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Buckeye Technologies Inc. Reports Operating Results (10-Q)

November 08, 2010 | About:

Buckeye Technologies Inc. (BKI) filed Quarterly Report for the period ended 2010-09-30.

Buckeye Technologies Inc. has a market cap of $786.73 million; its shares were traded at around $19.57 with a P/E ratio of 17.79 and P/S ratio of 1.04. The dividend yield of Buckeye Technologies Inc. stocks is 0.82%. Buckeye Technologies Inc. had an annual average earning growth of 9% over the past 10 years.BKI is in the portfolios of NWQ Managers of NWQ Investment Management Co, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Net sales for the three months ended September 30, 2010 were $202 million, up by $25 million or 14% versus net sales of $177 million during the same period in 2009 due to higher selling prices and improved mix. Selling prices were higher across all parts of our business, with the largest impact coming from a $218 per ton increase in fluff pulp prices, which accounted for $10 million of the sales increase. Shipment volume was down 5% year over year as we rebuilt inventories after the fourth quarter power outage at our Florida specialty wood pulp facility and limited raw material availability constrained shipments from our specialty cotton fibers plants, although nonwovens shipment volume was up 9%.

Operating income for the three months ended September 30, 2010 was $23.6 million, which was down $24.4 million compared to the same period in 2009. The reduction in operating income can be explained by the $35.8 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 $11.4 million, or from 14.0% to 18.0% as a percentage of sales. This margin improvement was largely driven by higher selling prices and improved mix in our specialty fibers segment.

Net earnings for the three months ended September 30, 2010 of $64.4 million or $1.59 per diluted share, were up $24.0 million or $0.59 per diluted share compared to the same period a year ago. The net benefit of this year s recognition of $51.3 million in net income from the cellulosic biofuel credit (“CBC”) less last year s $35.1 million in net income from the alternative fuel mixture credit (“AFMC”) accounted for $16.2 million or $0.41 per diluted share of the year over year improvement in net income and earnings per share, respectively.

Net cash provided by operating activities for the three months ended September 30, 2010 of $82.0 million was up $47.9 million compared to the same period a year ago. In July 2010, we received our fiscal 2010 tax refund of $67.1 million, of which most was attributable to AFMC credits. In the year ago quarter, we received $8.4 million in AFMC excise tax refunds. This increase in tax refunds between the two periods accounted for a $58.7 year over year increase in cash provided by operating activities. Excluding the impact of these tax refunds, cash flow from operations was $10.7 million lower in spite of an increase in sales and gross margin between the two periods primarily because of the inventory build during the most recent quarter. In addition, net cash used in investing activities increased by $10.6 million compared to the same period last year as capital expenditures were up $3.2 million and we received a $7.4 million grant from the State of Florida in the year ago quarter. Strong cash flow during the quarter enabled us to reduce debt by $72.5 million and pay our first quarterly cash dividend of $1.6 million during the quarter.

Net interest expense and amortization of debt costs decreased $1.7 million for the three months ending September 30, 2010 versus the prior year comparable period. Net interest expense decreased primarily due to the debt reduction of $130.0 million at September 30, 2010 versus 2009. The weighted average effective interest rate on our variable debt, which totaled $25.0 million at September 30, 2010, increased from an average of 2.0% during the three months ended September 30, 2009 to 2.5% during the three months ended September 30, 2010. During the three months ending September 30, 2010, we recorded $0.6 million of interest expected to be paid to the U.S. government related to exchanging AFMC credits for CBC credits.

The new credit facility increased available borrowing capacity (taking into account the $140 million borrowed to repay the 2013 Notes on October 1, 2010) to $147.9 million. The commitment fee on the unused portion of the new credit facility is 0.375%. Total costs for the issuance of the new facility were approximately $2.6 million and will be amortized to interest expense using the effective interest method over the life of the facility.

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