Buckeye Technologies Inc. (BKI, Financial) filed Quarterly Report for the period ended 2009-03-31.
Buckeye Technologies Inc. is a leading manufacturer and worldwide marketer of value-added cellulose-based specialty products. The company utilizes its expertise in polymer chemistry and its state-of-the-art manufacturing facilities to develop and produce innovative and proprietary products for its customers. The company sells its products to a wide array of technically demanding niche markets in which its proprietary products and commitment to customer technical service give it a competitive advantage. Buckeye Technologies Inc. has a market cap of $187.5 million; its shares were traded at around $4.85 with a P/E ratio of 6.2 and P/S ratio of 0.2. Buckeye Technologies Inc. had an annual average earning growth of 23.8% over the past 5 years.
Operating income for the three months ended March 31, 2009 was $9.5 million less than in the same period in 2008, with operating income for the Specialty Fibers segment down by $11.3 million and operating income for the Nonwoven Materials segment up by $1.7 million. This decline in operating income for the total Company was almost entirely due to the lower sales volume and associated market-related downtime taken during the quarter in our Specialty Fibers segment. Overall selling price increases over the past 12 months have more than offset increases in raw material and chemicals prices over that same period, and we started to see reductions in raw materials, energy and transportation costs during the quarter. We also believe that our chemical costs peaked during the January-March quarter and we expect them to start decreasing in the April-June quarter. The favorable impact of the weaker Canadian Dollar and Brazilian Real on costs at our Canadian airlaid plant and Brazilian specialty cotton fibers plant, along with a reduction in selling, research and administrative expenses also had a positive impact on earnings compared to the year ago quarter. We have implemented formula-based pricing on our high-end specialty wood fibers products in our 2009 contracts, which will result in our passing through cost changes in chemicals and energy costs to our customers in the form of selling price changes beginning in the April-June quarter. This resulted in price reductions of about 5% effective April 1st on these products.
Fiscal 2009 year-to-date net sales of $578 million were $33 million or 5% lower than fiscal 2008 year-to-date net sales. Sales in the first quarter were up 12% while sales in the second and third quarter were down 12% and 15%, respectively, as the global recession started to impact our business. The operating loss for the nine months ended March 31, 2009 of $91 million was $172 million worse when compared to the same period in 2008. In the October-December quarter, based on the economic environment at that time and the recent steep decline in the price of our stock, which created a significant gap between the book and market value of our equity, we recorded a $138 million non-cash goodwill impairment charge. This goodwill impairment charge was the primary cause of the reduction. The remaining reduction of $34 million was due to the lower sales volume and associated market-related downtime. Selling price increases have been sufficient to offset the increases in costs on a year-to-date basis.
Cash from operations for the three months ended March 31, 2009 was $21.3 million, which was down $5.3 million compared to the three months ended March 31, 2008. This reduction was primarily driven by a reduction in net income (down $6.1 million). We were successful in reducing our net working capital by $2.1 million during the January – March quarter (driven by lower inventories), versus a $0.8 million increase during the prior year period. Purchases of property, plant and equipment in the quarter were $9.0 million, which was $3.5 million lower than in the year ago quarter, reflecting the reduction in our planned capital spending for this fiscal year from $64 to $40 million. We have put a number of capital projects on hold in order to accomplish this objective, including the Foley Energy Project, which we intend to restart as soon as we are confident that we will meet our debt reduction goal.
We have established a goal of paying down our debt to $350 million by December 31, 2009. By doing so, we believe that we will have sufficient borrowing capacity on our $200 million revolving credit facility to pay off the $110 million in 2010 Notes that mature in October 2010 without accessing the credit markets for new financing. One factor that could help us achieve this goal more quickly is the extent to which we continue to receive refunds from the alternative fuels tax credit. While we did not receive any refunds under this program during the three months ended March 31, 2009, we have received $25.4 million in refunds during the month of April for the period between February 12 and April 14, 2009. We are also exploring several other alternative financing sources allowed under our credit agreements and bond indentures, such as borrowing against our foreign assets and capital lease financing, which could allow us to further expand our potential borrowing capacity once the 2010 Notes are retired. To the extent we are able to retire these bonds, which have a coupon rate of 8.0%, using free cash flow and borrowings under our bank revolver, the annual interest savings at current borrowing rates would be significant (in the $6 – 7 million per year range). We could begin to realize a portion of those savings as early as October-December 2009 when we will be free of payment restrictions per our 2013 Notes .
Selling, research and administrative expenses decreased $0.9 million for the three months ended March 31, 2009 and decreased $0.7 million for the nine months ended March 31, 2009 versus the same periods in the prior year. The primary reasons for the decrease were lower at risk compensation and bonus expenses.
Read the The complete ReportBKI is in the portfolios of NWQ Managers of NWQ Investment Management Co.
Buckeye Technologies Inc. is a leading manufacturer and worldwide marketer of value-added cellulose-based specialty products. The company utilizes its expertise in polymer chemistry and its state-of-the-art manufacturing facilities to develop and produce innovative and proprietary products for its customers. The company sells its products to a wide array of technically demanding niche markets in which its proprietary products and commitment to customer technical service give it a competitive advantage. Buckeye Technologies Inc. has a market cap of $187.5 million; its shares were traded at around $4.85 with a P/E ratio of 6.2 and P/S ratio of 0.2. Buckeye Technologies Inc. had an annual average earning growth of 23.8% over the past 5 years.
