.28 per share relating to the cellulosic biofuel credit. The year over year reduction in adjusted net income was driven by the drop in adjusted operating income mentioned above as well as by a higher effective tax rate.
Comparing the first quarter of fiscal year 2013 to the fourth quarter of fiscal 2012, sales were down $28 million or 12%. This was mainly due to a $27 million reduction in sales from the Foley specialty wood fibers facility, as shipments were impacted by the June outage and demand softness in some markets. Adjusted operating income was down $1.3 million due to lower shipment volume and unfavorable mix at Foley, and higher SRA expenses. These were partly offset by higher operating income from our Memphis specialty cotton fibers plant and our Nonwovens segment. The net impact of the June outage was $1.9 million less in Q1 than in Q4. Adjusted EPS* of $0.62 was down $0.04 versus the fourth quarter due to lower adjusted operating income and a higher effective tax rate.
Free cash flow* was negative $21 million for the quarter and long-term debt increased by $23 million to $82 million, as the Company repaid $28 million of alternative fuel mixture credits which will be traded for higher value cellulosic biofuel credits. We currently expect to realize about $40 to $45 million in positive cash flow over the next three quarters relating to the cellulosic biofuel credit. Capital spending continues to be at a high level as Buckeye continues work on a couple of large high return projects. At the end of the quarter our cash and short term investments stood at $48 million. Inventories were up $25 million during the quarter, with about half of that coming from planned restocking after the June outage at Foley and the other half due to weaker demand in some markets. Share repurchases were very limited in the first quarter, but have picked up again in October, as we have repurchased about 290,000 shares for $8.9 million in October through today.
Chairman and Chief Executive Officer John B. Crowe said, “Our first quarter fiscal 2013 financial results came in as we expected, except that the impact of the June outage at Foley on the quarter was less than expected. We are experiencing some weaker conditions in a few of the specialty fibers markets, namely in tire cord, auto filtration and fluff pulp. We are seeing positive signs as well, though, in the LCD/LED markets for our cotton specialty fibers, where we see growth returning in 2013, and in nonwovens, where our shipment volume is up year over year. We were pleased to see our gross margin improve to above 25% in the quarter. During the quarter, we made good progress on our Specialty Expansion Project and the Oxygen Delignification Project at our Florida wood fibers facility. Both are important projects and are expected to come on-line in April and July 2013 respectively, and will be key contributors for revenue growth and cost reduction. In our Nonwovens business, we continue to work toward transitioning the supply of our current customers from our Delta facility to our other two Nonwovens facilities following the Delta closure, which remains on schedule for December 2012.”
Mr. Crowe went on to say, “While the headwinds we forecasted in August did arrive, we are committed to disciplined execution of our strategy. With continued strong cash flow and a strong balance sheet, we are well-positioned to continue to provide shareholder value and to meet the challenges of a sluggish economy over the next couple of quarters.”
Buckeye has scheduled a conference call for Wednesday morning, October 24, at 11:00 a.m. ET to discuss first quarter performance. Persons interested in listening by telephone may dial in at (800) 768-6570 within the United States. International callers should dial (785) 830-1942. Supplemental material for the call will be available on the Company’s website at www.bkitech.com or at www.streetevents.com.
Buckeye, a leading manufacturer and marketer of specialty fibers and nonwoven materials, is headquartered in Memphis, Tennessee, USA. The Company currently operates facilities in the United States, Germany, and Canada. Its products are sold worldwide to makers of consumer and industrial goods.
Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the federal securities laws and is intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. “Forward-looking statements” generally can be identified by the use of forward-looking terminology such as “assumptions,” “target,” “guidance,” “outlook,” “plans,” “projection,” “may,” “will,” “would,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “potential,” or “continue (or the negative or other derivatives of each of these terms or similar terminology). The “forward-looking statements” include, without limitation, statements regarding the economic outlook for Buckeye and the demand for its products, the results and timing of Buckeye’s strategic investments and growth opportunities and expected levels of cash flow and debt reduction. These statements are based on management’s estimates and assumptions with respect to future events and financial performance and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results could differ materially from those projected as a result of certain factors. A discussion of factors that could cause results to vary is included in Buckeye’s Annual Report on Form 10-K and other periodic filings with the Securities and Exchange Commission.
