Buckeye Technologies Inc. Reports Operating Results (10-Q)
Buckeye Technologies Inc has a market cap of $981.8 million; its shares were traded at around $24.98 with a P/E ratio of 18.01 and P/S ratio of 1.3. The dividend yield of Buckeye Technologies Inc stocks is 0.64%. Buckeye Technologies Inc had an annual average earning growth of 9% over the past 10 years.Mutual Fund and Other Gurus that owns BKI: NWQ Managers of NWQ Investment Management Co.
Highlight of Business Operations:Operating income for the three months ended December 31, 2010 was $31.6 million, which was down $24.1 million compared to the three months ended December 31, 2009. The reduction in operating income can be explained by the $37.1 million reduction in income from alternative fuel mixture credits (“AFMC”) versus the same period a year ago which was partially offset by an increase in gross margin, which improved by $14.2 million, or from 16.5% to 21.2% as a percentage of sales. This margin improvement was largely driven by higher selling prices in the specialty fibers segment. On the cost side, cotton linter prices were up significantly, but chemical and freight costs were only up modestly while natural gas costs were lower. The final insurance settlement related to the June power outage at our Foley Plant net of related costs incurred during the quarter added $3.1 million to operating income in the second quarter, representing a partial recovery of the $6.1 million in lost income from business interruption and property damage incurred during the preceding two quarters.
For the six months ended December 31, 2010, operating income was down by $48.5 million versus the six months ended December 31, 2009. The reduction in operating income can be explained by the $72.9 million reduction in income from alternative fuel mixture credits versus the same period a year ago which was partially offset by an increase in gross margin, which improved by $25.6 million, or from 15.3% to 19.6% as a percentage of sales. Higher fluff pulp pricing accounted for $21.4 million of the year over year improvement in profitability. Operating income for this period was $31.0 million year over year for the specialty fibers segment, but was down $4.3 million year over year for the nonwovens segment as selling price increases have fallen behind increases in raw material (fluff pulp) costs.
Net earnings for the three months ended December 31, 2010 was $17.1 million or $0.42 per diluted share. Second quarter earnings included after-tax costs relating to early extinguishment of debt, restructuring, and accrued interest associated with the cellulosic biofuel credit (“CBC”) totaling $3.2 million, or $0.08 per share. This compared to net income of $46.3 million or $1.18 per share in the prior year comparable period, which included net income of $37.5 million, or $0.96 per share, from AFMC. Out of the $0.76 year over year reduction in EPS, the energy tax credits, early debt retirement and restructuring costs mentioned above account for an EPS reduction of $1.04. The offsetting improvement of $0.28 was driven by improved margins in the specialty fibers segment, combined with $0.06 from reduced interest expense and $0.05 from the insurance settlements.
Net earnings for the six months ended December 31, 2010 of $81.5 million or $2.01 per diluted share, were down $4.0 million or $0.17 per diluted share compared to the six months ended December 31, 2009. The variation in the AFMC and CBC accounted for $21.7 million or $0.60 per diluted share of this reduction in net income. The offsetting improvement of $17.7 million in net income or $0.43 per diluted share was driven by improved margins in the specialty fibers segment, combined with $3.7 million or about $0.09 per share from reduced interest expense, excluding accrued interest related to the CBC. There was no significant impact on a year-to-date basis from the insurance settlement as the Q2 settlement offset costs incurred in Q1.
Net cash provided by operating activities for the six months ended December 31, 2010 of $105.9 million was up $60.9 million compared to the same period a year ago, which can be explained by a $61.0 million in increase in cash receipts related to the AFMC and the CBC. While gross margin was significantly higher relative to the same six month period a year ago, this was offset by an increase in working capital as we rebuilt inventory to more sustainable levels during the first 6 months of the current fiscal year. Net cash used in investing activities during the six months ended December 31, 2010 was $31.5 million, an increase of $20.0 million compared to the same period last year. During the first six months of last fiscal year, we received a grant from the State of Florida for $7.4 million. Fiscal 2011 spending on the Foley Energy Project was $10.6 million, up $5.3 million compared to the year-ago period; and, we also spent $6.0 million to purchase about 8,000 acres of land adjacent to our Foley specialty wood pulp mill.
In October 2010 we retired our remaining $140 million in public debt and refinanced our existing bank credit facility with a larger $300 million bank revolver. The impact of refinancing the $140 million of 8.5% senior notes with the new bank revolver at LIBOR plus 200 basis points resulted in interest savings of about $1.9 million during the second quarter relative to the first quarter. Over the past 12 months, total long-term debt has been reduced by 43% from $290 million to $164 million, and the combination of debt reduction and a lower average interest rate has lowered our quarterly interest expense by $3.4 million compared to the year ago quarter.
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