Highlight of Business Operations:
The January – March 2009 period continued to be a challenge for Buckeye as the global economic recession continued to impact demand for many of our products. Sales for the three months ended March 31, 2009 of $172 million were down $30 million or 15% versus the same period in 2008, with sales in the Specialty Fibers segment down 18% and sales in the Nonwoven Materials segment off 2%. Reduced shipment volume had a negative $33 million impact on sales compared to the year ago quarter while increased selling prices added $8 million with product mix and currency making up the balance. Specialty Fibers sales were negatively impacted by reduced demand for cotton specialty fibers, wood specialty fibers used in automotive applications, and fluff pulp. We continued to take market downtime at our Foley, Memphis and Americana plants during the quarter to match production to shipment demand, and effective May 1, 2009, we intend to further reduce staffing at our Memphis Plant to adjust our capacity to match reduced demand levels for products supplied by this plant. Shipment volume for our airlaid nonwovens products increased by 7% versus the same quarter a year ago, as we regained in June 2008 a significant portion of the business we lost with a major customer in January 2008. Selling prices were up 17% on average year over year for our high-end specialty wood and cotton fibers products, but our fluff pulp prices were down by about 6% on average.Operating income for the three months ended March 31, 2009 was $9.5 million less than in the same period in 2008, with operating income for the Specialty Fibers segment down by $11.3 million and operating income for the Nonwoven Materials segment up by $1.7 million. This decline in operating income for the total Company was almost entirely due to the lower sales volume and associated market-related downtime taken during the quarter in our Specialty Fibers segment. Overall selling price increases over the past 12 months have more than offset increases in raw material and chemicals prices over that same period, and we started to see reductions in raw materials, energy and transportation costs during the quarter. We also believe that our chemical costs peaked during the January-March quarter and we expect them to start decreasing in the April-June quarter. The favorable impact of the weaker Canadian Dollar and Brazilian Real on costs at our Canadian airlaid plant and Brazilian specialty cotton fibers plant, along with a reduction in selling, research and administrative expenses also had a positive impact on earnings compared to the year ago quarter. We have implemented formula-based pricing on our high-end specialty wood fibers products in our 2009 contracts, which will result in our passing through cost changes in chemicals and energy costs to our customers in the form of selling price changes beginning in the April-June quarter. This resulted in price reductions of about 5% effective April 1st on these products.
Fiscal 2009 year-to-date net sales of $578 million were $33 million or 5% lower than fiscal 2008 year-to-date net sales. Sales in the first quarter were up 12% while sales in the second and third quarter were down 12% and 15%, respectively, as the global recession started to impact our business. The operating loss for the nine months ended March 31, 2009 of $91 million was $172 million worse when compared to the same period in 2008. In the October-December quarter, based on the economic environment at that time and the recent steep decline in the price of our stock, which created a significant gap between the book and market value of our equity, we recorded a $138 million non-cash goodwill impairment charge. This goodwill impairment charge was the primary cause of the reduction. The remaining reduction of $34 million was due to the lower sales volume and associated market-related downtime. Selling price increases have been sufficient to offset the increases in costs on a year-to-date basis.
Cash from operations for the three months ended March 31, 2009 was $21.3 million, which was down $5.3 million compared to the three months ended March 31, 2008. This reduction was primarily driven by a reduction in net income (down $6.1 million). We were successful in reducing our net working capital by $2.1 million during the January – March quarter (driven by lower inventories), versus a $0.8 million increase during the prior year period. Purchases of property, plant and equipment in the quarter were $9.0 million, which was $3.5 million lower than in the year ago quarter, reflecting the reduction in our planned capital spending for this fiscal year from $64 to $40 million. We have put a number of capital projects on hold in order to accomplish this objective, including the Foley Energy Project, which we intend to restart as soon as we are confident that we will meet our debt reduction goal.
We have established a goal of paying down our debt to $350 million by December 31, 2009. By doing so, we believe that we will have sufficient borrowing capacity on our $200 million revolving credit facility to pay off the $110 million in 2010 Notes that mature in October 2010 without accessing the credit markets for new financing. One factor that could help us achieve this goal more quickly is the extent to which we continue to receive refunds from the alternative fuels tax credit. While we did not receive any refunds under this program during the three months ended March 31, 2009, we have received $25.4 million in refunds during the month of April for the period between February 12 and April 14, 2009. We are also exploring several other alternative financing sources allowed under our credit agreements and bond indentures, such as borrowing against our foreign assets and capital lease financing, which could allow us to further expand our potential borrowing capacity once the 2010 Notes are retired. To the extent we are able to retire these bonds, which have a coupon rate of 8.0%, using free cash flow and borrowings under our bank revolver, the annual interest savings at current borrowing rates would be significant (in the $6 – 7 million per year range). We could begin to realize a portion of those savings as early as October-December 2009 when we will be free of payment restrictions per our 2013 Notes .
Selling, research and administrative expenses decreased $0.9 million for the three months ended March 31, 2009 and decreased $0.7 million for the nine months ended March 31, 2009 versus the same periods in the prior year. The primary reasons for the decrease were lower at risk compensation and bonus expenses.
Read the The complete ReportBKI is in the portfolios of NWQ Managers of NWQ Investment Management Co.