Note Regarding Non-GAAP Financial Measures
*This release includes certain financial information not derived in accordance with generally accepted accounting principles (“GAAP”). The non-GAAP measures presented are “adjusted operating income,” “adjusted net income,” “adjusted earnings per share,” “free cash flow” and are equal to net income, pre-tax income, operating income and earnings per share excluding the after-tax effects of alternative fuel mixture credits (AFMC) and cellulosic biofuel credits (CBC), goodwill and long-term asset impairment cost, and restructuring cost.
| ($ in Millions) | Q1-2013 | Q1-2012 | Q4-2012 | ||||||||||||
|
Operating income |
|||||||||||||||
| Operating income in accordance with GAAP | 38.0 | 43.4 | 40.0 | ||||||||||||
| Special items: | |||||||||||||||
| Restructuring costs | 1.0 | --- | --- | ||||||||||||
| Asset and Goodwill impairment | --- | --- | 0.3 | ||||||||||||
|
Adjusted operating income |
39.0 | 43.4 | 40.3 | ||||||||||||
|
Net income |
|||||||||||||||
| Net income in accordance with GAAP | 29.5 | 41.1 | 28.5 | ||||||||||||
| Special items, after-tax: | |||||||||||||||
| Restructuring costs | 0.6 | --- | 1.2 | ||||||||||||
| AFMC / CBC | (5.5 | ) | (11.2 | ) | (3.3 | ) | |||||||||
| Asset and Goodwill impairment | --- | --- | (0.2 | ) | |||||||||||
| Adjusted net income | 24.6 | 29.9 | 26.2 | ||||||||||||
|
Earnings per share (EPS) |
|||||||||||||||
| EPS in accordance with GAAP | $ | 0.74 | $ | 1.03 | $ | 0.71 | |||||||||
| Special items, after-tax, per share: | |||||||||||||||
| Restructuring costs | 0.02 | --- | 0.03 | ||||||||||||
| AFMC / CBC | (0.14 | ) | (0.29 | ) | (0.08 | ) | |||||||||
| Asset and Goodwill Impairment | --- | --- | --- | ||||||||||||
| Adjusted EPS | $ | 0.62 | $ | 0.74 | $ | 0.66 | |||||||||
|
|
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|
($ in Millions) |
Q1-2013 |
Q1-2012 |
Q4-2012 |
||||||||||||
|
Free Cash Flow |
|||||||||||||||
| Net cash provided by operating activities | 3.7 | 28.5 |
87.4 |
||||||||||||
| Purchases of property, plant & equipment / Other | (28.1 | ) | (10.8 | ) | (38.9 | ) | |||||||||
| Proceeds from insurance settlement related to capital investments | 3.1 | ||||||||||||||
| Proceeds from sale of assets | --- | --- | 6.1 | ||||||||||||
| Free Cash Flow | (21.3 | ) | 17.7 |
54.6 |
|||||||||||
Loss from Discontinued Operations
*As a result of the disposition of our Americana operations in Q4 2012 and resulting end to our continuing involvement with the inclusion of the waste water treatment facilities in the assets that were sold, we believe the results of the operations for this business, including the loss recognized from the sale and less applicable income taxes (benefit), should be reported in discontinued operations in our consolidated income statement. The table below shows the detail behind the loss from discontinued operations for each period reported in the press release financial statements.
|
($ in Millions) |
Q1-2013 |
Q1-2012 |
Q4-2012 |
||||||||
| Net Sales | 0.0 | 8.6 | 0.0 | ||||||||
| COGS | 0.0 | 8.0 | 0.3 | ||||||||
| Gross Margin | 0.0 | 0.6 | (0.3 | ) | |||||||
| Asset Impairment Cost | 0.0 | 0.0 | 0.1 | ||||||||
| Restructuring Costs | 0.0 | 0.0 | 1.8 | ||||||||
| Operating Income | 0.0 | 0.6 | (2.2 | ) | |||||||
| Net Interest Expense (Income) | 0.0 | (0.1 | ) | (0.1 | ) | ||||||
| Foreign Exchange & Other | 0.0 | 0.1 | 0.3 | ||||||||
| Earnings before Tax | 0.0 | 0.6 | (2.4 | ) | |||||||
| Income tax expense (Benefit) | 0.0 | 0.0 | (0.5 | ) | |||||||
| Income (Loss) from Discontinued Operations | 0.0 | 0.6 | (1.9 | ) | |||||||
| BUCKEYE TECHNOLOGIES INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
| (unaudited) | |||||||||||||||
| (In thousands, except per share data) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2012 | June 30, 2012 | September 30, 2011 | |||||||||||||
| Net sales | $ | 196,958 | $ | 224,940 | $ | 231,462 | |||||||||
| Cost of goods sold | 146,838 | 171,877 | 175,196 | ||||||||||||
| Gross margin | 50,120 | 53,063 | 56,266 | ||||||||||||
| Gross margin as a percentage of sales | 25.4 | % | 23.6 | % | 24.3 | % | |||||||||
| Selling, research and administrative expenses | 13,188 | 12,257 | 12,339 | ||||||||||||
| Amortization of intangibles and other | 508 | 510 | 496 | ||||||||||||
| Asset impairment loss | - | 329 | - | ||||||||||||
| Restructuring costs | 963 | - | - | ||||||||||||
| Other operating income | (2,528 | ) | - | - | |||||||||||
| Operating income (loss) | 37,989 | 39,967 | 43,431 | ||||||||||||
| Net interest expense and amortization of debt costs | (641 | ) | 5,211 | (3,449 | ) | ||||||||||
| Foreign exchange and other | (363 | ) | 301 | 642 | |||||||||||
| Income from continuing operations before income taxes | 36,985 | 45,479 | 40,624 | ||||||||||||
| Income tax expense | 7,494 | 15,075 | 101 | ||||||||||||
| Income from continuing operations | 29,491 | 30,404 | 40,523 | ||||||||||||
| Loss from discontinued operations, net of tax | - | (1,889 | ) | 584 | |||||||||||
| Net Income | $ | 29,491 | $ | 28,515 | $ | 41,107 | |||||||||
| Computation of diluted earnings per share under the two-class method: | |||||||||||||||
| Net income attributable to shareholders | $ | 29,491 | $ | 28,515 | $ | 41,107 | |||||||||
|
Less: Distributed and undistributed income allocated to participating securities (nonvested stock) |
(337 | ) | (341 | ) | (606 | ) | |||||||||
|
Distributed and undistributed income available to shareholders |
$ | 29,154 | $ | 28,174 | $ | 40,501 | |||||||||
| Diluted weighted average shares outstanding | 39,255 | 39,466 | 39,839 | ||||||||||||
| Income per share from continuing operations | $ | 0.74 | $ | 0.76 | $ | 1.02 | |||||||||
| Loss per share from discontinued operations | - | (0.05 | ) | 0.01 | |||||||||||
| Diluted earnings per share | $ | 0.74 | $ | 0.71 | $ | 1.03 | |||||||||
| BUCKEYE TECHNOLOGIES INC. | ||||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||||
| (In thousands) | ||||||||||||
| September 30 | June 30 | September 30 | ||||||||||
| 2012 | 2012 | 2011 | ||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 39,196 | $ | 38,284 | $ | 32,794 | ||||||
| Short term investments | 9,051 | 8,813 | - | |||||||||
| Accounts receivable, net | 131,212 | 126,705 | 135,322 | |||||||||
| Inventories | 114,948 | 90,183 | 101,588 | |||||||||
| Deferred income taxes and other | 27,893 | 25,697 | 11,396 | |||||||||
| Total current assets | 322,300 | 289,682 | 281,100 | |||||||||
| Property, plant and equipment, net | 508,683 | 492,109 | 514,743 | |||||||||
| Goodwill | - | - | 2,425 | |||||||||
| Deferred income taxes | 50,144 | 42,427 | 44,970 | |||||||||
| Intellectual property and other, net | 12,572 | 13,193 | 29,026 | |||||||||
| Total assets | $ | 893,699 | $ | 837,411 | $ | 872,264 | ||||||
| Liabilities and stockholders' equity | ||||||||||||
| Current liabilities: | ||||||||||||
| Trade accounts payable | $ | 30,775 | $ | 40,600 | $ | 37,728 | ||||||
| Accrued expenses | 38,632 | 43,135 | 60,418 | |||||||||
| Total current liabilities | 69,407 | 83,735 | 98,146 | |||||||||
| Long-term debt | 81,842 | 58,578 | 90,351 | |||||||||
| Deferred income taxes | 16,385 | 4,930 | 5,438 | |||||||||
| Other liabilities | 90,497 | 87,132 | 87,374 | |||||||||
| Stockholders' equity | 635,568 | 603,036 | 590,955 | |||||||||
| Total liabilities and stockholders' equity | $ | 893,699 | $ | 837,411 | $ | 872,264 | ||||||
| BUCKEYE TECHNOLOGIES INC. | |||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||
| (unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| September 30, 2012 | June 30, 2012 | September 30, 2011 | |||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||
| Net income (loss) | $ | 29,491 | $ | 28,515 | $ | 41,107 | |||||||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||||
| Asset impairment loss | - | 465 | - | ||||||||||||
| Depreciation | 12,242 | 12,091 | 13,026 | ||||||||||||
| Amortization | 663 | 665 | 651 | ||||||||||||
| Deferred income taxes | 1,608 | 1,253 | (13,632 | ) | |||||||||||
| Noncurrent AFMC refund payable | 3,288 | (3,648 | ) | 15,462 | |||||||||||
| Loss on disposal of equipment | 529 | 954 | 283 | ||||||||||||
| Insurance settlement | (2,528 | ) | - | - | |||||||||||
| Provision for bad debts | 104 | 37 | 555 | ||||||||||||
| Excess tax benefit from stock based compensation | (1,048 | ) | (1,367 | ) | (765 | ) | |||||||||
| Stock-based compensation expense | 1,340 | 868 | 966 | ||||||||||||
| Other | 20 | 2,107 | (112 | ) | |||||||||||
| Change in operating assets and liabilities | |||||||||||||||
| Accounts receivable | 16,121 | 3,114 | (1,462 | ) | |||||||||||
| Income tax receivable | (20,525 | ) | - | - | |||||||||||
| Inventories | (24,043 | ) | 20,227 | (12,447 | ) | ||||||||||
| Other assets | (131 | ) | (2,889 | ) | 359 | ||||||||||
| Accounts payable and other liabilities | (13,395 | ) | 24,977 | (15,527 | ) | ||||||||||
| Net cash provided by operating activities | 3,736 | 87,369 | 28,464 | ||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||
| Purchases of property, plant & equipment | (28,103 | ) | (38,734 | ) | (10,713 | ) | |||||||||
| Proceeds from sale of assets | - | 6,085 | - | ||||||||||||
| Short term investments | - | (9,213 | ) | - | |||||||||||
|
Proceeds from insurance settlement related to capital investments |
3,071 | - | - | ||||||||||||
| Other | (17 | ) | (128 | ) | (51 | ) | |||||||||
| Net cash used in investing activities | (25,049 | ) | (41,990 | ) | (10,764 | ) | |||||||||
| FINANCING ACTIVITIES | |||||||||||||||
| Net borrowings (payments) under line of credit | 23,264 | (11,561 | ) | (6,570 | ) | ||||||||||
| Excess tax benefit from stock based compensation | 1,048 | 1,367 | 765 | ||||||||||||
| Purchase of treasury shares | (28 | ) | (22,327 | ) | (8,648 | ) | |||||||||
| Net proceeds from sale of equity interests | 874 | 253 | 638 | ||||||||||||
| Payment of dividend | (3,148 | ) | (3,164 | ) | (2,410 | ) | |||||||||
| Other | (864 | ) | (1,057 | ) | (469 | ) | |||||||||
| Net cash used in financing activities | 21,146 | (36,489 | ) | (16,694 | ) | ||||||||||
| Effect of foreign currency rate fluctuations on cash | 1,079 | (7,773 | ) | 1,294 | |||||||||||
| Increase in cash and cash equivalents | 912 | 1,117 | 2,300 | ||||||||||||
| Cash and cash equivalents at beginning of period | 38,284 | 37,167 | 30,494 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 39,196 | $ | 38,284 | $ | 32,794 | |||||||||
| BUCKEYE TECHNOLOGIES INC. | |||||||||||||||
| SUPPLEMENTAL FINANCIAL DATA | |||||||||||||||
| (unaudited) | |||||||||||||||
| (In thousands) | |||||||||||||||
| Three Months Ended | |||||||||||||||
| SEGMENT RESULTS | September 30, 2012 | June 30, 2012 | September 30, 2011 | ||||||||||||
| Specialty Fibers | |||||||||||||||
| Net sales | $ | 143,311 | $ | 170,950 | $ | 174,817 | |||||||||
| Operating income (a) | 37,072 | 39,106 | 43,245 | ||||||||||||
| Depreciation and amortization (b) | 7,709 | 7,670 | 7,694 | ||||||||||||
| Total assets | 505,281 | 487,764 | 520,636 | ||||||||||||
| Capital expenditures | 25,264 | 33,368 | 8,985 | ||||||||||||
| Nonwoven Materials | |||||||||||||||
| Net sales | $ | 58,374 | $ | 61,827 | $ | 64,685 | |||||||||
| Operating income (a) | 5,522 | 3,626 | 2,328 | ||||||||||||
| Depreciation and amortization (b) | 4,087 | 3,945 | 4,217 | ||||||||||||
| Total assets | 188,297 | 182,924 | 198,576 | ||||||||||||
| Capital expenditures | 1,885 | 4,171 | 1,689 | ||||||||||||
| Corporate | |||||||||||||||
| Net sales | $ | (4,727 | ) | $ | (7,837 | ) | $ | (8,040 | ) | ||||||
| Operating income (loss) (a) | (4,605 | ) | (2,765 | ) | (2,142 | ) | |||||||||
| Depreciation and amortization (b) | 954 | 987 | 946 | ||||||||||||
| Total assets | 200,121 | 166,723 | 153,052 | ||||||||||||
| Capital expenditures | 954 | 1,195 | 39 | ||||||||||||
| Total | |||||||||||||||
| Net sales | $ | 196,958 | $ | 224,940 | $ | 231,462 | |||||||||
| Operating income (a) | 37,989 | 39,967 | 43,431 | ||||||||||||
| Depreciation and amortization (b) | 12,750 | 12,602 | 12,857 | ||||||||||||
| Total assets | 893,699 | 837,411 | 872,264 | ||||||||||||
| Capital expenditures | 28,103 | 38,734 | 10,713 | ||||||||||||
| (a) The corporate segment includes operating elements such as segment eliminations, amortization of intangibles, impairment of long-lived assets, goodwill impairment, alternative fuel mixture credits, charges related to restructuring, unallocated at-risk compensation and unallocated stock-based compensation for executive officers and certain other employees. Corporate net sales represents the elimination of intersegment sales included in the specialty fibers reporting segment. | |||||||||||||||
| (b) Depreciation and amortization includes depreciation, depletion and amortization of intangibles. | |||||||||||||||
| Three Months Ended | |||||||||||||||
| ADJUSTED EBITDA | September 30, 2012 | June 30, 2012 | September 30, 2011 | ||||||||||||
| Net income | $ | 29,491 | $ | 28,515 | $ | 41,107 | |||||||||
| Elimination of discontinued operations | - | 1,889 | (584 | ) | |||||||||||
| Income tax expense (benefit) | 7,494 | 15,075 | 101 | ||||||||||||
| Interest expense | 535 | (5,296 | ) | 3,348 | |||||||||||
| Amortization of debt costs | 155 | 155 | 155 | ||||||||||||
| Depreciation, depletion and amortization | 12,750 | 12,601 | 12,857 | ||||||||||||
| EBITDA | 50,425 | 52,939 | 56,984 | ||||||||||||
| Asset impairments | - | 329 | - | ||||||||||||
| Restructuring | 963 | - | - | ||||||||||||
| Non cash charges | 531 | 803 | 300 | ||||||||||||
| Adjusted EBITDA | $ | 51,919 | $ | 54,071 | $ | 57,284 | |||||||||
| We calculate EBITDA as earnings before cumulative effect of change in accounting plus interest expense, income taxes and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA by adding back the following items: asset impairment charges, goodwill impairment, restructuring charges incurred since the inception of the current credit facility, non-cash charges and other (gains) losses and deducting any non-cash expense associated with alternative fuel mixture credits. You should not consider adjusted EBITDA to be an alternative measure of our net income, as an indicator of operating performance; or our cash flow, as an indicator of liquidity. Adjusted EBITDA corresponds with the definition contained in our US revolving credit facility, established on October 22, 2010, and it provides useful information concerning our ability to comply with debt covenants. Although we believe adjusted EBITDA enhances your understanding of our financial condition, this measure, when viewed individually, is not a better indicator of any trend as compared to other measures (e.g., net sales, net earnings, net cash flows, etc.). Prior period amounts have been adjusted to conform to the definition contained in our new credit facility. | |||||||||||||||
CONTACT:
Buckeye Technologies Inc.
Steve Dean, 901-320-8352
Executive
Vice President and Chief Financial Officer
or
Eric Whaley,
901-320-8509
Investor Relations
www.bkitech.com